Gala Technology Holding (2458) H2 2022 earnings summary

Executive summary

• FY22 revenue rose 38.7% to RMB637.9m, while adjusted net profit fell 25.2% to RMB42.4m as marketing, R&D and listing costs increased.

• Four games were operating by year-end; Football Champion led revenue, and Total Football launched in July 2022.

Financial highlights

• Revenue increased 38.7% to RMB637.9m; gross profit rose 50.4% to RMB333.1m, with gross margin up to 52.2% from 48.2%.

• Operating profit declined to RMB18.9m from RMB41.0m; net profit was RMB13.5m versus RMB39.4m, and basic and diluted EPS was RMB0.12 versus RMB0.35.

• Adjusted net profit, excluding specified fair-value changes, share-based compensation and listing expenses, fell to RMB42.4m from RMB56.7m.

• Selling and marketing expenses doubled to RMB173.2m; R&D expenses rose 38.8% to RMB87.0m, while listing expenses increased to RMB22.4m.

Outlook and guidance

• 2023 plans include global launches of MLB Baseball Master and Fishing; action-based basketball and American football titles were in development.

• Management expected improving China consumption and the resumption of sports events to support gaming demand, particularly football-related products, in 2023.

• Total Football expansion into Japan, Korea, Southeast Asia, Europe and Latin America, plus further product iteration, was expected to grow users and revenue.

• Strategy priorities: broaden sports and game genres, expand overseas operations, and extend selected titles to PC, consoles and other platforms.