Galaxy Payroll Group Ltd

Galaxy Payroll Group Limited operates in the payroll outsourcing service industry and the employment service industry across the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries, markets that are fragmented and populated by a large number of market players ¹. The Group's business is conducted through operating entities in Hong Kong, mainland China, Macau and Taiwan, with the majority of operations in the PRC and Hong Kong, exposing results to economic, political and legal developments in those jurisdictions ². Competition in these industries is intense, with some competitors holding advantages such as wider geographical coverage, broader service offerings, higher technology and security levels enabling greater economies of scale, better industry reputation and image, and higher capability in providing value-added services including consulting services and system maintenance and upgrade ³. The payroll outsourcing and employment service industries in the PRC are currently dominated by PRC enterprises, which used to be the only authorized entities to provide such services in the PRC ⁴. The Group's expansion plans focus on the PRC and Hong Kong, with a focus on the PRC market, though the fragmented and competitive nature of these markets and the dominance of local PRC enterprises present execution challenges ⁵.

The Group faces a concentrated customer base, with its five largest customers accounting for approximately HKD20.4 million (US$2.6 million), HKD18.3 million (US$2.3 million) and HKD22.0 million (US$2.8 million), representing approximately 70.9%, 66.7% and 73.0% of revenue for the years ended June 30, 2026, 2025 and 2024, respectively ⁶. For the year ended June 30, 2026, four major customers accounted for 26.7%, 17.0%, 11.6% and 10.3% of total revenues, while for the year ended June 30, 2025, three major customers accounted for 23.6%, 18.7% and 13.2%, and for the year ended June 30, 2024, three major customers accounted for 23.3%, 22.1% and 12.8% of total revenues ⁷. Revenue derived from channel customers accounted for approximately 59.5%, 62.4% and 63.7% of revenue for the years ended June 30, 2026, 2025 and 2024, respectively ⁸. The Group also depends on a limited number of suppliers, with its top vendor accounting for 100% of total accounts payable as of June 30, 2026 and 2025, and 23.3%, 30.3% and 34.4% of total in-country partner costs for the years ended June 30, 2026, 2025 and 2024, respectively ⁹. The Major In-country Partner, China-Key HR Outsourcing Co., Limited, an independent third party engaged since the founding of the Group, accounted for over 23%, 30% and 34% of in-country partner costs for the years ended June 30, 2026, 2025 and 2024, respectively ¹⁰. The Group's competitive position rests on more than a decade of operating history in the payroll outsourcing and employment service industries, with the founders each possessing over 16 years of experience in these industries and senior management members Ms. Lo Ho and Mr. Wu Chunlei possessing over 15 years of experience ¹¹.

The Group generates revenue primarily through payroll outsourcing services and employment services provided to enterprises and individuals across the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries ¹². Payroll outsourcing services are delivered both directly and through in-country partners, with the Major In-country Partner cooperating to provide local payroll outsourcing services and employment services in the PRC ¹³. Employment services include acting as employers of record for end-users, with seconded employees working for and under the supervision of end-users during the employment period while remaining employees of the Group pursuant to employment contracts ¹⁴. As of June 30, 2026, 2025 and 2024, the Group had 22, 13 and 6 seconded employees in Hong Kong, 65, 40 and 63 seconded employees in Taiwan, and 4, 2 and 3 seconded employees in Macau employed directly ¹⁵. Revenue is generated through both direct customer relationships and channel customers, with channel customers accounting for approximately 59.5% of revenue for the year ended June 30, 2026 ¹⁶. The Group maintains master service agreements with more than half of its channel customers, though these agreements do not impose any guaranteed or minimum number of employees for payroll outsourcing services or minimum number of employees to be seconded ¹⁷.

