Gamehaus Holdings (NASDAQ:GMHS) reported third-quarter financial results on Monday. The transcript from the company's third-quarter earnings call has been provided below.

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Summary

Gamehaus Holdings reported Q3 fiscal 2026 revenue of $26.2 million, exceeding guidance, with net income of $3.2 million for the first nine months, up 40% year over year.

The company emphasized a shift towards efficiency and profitability, reducing operating expenses by 10.1% and increasing DTC revenue mix to 13.9%.

Gamehaus is integrating AI into core business processes, enhancing productivity and decision-making, and aims to evolve into an AI-driven content generation and distribution platform.

Despite a decline in MAU and DAU due to focusing on high-value players, ARPDAU increased by 13%, and payer conversion improved.

Looking ahead, Gamehaus expects Q4 revenue between $23 million and $26 million, driven by new title launches and continued investment in AI and DTC initiatives.

Full Transcript

OPERATOR

Good day ladies and gentlemen. Thank you for standing by and welcome to GameHoss third quarter of fiscal year 2026 earnings conference call. Currently, all participants are 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 objection, you may disconnect at this time. I will now turn the call over to Today's speaker host, Ms.

Allie Wong. Allie, please proceed.

Allie Wong (Moderator)

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 third quarter of fiscal year 2026. We released our earnings results earlier today. The press release is available on the company's website as well as from newswire services. On the call with me today are Mr. Brian Xiefeng, Chairman of the Board, Mr. Carl Cai Min, Chief Executive Officer and Mr.

Shung Zhang, Head of Capital Markets and Investor Relations. Brian will review business operations and company highlights followed by Sean who will discuss detailed financial results. They will all be available to answer your questions during the Q and 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 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 translation. Please go ahead. Brian. Hello everyone. Thank you for joining us for Gamehaus Holdings third quarter fiscal year 2026 earnings.

This quarter we continued to deliver on the efficiency first profitability focused strategy we laid out over the past year. Despite a seasonally softer quarter across our key markets. Revenue came in at approximately $26.2 million above the upper end of the guidance range we set last quarter quarter, underscoring the resilience of our core business. More importantly, the profitability improvement we have been building toward is now clearly visible on a trailing basis.

Over the first nine months of fiscal 2026, we generated approximately $3.2 million in cumulative net income, up roughly 40% year over year. This is not the result of any single quarter. It reflects the compounding effect of the work we have done across our product mix, marketing discipline, cost structure and payment channels over the past several quarters. On the user and monetization side, our investment in more targeted liveOps continues to pay off ARP, DAU reached 0.$55, up approximately 13% year over year and the daily payer conversion improved from 2.2% to 2.4%.

These gains are driven by the player segmentation system we have built out over recent quarters. We use behavioral data to tailor in game events and content for different player segments and we are constantly iterating on the format and presentation of that content to drive stronger engagement and higher willingness to spend. We recognize that Monthly Active Users (MAU) and Daily Active Users (DAU) declined year over year this quarter. That is a direct result of our decision to pull back from low return user acquisition and focus on higher value players.

We see this as a deliberate and acceptable trade off as we shift toward a higher quality revenue mix as multiple new titles Launch through fiscal 2027, we expect our user base to return to growth and the operational infrastructure and segmentation capabilities we have built will allow us to monetize those new users more effectively from day. On. Cost Total operating expenses declined approximately 10.1% year over year. Selling and marketing expenses were down roughly 15.5%, including a $2 million reduction in advertising spend.

Cost of revenue also decreased approximately 12.7%, with DTC driven savings on platform commissions now contributing meaningfully to profitability.

Brian Xiefeng (Chairman of the Board)

Notably, Direct-to-Consumer (DTC) hit another milestone this quarter. As of the end of March, companywide Direct-to-Consumer (DTC) revenue mix reached approximately 13.9%, up from roughly 10% last quarter. Our flagship title Game Content Services advanced to approximately 36.7%. We also completed the Direct-to-Consumer (DTC) rollout across our entire social casino portfolio during the quarter, opening up additional margin opportunity in that category.

By fiscal year end, we expect company wide Direct-to-Consumer (DTC) penetration to reach 15% to 20%. We continue to view Direct-to-Consumer (DTC) as much more than a payment optimization. It is a way to build direct player relationships and that create lasting value. As Direct-to-Consumer (DTC) adoption accelerates across the industry, we intend to remain a fast mover and invest aggressively behind it. On our product pipeline. We made clear progress across both RPG and Puzzle this quarter.

In rpg, the title we signed last quarter is now in commercial testing. Based on current pace, we expect it to go live around the end of Q2 calendar 2026, launching first in Hong Kong, Macau and Taiwan, then extending into Japan and Korea and ultimately into North America, Europe and other regions. A second custom developed RPG is on track to launch around September and this quarter we signed an additional RPG title for global distribution, currently targeting an August to September launch window.

