CTW (CTW) Earnings Call Transcript
September 23, 2026
Earnings Call Speaker Segments
[Audio Gap] consumer fire chat. I have the pleasure of welcoming Patrick Liu, CFO of CTW, who's going to tell us about the CTW story today. Patrick, thanks so much for joining us.
Thank you. Thank you, Aaron thank you for having me. And also thank you to A.G.P for hosting us here. So I think before we begin for today's discussion, there are going to be some forward-looking statements about the company. So the actual results may differ. And those are the things that we have in our SEC filings and since -- so I'm looking forward to also the company, CTW and the platform we are building here.
Absolutely. And those should be popping up on the screen. So Patrick, maybe to start things off, could you give a brief overview of the CTW story as some of the listeners may be new to the name?
Yes, sure, sure. So CTW, we turn [indiscernible] to Japanese Anime and Manga into free-to-play games. You can play instantly in the browser with no download, no app store and no restriction. So our platform is actually called the G123 the domain is G123.jp, which launched in Japan in 2018, and we did add English to the platform in 2021. We work with Anime IP holders and third-party game developers. We secured the IP rights with IP holders, and we have the developers build the games. We then dispute market and operated games through the platform. We shared in-game process with both IP holders and the game developers. So roughly net of the revenue share with both parties will return around 8% of the growth in game process. The model -- this model, I think, keeps us asset-light. For early August of 2026, we had licenses with around 30 IP holders, and we have around 42 live games on the platform. We have paying users from more than 180 countries in the world. And also, we completed our listing on NASDAQ in August last year. So for fiscal year 2025, we have a gross in-game purchase around USD 107 million, and we reported revenue around USD 90.4 million. So that [indiscernible] is actually up by 32% from last fiscal year, we reported. So our focus -- we focus on the license the Anime IP and the instant broader access, I think those are the two major differentiators of our platform with all the other gaming platform out there. I think that's the overview of CTW, our story, who we are, what we do.
No, I really appreciate that overview, Patrick. And for anyone in the audience, if you have any questions, go ahead and type in the chat box or you can e-mail me at agrey@allianceg.com, and we'll get those questions answered either during or at the end. So maybe lets take it back and talk about the broader H5 browser game category. How large is it globally? How does it compare to the native modal gaming? And why do you see it as maybe underexploited relative to app store gaming?
Yes. I think from my side, I'm probably going to separate those into what mattered from what our view is, right? So Frost & Sullivan saw us the top 10 H5 platforms at roughly [ $954 million ] of gross billings in 2023, and we ranked the third behind Tencent Games and NetEase Games. [ Our deck ] also cites a much larger mobile gaming estimates for 2026. But I think that is a very different source year and the definition. So I would not calculate an actual market share from 2 figures. I won't hand you a precise global H5 market size because all those third-party estimates vary a lot from the actual figure. I think our view is actually very different. Our view is [ wise face Anime ] and wise face our business model. So from our perspective, a fan who sees a clip or post can play the game actually in a second on any device. And we don't really pay apps to our commissions. Our payment processing costs run about 5% of gross in-game versus amounts. So the trade off is discovery, right, apps get to building store traffic and we buy ours. So I would -- the under-explored is our thesis, right, rather than [ married ] statistics. We believe Anime is going mainstream globally, and our focus is combining licensed Anime IP with instant access to the games and a direct distribution relationship with users who actually love the Anime IP content.
Okay. Great. I appreciate that, Patrick. And you partially answered this, but [indiscernible] a little bit further because your games run entirely on the browser with no app presence. So maybe speak more to why you built the business this way, which you kind of alluded to, but maybe more in terms of what it means for the economics versus what you would be doing with a typical mobile publisher that gives a cut to the app store?
Yes, sure. I think if we're going to go into a little bit deeper into this question and talking about economics and the numbers, so firstly, as I think we -- in today's word, we do see for app stores, they could charge commissions up to around 30%. Right? That is very typical in today's world in the industry. And for us to hosting our own platform without relying any app stores, we basically just immediately waive that sort of 30%. What that 30% could possibly equivalent to is think about our model. So we pay roughly 20% in combination to game developers and IP holders. And plus on top of that, we also pay roughly 5% to the payment processors, right? So that's around 25%, which is still lower than the straight 30% commissions paid directly to the app stores. So what that gives to us is we don't really pay that 30%. So we are able to retain that 30% for additional reinvestment in pay-to-use acquisition, which is going to be owned by us through our own platform. And also, we can use those extra money for continued investment in future titles, futures IPs, future games, which is going to help us to continue the growth, right? And also beyond that, I think from our perspective, the -- I think over the time, it means we had more resources, more cash, we are able to -- or we are free to use to actually enhance the platform we own enhance the relationship with users that we actually own. So I think that actually makes I mean, yes, number is one thing, but the more importantly is actually the fact that through building up this platform, not relying on app stores, make our own platform not reliance on any third-party sources for app stores. I think that's the most important thing.
