Gamehaus Q2 Earnings Call Highlights

Core Insights - The company is transitioning towards a more efficient and profitable operating model, emphasizing disciplined cost controls and improved monetization metrics [4][6] - Direct-to-consumer (DTC) revenue has reached approximately 10% of total revenue, with expectations to exceed 15% by year-end, contributing to margin improvements [1][6][16] - Despite a 7.8% decline in total revenue to $26.3 million, profitability has improved significantly, with net income rising to $0.9 million and operating margin expanding to 3.3% [2][3][6] Revenue and Profitability - Total revenue for the quarter ended December 31, 2025, was $26.3 million, down from $28.5 million a year earlier, attributed to reduced advertising and user acquisition spending [3] - Net income increased to approximately $0.9 million from $0.4 million year-over-year, while operating income rose to $0.9 million from $0.2 million [2][6] - Operating margin improved to 3.3%, up from 0.8% the previous year, driven by cost control measures [2][6] Cost Management - Total operating costs decreased by 10.1% to $25.4 million, with cost of revenue falling 10.2% to $12.2 million due to lower platform fees and reduced profit-sharing payments [7] - Selling and marketing expenses decreased by 18.4% to $9.7 million, reflecting a $2.1 million reduction in advertising spending [8] - Research and development expenses increased by 7.5% to $2.1 million, indicating ongoing investment in collaborations and pipeline development [8] Growth Initiatives - The company is focusing on a dual-track pipeline in RPG and puzzle genres, with a new RPG project valued at approximately $10 million launching in Asia [5][9] - Plans to release 4-5 new puzzle titles by the end of 2026, utilizing a rapid prototyping model with external partners [10] - The internal AI creative platform, Haohan, processed nearly 30,000 requests in three months and is expected to exceed 60,000 requests by the end of March [11] Future Guidance - For the third quarter of FY26, the company guided revenue to a range of $24 million to $26 million, based on a prudent assessment of product timing and market conditions [12] - Management indicated that recent revenue declines were part of a proactive structural adjustment strategy, optimizing operations for mature titles [13] Shareholder Returns - The company has a $5 million share repurchase authorization, with approximately 370,000 Class A ordinary shares repurchased for about $459,000 as of December 31 [15] - Management noted that the pace of buybacks is influenced by compliance and market liquidity constraints rather than a lack of capital [15]