The Parrot. In Puzzle, we tested seven to eight prototypes this quarter. Two of those showed strong enough results to move into expanded development. A moderately scaled puzzle title that is already live continues to serve as a valuable source of real world operational and monetization data, helping us refine our approach across the category. With their longer life cycles and hybrid monetization model, puzzle titles remain an important part of our portfolio strategy.

On technology. AI at gamehouse has moved past the standalone tool space and is now being integrated directly into our core business workflows, our RMD systems and our GBS platform. We see this playing out across three areas. First, AI is moving from individual adoption to company wide standard practice. Live coding is now embedded in the day to day workflows of our product and engineering teams, shifting the way our R and D organization works from a traditional fully manual model towards one where AI copilots work alongside human engineers as a matter of course.

Second, AI is expanding from a productivity tool into a decision support capability. This quarter we rolled out AI driven budget optimization tools and AI agent powered market intelligence, bringing AI into higher stakes functions like AD spend allocation, competitive monitoring and market analysis. Third, we are building enterprise grade AI infrastructure. This quarter we advanced work in parallel on our internal code service system level, MCP integration and open cloud process automation, laying the groundwork for a reusable, scalable and well governed AI platform across the company.

These efforts are producing tangible, measurable results. Our Houhan AI Creative platform processed nearly 70,000 requests this quarter, exceeding the 60,000 target we set last quarter.

Beyond creative production, our centralized AI gateway handled approximately 240,000 large language model calls during the quarter with use cases extending well beyond the original asset generation to include customer service automation, market scanning, operational Q and A and several early stage AI agent workflows.

AI is no longer a side project, it is now part of how we run the business across functions and it is having a real impact on our speed, our productivity and how our teams make decisions. The near term financial impact remains modest, but the competitive advantage these capabilities are creating over the medium to long term is becoming increasingly clear.

Stepping Back the pace at which our AI capabilities are compounding is also shaping how we think about Gamehaus Holdings' long term identity. Since the beginning we have been focused on connecting global players with great game developers. As AI matures across development, content creation, marketing and user intelligence, we see ourselves evolving from a pure play mobile game publisher into an AI native platform that integrates content creation and global distribution.

This quarter we made real progress on AI generated in game content and over time we intend to build out the full chain from AI content creation through to worldwide publishing. We believe the next era of competitive advantage in content publishing will not be determined by operational scale or data volume alone, but by how deeply a company integrates AI into its publishing stack. This is one of the most important strategic directions for gamehouse going forward, and it is the most significant long term investment we're making on behalf of our shareholders.

Regarding capital returns. As of March 31, 2026, we have repurchased approximately 392,000 Class A ordinary shares for a total of approximately $482,000. We will continue to execute the buyback program opportunistically based on the market conditions, share price and our overall capital allocation framework. Management remains confident in the company's medium and long term prospects and we are committed to balancing reinvestment in the business, profitability and return to shareholders with long term value creation as our guiding priority.

For the fourth quarter of fiscal 2026 ending June 30, 2026, we expect total revenues to be in the range of 23 million to $26 million. This reflects the current pace of product launches, pre launch marketing investment for upcoming titles, and the reallocation of operating resources from certain later life cycle titles. For new. Looking ahead to fiscal 2027 as our next generation of titles reaches the market, backed by a healthier margin structure, a stronger balance sheet and the durable advantages we have established in AI and dtc, we believe the company is well positioned to enter its next chapter of profitable growth.

With that, let me turn the call over to Sean for a closer look at our financials.

Sean Zhong

Thank you Brian and hello everyone. I will now walk through our financial results in more detail for the third quarter of fiscal year 2026 which end March 31, 2026. Please note that all figures are in US dollars and all comparisons are made on a year over year basis unless otherwise stated. Starting from the top line, top revenue for the quarter was US$26.2 million, a decrease of 9.1% from 28.8 million in the year ago period.

Advertising costs declined 17.2% year over year, which dropped the lower traffic and user acquisition Brian discussed earlier that said revenue exceeded the upper end of our forecast for the third quarter and the trajectory remained in line with our long term growth strategies, underscoring the resilience of our operating model. Breaking down our revenue in app purchase revenue was 23.4 million, a 9.9% decline from 26 million a year ago.

Advertising revenue was 2.8 million, slightly down from 2.9 million in the same period last year as we highlighted before. The monetization improvements we are seeing in Arpdau and payer conversion helped parcel offset the impact of lower user acquisition volumes.

Turning to expenses, total operating costs and expenses were 25.7 million, down 10.1 from 28.5 million a year ago, reflecting continued progress in our cost discipline efforts and efficiency optimization.