The Group's payroll outsourcing services span multiple geographies, with revenue derived from operations in the PRC, Hong Kong, Taiwan, Macau, Japan, Australia, Singapore, South Korea, Philippines, Indonesia, India, Vietnam, Malaysia, Thailand, Bangladesh and Italy ¹⁸. The Group operates through subsidiaries including Galaxy Payroll (HK), Galaxy HR (Macau), Galaxy Solutions Partner, Galaxy HR (TW) and Galaxy HR (SZ), with Galaxy HR (SZ) responsible for doing business in the PRC, Galaxy HR (Macau) responsible for Macau, Galaxy HR (TW) responsible for Taiwan, Galaxy Payroll (China) responsible for the PRC, and Galaxy Payroll (HK) responsible for Hong Kong ¹⁹. The Group obtained all requisite licenses, permits and approvals for business operations in Hong Kong including business registration certificates and the employment agency license, and obtained the Labor Dispatch Operation Permit required for acting as employers of record for end-users in providing employment services in the PRC ²⁰. The Group is not required to obtain any license from relevant government authorities for the provision of payroll outsourcing services in Hong Kong, Taiwan and Macau, and is not required to obtain any license for the provision of employment services in Taiwan ²¹.

During the year ended June 30, 2026, the Group recorded revenue of approximately HKD28.8 million (US$3.7 million), an increase of approximately 5% from approximately HKD27.4 million (US$3.5 million) for the year ended June 30, 2025 ²². Net loss decreased by approximately 61% to approximately HKD(10.6) million (approximately US$(1.4) million) for the year ended June 30, 2026 from approximately HKD(27.6) million (approximately US$(3.5) million) for the year ended June 30, 2025, primarily attributable to a decrease in research and development expenses by HKD19 million (US$2.4 million), with no research and development expenses incurred during the year ended June 30, 2026 ²³. The Group recorded net income of approximately HKD5.5 million (approximately US$0.7 million) for the year ended June 30, 2024 ²⁴. Gross profit was HKD10,492,083 (US$1,337,935) for the year ended June 30, 2026, compared to HKD11,681,231 for the year ended June 30, 2025 and HKD16,173,283 for the year ended June 30, 2024 ²⁵. Loss from operations was HKD11,078,505 (US$1,412,714) for the year ended June 30, 2026, compared to loss from operations of HKD27,758,397 for the year ended June 30, 2025 and income from operations of HKD7,024,481 for the year ended June 30, 2024 ²⁶. Cash and cash equivalents were HKD28,089,851 (US$3,581,975) as of June 30, 2026, compared to HKD32,188,711 as of June 30, 2025 ²⁷. Total shareholders' equity was HKD24,227,264 (US$3,089,424) as of June 30, 2026, compared to HKD27,099,242 as of June 30, 2025 ²⁸.

During the year ended June 30, 2026, the Group did not declare and pay dividends, while during the year ended June 30, 2025, the Group did not declare dividends and paid approximately HKD5.9 million (US$0.7 million), and during the year ended June 30, 2024, the Group declared dividends of approximately HKD9.4 million (US$1.2 million) and paid approximately HKD9.5 million (US$1.2 million) ²⁹. The Group effected a 10 for 1 Reverse Share Split on September 8, 2025, giving retroactive effect to the split ³⁰. As of June 30, 2026, there were 6,361,515 Class A Ordinary Shares issued and 5,601,515 Class A Ordinary Shares outstanding, at par value $0.00625 per share, and 360,000 Class B Ordinary Shares issued and outstanding, at par value $0.00625 ³¹. The Group's directors, officers, and shareholders holding 5% or more of Class A and Class B Ordinary Shares collectively own approximately 12.0% of outstanding Class A and Class B Ordinary Shares and are able to exercise approximately 77.7% of the voting power over matters subject to shareholder approval ³². Each Class B Ordinary Share has fifty votes per share, and Class A Ordinary Shares have one vote per share ³³.

The Group plans to expand its business operation in the PRC and Hong Kong, with a focus on the PRC market ³⁴. The Group may encounter difficulties in expanding its business operation in the PRC because the payroll outsourcing service industry and the employment service industry in the PRC are currently dominated by PRC enterprises, which used to be the only authorized entities to provide the services in the PRC ³⁵. There is no assurance that the Group can grow its customer base in the PRC, and any inability to execute development plans in the PRC market could adversely affect business, growth, financial condition and results of operations ³⁶. The Group's plans for development and business expansion are formulated based on assumptions on the occurrence of certain future events, which may or may not materialize, and there is no guarantee that the Group will be able to successfully implement its business plans or that any business strategies will yield the benefits or achieve the level of profitability as expected ³⁷. The Group may not be able to manage the growth of its business effectively in a controlled manner, and over-expansion may strain limited managerial, operational and financial resources, which may have a material adverse impact on the stability of operational and financial conditions ³⁸.

