Gamehaus Holdings Inc.

Good day, ladies and gentlemen. Thank you for standing by and welcome to Game Haas 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.

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 U.S. 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, investors, analysts, and friends who have been following the company for a long time. Thank you for attending the third quarter of the GameHouse 2020-2026 conference.

Hello, everyone. Thank you for joining us for GameHouse 3rd Quarter Fiscal Year 2026 Earnings Call.

This quarter, the company continues to operate steadily according to the set efficiency priorities and profits as its own development path. In a seasonally relatively mild quarter environment, our revenue has reached about $26.2 million. Over the last quarter, the rise in performance guidance shows the performance of the core business of the company. What is more worth paying attention to is that from the perspective 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, which is about 40% of the total growth. This is not an accidental result of a single quarter, but a cumulative structural return on the product combination, investment rhythm, cost structure, and capital channels in the past few quarters.

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.

Up to $0.05 this quarter, The growth rate has increased by 13%, and the daily turnover rate has also increased by 2.2% from the same period last year to 2.4%. This is the result of our continuous promotion of the user division operating system. Through the algorithm, we continuously summarize the characteristics of the behavior of the users, the activities and content of the specific delivery and delivery of users in different divisions, On the user and monetization side, our investment in more targeted live ops 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 games 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.

We are also aware that the MAU and DAU of this quarter fell back compared to the same period last year. This is a direct reflection of our initiative to search for low-cost buyers and focus on high-quality players who are willing to win. This is a reasonable price for our pursuit of high-quality income structures. As many new products come on the market in the fiscal year of 2027, the user base is expected to re-enter the expansion channel. We recognize that MAU and 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 work, and the operational infrastructure and segmentation capabilities we have built will allow us to monetize those new users more effectively from day one.

In terms of cost, this quarter's operating cost and cost-to-cost ratio decreased by about 10.1%. Among them, sales and market cost decreased by about 15.5%. 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.

The progress of DTC channels has brought another important turning point in this quarter. Since the end of March, the overall DTC revenue of the company has reached about 13.9%. Compared with the last quarter, it has increased by about 10% and continues to steadily increase. The DTC of our first product, GCS, has more than 36.7%. Notably, DTC hit another milestone this quarter.

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%.

We have always believed that DTC is not only a switch to a payment channel, but also a strategic infrastructure to build long-term value by connecting developers and players. As this trend continues to spread at the industry level, we will continue to maintain rapid follow-up and firm investment.

We continue to view DTC as much more than a payment optimization. It is a way to build direct player relationships that create lasting value. As DTC adoption accelerates across the industry, we intend to remain a fast mover and invest aggressively behind it.

In 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 rhythm, it is expected to officially launch around the end of the second quarter of the year in 2026. The launch route 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-made RPG 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 to September launch window.

In the parallel product category, we have completed 78 prototype products this quarter. Two of them have shown the potential for long-term investment, and are now in the more long-term version development stage. At the same time, a parallel product that used to be listed as a commercial product has also provided us with valuable source data and transformation experience, helping us to continuously optimize the overall transformation capability of parallel products. Parallel, as a long-term hybrid transformation product, will continue to be an important component of our product strategy.

In Puzzle, we tested seven to eight prototypes this quarter. Two of those showed 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 strategy.

In terms of technology and human resources construction, this quarter, AI has entered the core business process, technology development system, and deep integration stage of the GPS center from a single-point tool application. We can clearly see the evolution in three directions.

On technology, AI at GameHouse has moved past the standalone tool space and is now being integrated directly into our core business workflow, our R&D system, and our GBS platform. We see this playing out across three areas.

First, AI is a tool that goes to the organizational machine, WebCoding has already achieved systematic penetration in the daily development workflow of products and technology teams. It is promoting the traditional human-driven model of the entire development organization to continue to advance the AI assistant and human engineers' co-ordination model.

First, AI is moving from individual adoption to company-wide standard practice. WebCoding is now embedded in the day-to-day workflows of our product and engineering team. 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.

Second, AI has improved efficiency towards decision-making support. 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, AI is moving from a single-point application to a platform-based construction. This quarter, we are working in multiple directions, including in the field of code service, internal systems, MCP, open cloud, process innovation, and so on. We are working on a set of AI-based facilities that can be used, expanded, and managed.

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.

The construction of these capabilities is turning into measurable actual results. This quarter, Our powerful AI creation platform continues to use a strong market share, reaching nearly 70,000 calls per quarter, exceeding the 60,000 goals we previously set. At the same time, the AI official in the company has processed 240,000 large model calls this quarter, covering a range of early material generation, extensive expansion of customer service automation, market scan workflow, and other early agent workflow scenarios. These efforts are producing tangible, measurable results.

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.

In the long term, the rapid acceleration of AI capabilities in this quarter is also accelerating our thinking and upgrading of GameHouse's future strategic positioning. GameHouse has been focused on becoming the most valuable link between global players and developers since its establishment. 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 formed by AI capabilities and deep integration of distribution systems. This strategic line 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.

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

our shareholders. We will continue to invest in the business, release profits, and report to shareholders. We will create long-term shareholder value as the core issue.

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 priorities.

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. We will set the fourth quarter of the sales income in the fourth quarter of the year of June 30, 2026, between US$23 million and US$26 million.

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.

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.