More specifically, cost of revenue decreased 12.7% to $12 million mainly due to lower platform commission expenses as DTC adoption continued to increase and reduce profit sharing payments to game developers as some mature titles move further along in their life cycle. Research and development expenses increased 24.1% to 1.6 million DOL, reflecting our ongoing collaborations with multiple developers across the development and testing phases.

As we expand our future game pipeline, selling and marketing expenses decreased 15.5% to 10.3 million. The 2 million reduction in advertising spend was the primary driver, consistent with the efficiency focus of approach Brian discussed earlier. General and Administrative expenses were 1.8 million, up 33.1% from 1.4 million a year ago.

This primarily due to higher salary expenses associated with our efforts to improve corporate governance, financial reporting and investor relation capabilities as well as strategic hiring to support business expansion. Turning to profitability, operating income improved significantly to 0.5 million from 0.3 million in the year ago period.

Operating margin expanded to 2.1% from 1%, which we believe further validates the operational adjustment we have been making. Other income net was approximately 0.02 million compared with the 0.13 million in the year ago period. Net income for the quarter was 0.5 million up from 0.4 million a year ago.

Looking at the first nine months of fiscal year 2026, cumulative net income increased approximately 40% year over year, reflecting the continued improvement in our profitability profile. We ended the quarter with.

OPERATOR

A Pardon me, please stand by while we reconnect the speaker line. Hello, this is the operator. We have reconnected the speaker line and we can proceed.

Sean Zhong

Thank you David. We the quarter with US$18.3 million in cash and cash equivalents compared with $15.2 million as of June 30, 2025. We believe this provides sufficient liquidity to meet our working capital needs for the next 12 months on capital allocation. As a reminder, our board authorized a fund to million share repurchase program in August 2025 with a one year authorization period through August 18, 2026. As of March 31, 2026, we have repurchased approximately 392,000 Class A ordinary shares for approximately US$482,000.

Going forward, we will continue to evaluate repurchase activity based on market conditions, share price performance and our broader capital allocation priorities. Looking Ahead As Brian mentioned earlier, for the fourth quarter of fiscal year 2026 ending June 30, 2026, we expect total revenue to be in the range of approximately 23 million to 26 million.

We are encouraged by the progress we continue to make this quarter. Revenue reached the upper end of our guidance range margin continued to improve and both our DTC initiatives and AI driven operational capabilities continue to gain traction. Looking ahead, we remain focused on execution, strengthening our publishing and platform infrastructure, advancing our product and delivering sustainable long term value for shareholders. With that, we are now happy to take your operator Please proceed.

OPERATOR

We will now begin the Question and Answer session. To ask a question, you may press Star then one on your touchtone 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 and then two. When asking a question in Chinese, please repeat your question in English as well for everyone's convenience.

Our first question comes from Henghui with Sanhe Capital. Please go ahead.

Henghui

You have three RPG titles targeting an orchid to September launch window. That's a lot of titles in a narrow time frame. Is there a risk of cannibalization of resources strain and how are you struggling the marketing spend across them? In Brian's earlier remarks, he mentioned that Gamehaus Holdings' longer term goal is to evolve into an AI driven in targeted platform for content generated and distribution. Could you give us some more specific color on this beyond the games you are currently working on, what does this actually mean and where are you today along this path?

That's all. Thank you.

OPERATOR

Please pause momentarily while we reconnect the speaker line.

I have reconnected the speaker line. Can you please repeat your question?

Allie Wong (Moderator)

I think we know the question and I will just let Carl, our CEO to answer the first question. Okay,

Carl Yimin Cai

This is Carl. I will answer your first question. Regarding the three RPG titles planned for launch during the August to September window, we are paying close attention to launch pacing to avoid resource conflict or potential cannibalization. First, in terms of launch schedule, we plan to stagger the releases as much as possible with roughly three to four weeks between each title.

This should help reduce internal resource pressure and give our marketing operations and data teams enough time to shift focus, analyze early performance and optimize each launch properly. Second, we have already started preparing the required launch materials and events, including creative assets, localized content and operational resources for testing and launch.

Our goal is to have the key launch materials largely ready before the products complete their final testing stages so that we can avoid last minute resource constraints. From a marketing spend perspective, we will allocate badges dynamically based on each title's testing results, payback period and ROI performance, rather than launching all three titles with heavy spending at the same time.

RPG titles typically provide relatively fast early monetization feedback and the payback period is generally more manageable. Therefore, we will manage user acquisition with a disciplined payback target and keep marketing investment within a healthy range. In the short term, there may be some temporary fluctuation and profitability as multiple new titles enter the launch phase. That is normal during a new product ramp up period.