The Group's growth depends on its ability to maintain competitiveness through providing high quality services in the payroll outsourcing service industry and employment service industry ³⁹. The Group has been conducting business in these industries for more than a decade, and the sustainability of revenue and profit will depend on the ability to maintain competitiveness through providing high quality services ⁴⁰. The competition within the payroll outsourcing service industry and the employment service industry is intense, and competitors and new market entrants may increase in the future resulting in intensified price competition, which could in turn adversely affect bargaining power in terms of fees charged and consequently results of operations and prospects ⁴¹. The Group's market position may be hampered by intensified competition in the form of better services and/or price reductions by competitors, and failure to maintain high-quality services at competitive pricing could have a material adverse effect on business, operating results and financial conditions ⁴². The Group continually seeks to diversify its customer base, though there is no assurance that the proportion of revenue contribution from major customers to total revenues will decrease in the near future ⁴³. The Group will actively expand its suppliers base, but for now still depends on a limited number of major vendors ⁴⁴.

The Group's revenue may decline for an array of reasons, including failure to retain existing customers and/or attract new customers, intensified market competition, slowdown in the growth of the overall payroll outsourcing service market and the employment service market, and any unfavorable changes in government policies with respect to the payroll outsourcing service market and employment service market or the general economic conditions in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia or other Asian countries ⁴⁵. Historical figures for financial performance are reflective of past performance only and may not necessarily be indicative of financial performance in the future, and there is no assurance that there is a positive trend for business prospects ⁴⁶. The Group may not achieve comparable or higher level of financial performance in the future as achieved during June 30, 2026, 2025 and 2024 ⁴⁷. The Group's end-users may consider setting up their own human resources departments to manage their own payroll and employment functions when they expand to a larger scale in the respective regions, and if end-users decide not to continue engaging the Group for payroll outsourcing services and/or employment services due to their expansion of businesses, business and results of operations may be materially and adversely affected ⁴⁸.

The Group's margin trajectory reflects the elimination of research and development expenses, which decreased by HKD19 million (US$2.4 million) and were not incurred during the year ended June 30, 2026 ⁴⁹. Direct cost of revenues was HKD18,323,560 (US$2,336,593) for the year ended June 30, 2026, compared to HKD15,748,088 for the year ended June 30, 2025 and HKD13,951,669 for the year ended June 30, 2024 ⁵⁰. Selling, general and administrative expenses were HKD21,558,481 (US$2,749,105) for the year ended June 30, 2026, compared to HKD20,830,556 for the year ended June 30, 2025 and HKD9,047,204 for the year ended June 30, 2024 ⁵¹. Gross profit was HKD10,492,083 (US$1,337,935) for the year ended June 30, 2026, compared to HKD11,681,231 for the year ended June 30, 2025 and HKD16,173,283 for the year ended June 30, 2024 ⁵². The Group's cost structure evolution reflects the absence of research and development expenses in the most recent fiscal year, which contributed to the reduction in net loss ⁵³.

The Group's operational outlook includes maintaining stable relationships with its limited number of suppliers, as a limited number of major vendors have contributed a significant portion of supplies in the past ⁵⁴. The Group's top vendor accounted for 100% of total accounts payable as of June 30, 2026 and 2025, and 23.3%, 30.3% and 34.4% of total in-country partner costs for the years ended June 30, 2026, 2025 and 2024, respectively ⁵⁵. The Group will actively expand its suppliers base, but for now still depends on a limited number of major vendors and will expose itself to the risks of substantial losses and extend the turnover days if any of them reduces or even ceases business collaborations ⁵⁶. The Group's IT system is directly related to the stability and performance of business operation, and the Group has in its possession a substantial amount of personal data related to the employees of end users and seconded employees ⁵⁷. The Group is obliged to keep all personal data in its possession in such manner required by the laws and regulations relating to personal data protection implemented in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries ⁵⁸. The Group's continual development depends on its ability to successfully implement its business strategies and future plans, which in turn are subject to uncertainties and changing market conditions in the relevant jurisdictions ⁵⁹.

