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. Ali Wong. Ali, please proceed.
Ali Wong: Thank you, operator. Hello, everyone. Thank you all for joining us on today's conference call to discuss the financial results of GameHouse 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 Xie Feng, Chairman of the Board, Mr. Carl Cai Yiming, Chief Executive Officer, and Mr. Shuang 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&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.
Brian Xie Feng: Hello, investors, analysts, and friends who have been following the company for a long time. Thank you for attending the GameHouse's third quarter of the year.
Ali Wong: Hello, everyone. Thank you for joining us for GameHouse 3rd Quarter Fiscal Year 2026 Earnings Call.
Brian Xie Feng: This quarter, the company continues to operate steadily according to the set efficiency priorities and profits as the main development path. In the mainly seasonal and relatively mild quarter environment, our revenue has reached about $26.2 million. It exceeded the upper limit of the previous quarter's performance guidance and showed the performance of the core business of the company. What is more worth paying attention to is that from the point of view of the nine-month accumulation, the company's profit and loss ability has been further verified in the month-to-month. In the first nine months of the fiscal year of 2026, we accumulated an actual net profit of about 3.2 million US dollars, which is about 40% of the total growth. This is not an accidental result of a single quarter, but a product combination in the past few quarters. investment rhythm, cost structure, and financial channels.
Ali Wong: This quarter, we continue 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. underscoring the resilience of our core business. More importantly, the profitability improvement we have been building toward is now clearly visible on a sharing 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.
Brian Xie Feng: In terms of supply and demand, we have seen the continuous value release brought by the precision operation. This quarter, the ARP DAO has reached $0.5, which is 13% higher than the growth month. The daily supply and demand rate has also increased from 2.2% in the same period last year to 2.4%. On the user and monetization side, our investment in more targeted live ops continues to pay off.
Ali Wong: 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're constantly iterating on the format and presentation of that content. to drive stronger engagement and higher willingness to spend.
Brian Xie Feng: We are also aware that this quarter's MAU and DAU have declined compared to last year. This is a direct reflection of our initiative to search for low-cost purchases and focus on high-efficiency players' operating strategies. We recognize that MAU and DAU declined year-over-year this quarter.
Ali Wong: 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 work and the operational infrastructure and segmentation capabilities we have built will allow us to monetize those new users
Brian Xie Feng: more effectively from day one. Our sales cost decreased by about 12.7%. One of the driving factors is that DTC channels' platform division and saving are continuing to be profitable.
Ali Wong: 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 Xie Feng: The progress of DTC channels has brought another important turning point this quarter. Since the end of March, the company's overall DTC revenue has reached about 13.9%. Compared to the end of last quarter, it is about 10% more stable. The DTC of our first product, GCS, has made a further leap of about 36.7%. At the same time, this quarter, we have completed the DTC of all products in the Social Casino category, further consolidating the space for profit release in this category. Looking forward to the end of this fiscal year, Notably, DTC hit another milestone this quarter.
Ali Wong: As of the end of March, company-wide DTC revenue mix reached approximately 13.9%, up from roughly 10% last quarter. Our flagship title, GCS, advanced to approximately 36.7%, We also completed the 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 DTC penetration to reach 15% to 20%.
Brian Xie Feng: We continue to view DTC as much more than a payment optimization.
Ali Wong: It is a way to build direct player relationships that create lasting values. As DTC adoption accelerates across the industry, we intend to remain a fast mover and invest aggressively behind it.
Brian Xie Feng: In terms of product pipeline, this quarter, we have made clear progress on the main lines of RPG and Parallel. In the RPG category, a product signed last quarter is in the stage of commercialization testing. According to the current pace, it is expected to officially launch around the end of the second quarter of the year in 2026. The launch path will start from Hong Kong and Taiwan and advance to Japan and Korea, and eventually cover Europe, the United States, and other regions. In addition, our other custom-developed RPG is expected to launch around September according to the plan. This quarter, we signed another RPG product that will be released to the world. It is also expected to be released 8th to 9th of September.
Ali Wong: 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 expected 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-September launch window.
