Gala Technology Holding (2458) H2 2023 earnings summary

Executive summary

• FY2023 revenue was RMB633.6m, down 0.7% YoY; gross profit rose 3.5% to RMB344.7m and profit increased to RMB74.2m from RMB13.5m.

• Improved customer acquisition efficiency and lower platform commissions supported gross-margin expansion; reduced marketing and G&A expenses also aided earnings.

Financial highlights

• Revenue RMB633.6m vs RMB637.9m; cost of revenue fell 5.2% to RMB289.0m, while gross margin increased to 54.4% from 52.2%.

• Operating expenses: selling and marketing RMB129.5m, down 25.2%; G&A RMB45.6m, down 18.6%; R&D RMB109.2m, up 25.6%.

• Profit before tax rose to RMB72.8m from RMB22.2m; net profit was RMB74.2m vs RMB13.5m, including a 2023 income tax credit of RMB1.5m vs expense of RMB8.8m in 2022.

• Adjusted net profit, excluding fair-value changes on Pre-IPO convertible bonds, share-based compensation and listing expenses, was RMB74.6m vs RMB42.4m.

• Operating cash flow was RMB98.3m vs RMB74.2m; investing cash outflow rose to RMB95.1m, and financing inflow was RMB62.0m.

Outlook and guidance

• Total Football reached new revenue and profitability peaks in Q1 2024; overseas promotion is planned for mid-2024 after game-version upgrades.

• Large-scale North American promotion for MLB Clutch Hit Baseball is planned for Q2 2024; Mainland China, Japan, South Korea and Taiwan versions are also planned for Q2.

• Code: Action-based Basketball is expected to launch in summer 2024; Fishing Master and the action-based American football game are planned within one to two years.

• Priorities include expanding the product portfolio, improving acquisition efficiency, building R&D and operations talent, and advancing AIGC applications.