The Group's capital allocation priorities include maintaining sufficient cash resources, with cash and cash equivalents of HKD28,089,851 (US$3,581,975) as of June 30, 2026, compared to HKD32,188,711 as of June 30, 2025 ⁶⁰. Net cash used in operating activities was HKD8,136,095 (US$1,037,502) for the year ended June 30, 2026, compared to net cash used in operating activities of HKD27,707,982 for the year ended June 30, 2025 and net cash provided by operating activities of HKD6,725,500 for the year ended June 30, 2024 ⁶¹. Net cash used in investing activities was HKD73,799 (US$9,411) for the year ended June 30, 2026, compared to HKD63,356 for the year ended June 30, 2025 and HKD59,449 for the year ended June 30, 2024 ⁶². Net cash provided by financing activities was HKD3,930,986 (US$501,273) for the year ended June 30, 2026, compared to HKD49,269,420 for the year ended June 30, 2025 and net cash used in financing activities of HKD13,286,626 for the year ended June 30, 2024 ⁶³. The Group did not declare and pay dividends during the year ended June 30, 2026, did not declare dividends and paid approximately HKD5.9 million (US$0.7 million) during the year ended June 30, 2025, and declared dividends of approximately HKD9.4 million (US$1.2 million) and paid approximately HKD9.5 million (US$1.2 million) during the year ended June 30, 2024 ⁶⁴. Any historical dividend payment should not be regarded as an indication of future dividend policy or payment of dividends in the future ⁶⁵.

The Group faces structural headwinds including substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws and regulations, which could have a significant impact upon the business the Group may be able to conduct in the PRC and accordingly on the results of operations and financial condition ⁶⁶. The Group's business operations may be adversely affected by the current and future political environment in the PRC, and the Chinese government exerts substantial influence and control over the manner in which the Group must conduct its business activities ⁶⁷. The Group's ability to operate in China may be adversely affected by changes in Chinese laws and regulations, and under the current government leadership, the government of the PRC has been pursuing reform policies which have adversely affected China-based operating companies whose securities are listed in the United States, with significant policy changes being made from time to time without notice ⁶⁸. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, and only after 1979 did the Chinese government begin to promulgate a comprehensive system of laws that regulate economic affairs in general ⁶⁹. The Group's operations are subject to fluctuations in the exchange rate between the U.S. dollar and the Hong Kong dollar, and exchange rate fluctuations between the U.S. dollar and the Hong Kong dollar, as well as inflation in Hong Kong, may negatively affect earnings ⁷⁰. Since 1983, Hong Kong dollars have been pegged to the U.S. dollars at the rate of approximately HKD7.80 to US$1.00, and there is no assurance that this policy will not be changed in the future ⁷¹.

The Group faces execution risks including the need to maintain stable relationships with its limited number of suppliers, as the top vendor accounted for 100% of total accounts payable as of June 30, 2026 and 2025 ⁷². The Major In-country Partner accounted for over 23%, 30% and 34% of in-country partner costs throughout the year ended June 30, 2026, 2025 and 2024, respectively, and any deterioration, termination of relationship or change of service offerings from the Major In-country Partner may adversely affect business and results of operations ⁷³. The Group's success depends on key management personnel, and there is no assurance that the Group will be able to retain these key personnel, and the loss of any of them without suitable and timely replacements, or the inability to attract and retain qualified personnel, may adversely affect business, results of operations, financial positions and prospects ⁷⁴. The Group may be vicariously liable for the acts or omissions of seconded employees and may be exposed to employment-related claims, including claims by seconded employees of wrongful termination, discrimination or harassment, rights under employment contracts, entitlement of employment benefits, and claims by customers of end-users for any negligent conduct or fault of seconded employees ⁷⁵. The Group's businesses collect, host, store, transfer, process, disclose, use, secure and retain and dispose of personal and business information, and collect, hold and transmit client funds, and a security or privacy breach may damage or disrupt businesses, result in the disclosure of confidential information, damage reputation, increase costs, cause losses and materially adversely affect results of operations ⁷⁶.