Brian Xie Feng: In this quarter, we signed an additional RPG title for global distribution, currently targeting an August-September launch window. In this quarter, we signed an additional RPG title for global distribution, currently targeting an August-September launch window. In this quarter, we signed an additional RPG title for global distribution, currently targeting an August-September launch window. In this quarter, we signed an additional RPG title for global distribution, currently targeting an August-September launch window. At Puzzle, we tested seven to eight prototypes this quarter,
Ali Wong: Two of those show strong enough results to move into extended 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 strategies.
Brian Xie Feng: On technology, AI at GameHouse has moved past the standalone tool space and is now being integrated directly into our core business workflows, our R&D systems,
Ali Wong: and our GBS platform. We see this playing out across three areas.
Brian Xie Feng: First, AI tools are moving towards the organization. Web coding has already achieved systematic penetration in the daily development workflow of products and technology teams. It is pushing the entire development organization from the traditional human-driven mode to AI assistant and human-engineered co-model mode.
Ali Wong: 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&D organization works from a traditional, fully manual model towards one where AI co-pilots work alongside human engineers as a matter of course.
Brian Xie Feng: Second, AI human beings move from efficiency improvement to business decision making. Second, AI is expanding from a productivity tool into a decision support capability.
Ali Wong: 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.
Brian Xie Feng: Third, AI is moving from a single-point application to a platform-based construction. This quarter, we are working in multiple directions, including code service, internal system, MCP, open cloud, process innovation, and so on. We are building a set of sustainable, expandable, and manageable enterprise-level AI infrastructure.
Ali Wong: Third, we are building enterprise-grade AI infrastructure. This quarter, we advance work in parallel on our internal code service, system-level MCP integration, and open-call process automation, laying the groundwork for a reusable, scalable, and well-governed AI platform across the company.
Brian Xie Feng: 这些能力的建设正在转化为可被衡量的实际成果。 本季度, Our powerful AR creation platform has continued to use 4 heads. The number of calls per quarter has reached nearly 70,000 times, exceeding the 60,000 targets that we have previously given. At the same time, the company's internal unified AR website has processed 240,000 large model calls this quarter, covering a range of early material generation, extensive expansion to customer service automation, market scan workflow, and other early agent workflow scenarios. These efforts are producing tangible, measurable results.
Ali Wong: Our Haohan 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 expanding well beyond the original asset generation to include customer service automation, market scanning, operational Q&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.
Brian Xie Feng: In the long term, the rapid acceleration of AI capabilities in this quarter is also accelerating our thinking and upgrading of the future strategic positioning of GAMING HOUSE. Since the establishment of GAMING HOUSE, GAMING HOUSE has been focused on becoming the most valuable link between global players and developers. With the development of AI in games, We believe that the core competitiveness of the next generation of content publishing industries will not only depend on the scale of operating capabilities and data resources, but also depend on the systematic balance of AI capabilities and deep integration of distribution systems. This strategy will be one of the most important directions for the next generation of GameHouse. It is also the most important bottom-up investment we have made for long-term shareholder value creation.
Ali Wong: Stepping back, the pace at which our AI capabilities are compounding is also shaping how we think about GameHouse 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
Brian Xie Feng: our shareholders. We will continue to invest in the business, release profits, and report to shareholders to balance the election, and create long-term shareholder value as the core issue that will not change.
Ali Wong: 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 returns to shareholders with long-term value creation as our guiding priority.
Brian Xie Feng: Looking forward to the next quarter, China will consider the current product supply rhythm, prepare to invest in the market for new products, and provide strategic assistance to new products in the later part of the life cycle. As of June 30, 2026, we will set the fourth quarter operating income for the fourth quarter between US$2,300 million and US$2,600 million.
Ali Wong: For the fourth quarter of fiscal 2026, ending June 30th, 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 lifecycle titles for new products.
Brian Xie Feng: Looking ahead to fiscal 2027, as our next generation of titles reaches the market backed by a healthier margin structure,
Ali Wong: 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.
Shuang Zhang: Thank you, Brian. Hello, everyone. I will now walk through our financial results in more detail for the third quarter of fiscal year 2026, which ended March 31st, 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 26.2 million US dollars. 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 partially 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 continues to increase and reduce profit-sharing payments to game developers as some mature titles move further along in their lifecycle. Research and development expenses increased 24.1% to $1.6 million, 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 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. Night 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 night income increased approximately 40% year-over-year, reflecting the continued improvement in our profitability profile. We ended the quarter with...
Operator: A part of 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.
Shuang Zhang: Thank you, David.