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 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% over the 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 two 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 percent from 1 percent, 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 percent year-over-year, reflecting the continued improvement in our profitability profile. We ended the quarter with 18.3 million US dollars in cash and cash equivalents, compared with 15.2 million as of June 30th, 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 5 million US dollars share repurchase program in August, 2025, with a one year authorization period through August 18th, 2026. As of March 31st, 2026, we have repurchased approximately 392 1,000 class A ordinary shares for approximately $482,000. Going forward, we will continue to evaluating 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 30th, 2026, we expect total revenue to be in the range of approximately $23 million to $26 million. Overall, we are encouraged by the progress we continue to make this quarter, the operating of our guidance range, margin continue to improve, and both our DTC initiatives and AI-driven operational capabilities continue to gain traction. Looking ahead, we remain focused on this execution, strengthening our publishing and platform infrastructure, developing our product, and delivering sustainable long-term value for shareholders. With that, we are now happy to take your questions. Operator, please proceed.

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're 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 Hung Hui with Sanhi Capital. Please go ahead.

您好,管理层。 我有两个问题想要提问。 第一个问题是公司提到有三款RPG产品都计划在8月至9月上线。 你们打算如何错开营销支出呢? 我来翻译一下第一个问题。 You have three RPG titles targeting an August to September launch window. That's a lot of titles in a narrow time frame. Is there a risk of a cannibalization of resources stream? And how are you struggling the marketing spend across them? In Brian's earlier remarks, Kim mentioned that GameHorse's longer-term goal is to evolve into an AI-driven in targeted platform, both 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.

I will just let Carl, our CEO, to answer the first question.

This is Carl. I'll 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 conflicts or potential cannibalization.

First of all, we will try our best to release the three products as soon as possible. It is expected that each product will maintain a gap of about three to four weeks, so as to reduce the internal resource pressure brought by the concentration line.

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 point of view, we will also use the test performance, recovery cycle, and ROI data of each product to dynamically add budget, instead of putting three products at the same time.

From a marketing spend perspective, we will allocate budgets 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 Ali to translate into English. First of all, thank you for this question. And then this positioning is currently pushed to a very important strategic level within our company. From my understanding, the core of this positioning is to open up the two-end capabilities that we have built up. One end is the distribution, which is the global distribution system that we have accumulated over the past 10 years, and the ability to use it for growth, operation, and transformation. The other end is the production of content. As we know that AI has matured, the production method of content is also being repurchased. Our goal is to use AI to connect these two ends into a closed loop. 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 landing, I think the most direct step is to use AI to generate games. As Brian mentioned earlier, in this season, we have already completed the most critical ability construction in terms of AI-generated game content. This means that we have truly implanted AI in the entire production process of game content, rather than just using it in the previous material or operation stages. This is the first point that we put into practice in terms of content generation.

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 for making the content generation tangible.

OK, but our understanding of this content is absolutely not limited to the game. We believe that the ability of AI-driven content generation and global distribution can essentially extend to other interactive content other than games. Under the premise of ensuring focus on the main business, we are also exploring the potential to apply this platform capability in a broader field of content. This part is still under exploration. That said, our understanding of content is now 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 mode of the next phase for games and for the broader content industry, and we are laying solid groundwork to position ourselves for that opportunity.

Thank you, Zhenghui. That's our answer.

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

Hello, Manager Chen. I have two questions I would like to ask. The first question is that we are concerned that DTC is the most specific profit improvement catcher in the short term. I have two questions for management. The first one is BTC 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 commissions. What's preventing faster adoption? Is it player behaviors, platform restrictions, or something else? 我第二个问题是,公司这个季度的营业利润率从1%提升到了2.1%, 9个月累计的净利润同比增长了约40%, 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 2020, Thank you for your question. I will answer the first question first.

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 of all, from the point of view of compliance, not all regions can directly guide users to use third-party payment in the game. At the moment, the US market is the region where we can more clearly talk about third-party payment options in the game. Therefore, the company will gradually advance the coverage of DTT in order to ensure complete compliance.

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 U.S. is the primary market where we have relatively broad latitudes to present third-party payment options in-game, so we will continue to expand BTC only under a fully compliant split framework.

Secondly, from the perspective of the user's behavior, app shopping is still the simplest and most convenient payment method for most users. The number of steps to jump is the least, and the reliability of payment is relatively high. If we push third-party payment too aggressively, it may affect the overall payment conversion rate. Therefore, we are more concerned about the maximization of comprehensive revenue, rather than simply pursuing an increase in DTC ratio. In other words, we need to find the best balance between saving platform commission and maintaining payment conversion.

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.

另外的话,应用商店内购表现本身也是平台评估产品质量和自然流量分发的重要指标之一。 因此,公司在推进DTC的时候也会综合考虑平台的自然流量,用户体验和产品整体的收益,而不是采取刀切的方式。

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.

Okay, this is Sean, and I will answer your second question in Chinese first, and I will also let Ali to translate my answer into English. There is indeed a part of the current interest rate that is benefited from our initiative to shrink the purchase volume of this low-end. This part, as we are in the year of 2027, if we re-invest it, there will be a certain degree of return. This is objective. But at the same time, if we look at our interest rate this quarter, it's about 54% and it's about 2% higher. I think this improvement has nothing to do with the amount of purchase. I think it's mainly due to two structural factors. The first is the increase in the penetration rate of DTC mentioned just now, which directly reduces the cost of our platform division. The second part I think is This is a part of the life cycle of mature products. Our developers have a certain advantage in dividing the structure. I think this part can be kept. And as our DTC ratio continues to increase from 15% to 20%, I think this structural horsepower and red power will be further expanded. That's about it. Thank you.

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% this quarter, up about two 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 lifecycle. The portion is sustainable, and as DTC penetration continues to climb toward the 15% to 20% range, the structural growth margin benefit will expand further. That is broadly how we see it. Thank you.

Thank you, Avril. That will be that answer of us.

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

Okay. Thank you, operator. And thank you all for participating on today's call. And sorry for disconnecting for several times. And thank you for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.