The Group faces material risks specific to its business model and current situation. Customer concentration is acute, with the five largest customers accounting for approximately 70.9%, 66.7% and 73.0% of revenue for the years ended June 30, 2026, 2025 and 2024, respectively ⁷⁷. For the year ended June 30, 2026, four major customers accounted for 26.7%, 17.0%, 11.6% and 10.3% of total revenues, and as of June 30, 2026, four customers accounted for 29.1%, 23.2%, 20.7% and 18.9% of total accounts receivable ⁷⁸. Supplier concentration is equally severe, with the top vendor accounting for 100% of total accounts payable as of June 30, 2026 and 2025, and the Major In-country Partner accounting for over 23%, 30% and 34% of in-country partner costs for the years ended June 30, 2026, 2025 and 2024, respectively ⁷⁹. The Group's channel customers accounted for approximately 59.5%, 62.4% and 63.7% of revenue for the years ended June 30, 2026, 2025 and 2024, respectively, and master service agreements with channel customers do not impose any guaranteed or minimum number of employees for payroll outsourcing services or minimum number of employees to be seconded ⁸⁰. The Group's operations are subject to substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws and regulations, and the Chinese government exerts substantial influence and control over the manner in which the Group must conduct its business activities ⁸¹. The Group's businesses collect, host, store, transfer, process, disclose, use, secure and retain and dispose of personal and business information, and collect, hold and transmit client funds, and a security or privacy breach may damage or disrupt businesses, result in the disclosure of confidential information, damage reputation, increase costs, cause losses and materially adversely affect results of operations ⁸². The Group's accounts receivable amounted to approximately HKD3.3 million and HKD3.6 million (US$0.4 million and US$0.5 million) as of June 30, 2026 and 2025, respectively, with accounts receivable turnover days of approximately 43 days and 41 days for the years ended June 30, 2026 and 2025, respectively ⁸³. The Group may be vicariously liable for the acts or omissions of seconded employees and may be exposed to employment-related claims, with 22, 13 and 6 seconded employees in Hong Kong, 65, 40 and 63 seconded employees in Taiwan, and 4, 2 and 3 seconded employees in Macau employed directly as of June 30, 2026, 2025 and 2024, respectively ⁸⁴.

Management's message to shareholders emphasizes the Group's more than a decade of operating history in the payroll outsourcing service industry and the employment service industry, with revenue of approximately HKD28.8 million, HKD27.4 million and HKD30.1 million (approximately US$3.7 million, US$3.5 million and US$3.9 million) for the years ended June 30, 2026, 2025 and 2024, respectively, and net (loss) income of approximately HKD(10.6) million, HKD(27.6) million and HKD5.5 million (approximately US$(1.4) million, US$(3.5) million and US$0.7 million) for the same periods ⁸⁵. Management attributes the reduction in net loss for the year ended June 30, 2026 primarily to a decrease in research and development expenses by HKD19 million (US$2.4 million), with no research and development expenses incurred during the year ended June 30, 2026 ⁸⁶. The Group's strategic priorities for the period ahead center on expanding business operations in the PRC and Hong Kong with a focus on the PRC market, maintaining competitiveness through providing high quality services, and actively expanding the suppliers base while managing dependence on a limited number of major vendors ⁸⁷. Management acknowledges that the Group may encounter difficulties in expanding its business operation in the PRC because the payroll outsourcing service industry and the employment service industry in the PRC are currently dominated by PRC enterprises, which used to be the only authorized entities to provide the services in the PRC ⁸⁸. Management also emphasizes the importance of retaining key management personnel, including Mr. Lao, Mr. But and Mr. Yeung, each with over 16 years of experience in the payroll outsourcing service industry and employment service industry, and senior management team members Ms. Lo Ho and Mr. Wu Chunlei, who possess extensive experience in these industries for over 15 years ⁸⁹. The Group's forward-looking statements include expectations regarding timing of the development of future business, capabilities of business operations, expected future economic performance, competition in the market, continued market acceptance of services and products, changes in laws that affect operations, inflation and fluctuations in foreign currency exchange rates, continued development of a public trading market for securities, the cost of complying with current and future government regulations, managing growth effectively, projections of revenue, earnings, capital structure and other financial items, fluctuations in operating results, and dependence on senior management and key employees ⁹⁰.