However, because we will stagger the launches and carefully control the payback cycle, we expect the impact to be temporary. As these products move into a more stable operating phase, we expect profitability to return to a more normalized level in the following quarter.

I will answer your second question in Chinese first and I will let Allie to translate into English. Sunyani, Thank you for the question. Internally, this positioning has become an increasingly important strategic focus for us. As I see it, the core of this positioning is to connect the two ends of the capability chain we have already built. On one end is distribution. This is our core business built on a decade of expertise in global publishing, user growth, live operations and monetization capabilities.

On the other end is content generation. As AI matures, the way content is produced is being fundamentally reshaped. Our goal is to use AI to connect these two ends into a closed loop AI driven content generation layered on top of our mature global distribution, forming an integrated capability that is difficult for others to replicate.

In terms of execution, the most direct step is AI generated games. As Brian mentioned earlier, this quarter we completed key capability building in AI generated game content. This means we are embedding generative AI directly into the production process of game content itself, not just applying it to creative assets or live operations. This is our first concrete step toward making the content generation tangible.

Okay. That said, our understanding of content is not limited to games. We believe this set of capabilities, AI driven content generation combined with global distribution can in essence be extended to other forms of interactive content beyond games. While staying focused on our core business, we are also proactively exploring the potential applications of this platform capability in the broader content domain. This part is still in the exploratory stage and as conditions mature, we will update the market on our progress in a timely manner.

We believe this direction will define the core competitive modes of the next phase for games and for the broader content industry, and we are laying solid groundwork to position ourselves to for that opportunity.

Thank you, Zhonghui. That's our answer.

OPERATOR

Okay, and the next question comes from Hua Rong with Jinyu Asset. Please go ahead.

Hua Rong

See, now. I have two questions for management. The first one is Direct-to-Consumer (DTC) is clearly the most accountable margin level in the near term, but 13.9% company wide means 86% of your revenue still flows through platforms paying commission. What's preventing faster adoption? Is it player behavior, platform restrictions, or something else? The operating margin improved to 2.1% this quarter from 1% a year ago, and the cumulative net income for the first nine months grew approximately 40% year over year.

But candidately, much of that improvement has come from reduced marketing spend rather than revenue growth. As you move into fiscal 2027 and ramp up user acquisition again to support your new product pipeline, how much of this margin improvement is structural and sustainable? Should we expect margins to compress again once marketing spend comes back? Thank you,

Carl Yimin Cai

Thank you for your question. This is Carl I'll answer your first question on dtc, we do see it as one of the important near term levers to improve margins. That said, we need to balance several factors as we scale it, including compliance, user experience, payment conversion, and the broader platform ecosystem. First, from a compliance perspective, not every market currently allows us to directly promote or trigger third party payment options inside the game.

At this stage, the US Is the primary market where we have relatively broad latitude to present third party payment options in game, so we will continue to expand Direct-to-Consumer (DTC) only under a fully combined FLIP framework. Second, from a player behavior perspective, in app, purchases through app stores remain the simplest and most seamless payment method for many users. They require the fewest steps and benefit from strong user trust. If we push third party payment too aggressively, it may negatively affect overall payment conversion.

Therefore, our focus is not simply to maximize the DTC ratio, but to maximize total net revenue. In other words, we need to find the right balance between commission, savings and payment conversion. In addition, in app, purchase performance is also an important signal for platforms when they evaluate product quality and allocate organic traffic. So when we increase DTC penetration, we also need to consider its potential impact on organic traffic, user experience, and the overall economics of each product.

Overall, we will continue to steadily increase our DTC share, especially in markets where compliance is clear and user acceptance is strong. But we will do it in a disciplined and sustainable way rather than forcing a rapid increase at the expense of conversion or platform relationships.

Sean Zhong

Okay, this is Sean and I will answer your second question in Chinese first. And I will also let Allie to translate my answer into English. Thank you for the question. It's true that part of our current margin does benefit from our deliberate pullback and low efficiency user acquisition. And as we potentially scale that spending back up in fiscal 2027, there will be some give back on that portion. That's a fair point. At the same time, if you look at gross margin, it reached approximately 54% as quarter up about 2 percentage points year over year.

That improvement is unrelated to the level of our user acquisition spend. It is driven by two structural factors. First, the increase in DTC penetration directly reduces our platform commission costs. Second, the optimization of developer profit sharing arrangements. As certain mature titles progress through their life cycle, the portion is sustainable. And as DTC penetration continues to climb toward the 15% to 20% range, this structural gross margin benefit will expand further.

That is broadly how we see it. Thank you.

Carl Yimin Cai

Thank you, Hua Rong. That will be the answer of us.

OPERATOR

This concludes our question and answer session. I would like to turn the conference back over to Sean Zhong for any closing remarks.

Sean Zhong

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

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