Appreciate that. And going forward in terms of that enhanced user experience, another you elected to do is you chose not to run in-game advertising and more so relying on in-game purchases. So why forego that revenue stream? And how do you think about the trade-offs and potential incremental average revenue per user that it could unlock?
Yes. I think from that, that's actually a very good question. I think -- so that is actually a product and IP decision as much as a financial one. So for most of our players, they come to our platform, they come to the games for the characters and the stories. And beyond that, our licensors, the IP holders, they also care very much about their IP and especially how their IP is presented. So interruptive ad advertisements on our platform in any of the games could possibly chip that experiences and create distractions and shorter user visit times on our platform, the actual in-game content. So that's why we rely on in-game purchase where free players can progress meaningfully with optional spending and also from the economic perspective. So our economics show that for the players most of the time, they are highly engaged, the one we don't really post those advertisements within the game. I think this is also something you could possibly see from our historical presentations. We have paying users spend roughly $100 -- over $100 per month in the first half of fiscal year '26 and also on average, only $4 per month across all monthly users on the platform. So I think from that perspective, what matters most is actually keeping those players engaged as long enough to convert and stay rather than just to go with free advertisement where the economic returns is really not even comparable to the actual in-game purchase. So I think that is why we stick with in-game purchases, not go with in-game advertising.
No, that's helpful color in terms of why you went with that decision. You brought up license, right? So licensing Anime IP, it's key to your model. Can you walk us through how you identify and secure IP and what the economics of a typical licensing deal might look like?
Yes, sure, sure. So we always just make sure that with respect to the original work of the IP, whoever which IP we work on. So most of the typical process looks like this. We try to find our identified IPs with very strong character attachment and enough depth in the story line to support a live game with regular events. And also, we want the IP itself can be played well in a broader environment because that's where our platform, our games are on right? So practically, we license the IP from the right holder. And then we pair it with a very experienced game developer, who bring the cast, the game general, the way, the storyline, the original storyline and combine them together. And then we used -- we prepaid both IP holders and game developers. So from that perspective, we assure the downside per title is actually known upfront. And then we use the lab data from our platform to optimize user acquisition to optimize advertisement marketing efforts. So for each individual game, the deal -- I mean, definitely for sure, the contract is going to write it by each title, each IP. So the individual contract term is still confidential. But roughly as I think high level, I kind of mentioned this earlier, we pay around 10% in-game purchase amount to the IP holders and another 10% roughly to the game developers who actually developed the game and own the games. So normally the terms of our agreements with developers and IP holders range -- have an initial term of around 3 years, from the launch of the games. And most of the time, we do have renewal rights in those agreements. We don't really have an exclusivity on the agreements with IP holders typically, but we do have distribution exclusivity on our contract with game developers. So whatever games they developed, they are only able to distribute through our own platform.
Okay. Great. Really appreciate that. Maybe next, let's talk about the cycle, how you get a concept of a game to it becoming live? I know you have different stages of it and part of that, including kind of the preregistration. We've actually seen preregistration shrink from 13 to 5 over the past year, while live titles has grown from 28 to 14 -- 42, I'm sorry. So maybe talk about that cycle and whether or not we're seeing a deliberate shift towards converting that pipeline from preregistration to lab games?
Yes, sure, sure. So typically, the process looks like this. So we talk with the identified. We negotiated IP licensing agreements with IP holders, and we bring that IP to game developers. So they are able to develop the game. And after we all passed it and also the IP holder review it, we then make sure that it's actually launched on platform with our market supports. That process could take somewhere between half year to over a year. So you're probably going to see that we have some games that are in [indiscernible] for a bit in there. And a lot of times, it could be because there's some -- still review problems or some common feedback from either our side or from the IP holder side on the games. So I actually appreciate that you just noticed that there's a change in the number of count of our preregistration games. So from that side, I just want to highlight, the preregistration count is really just a snapshot for that period of time, right? I think that's a lower number alone means the slowdown in our licensing offers or in our continued launches. So I think what I want maybe -- I think maybe makes more sense to actually view is from the end of fiscal year 2025 when we reported, we had 29 live games to early August of this year. We now have 42 games. So you do see that we continue launching new games to -- through our platform. I think that actually means a lot. And also beyond just the preregistration, preregistration just means that we -- the game development actually bring to a status where we are happy and the IP holder, original IP holder is also happy with the development and -- we are able to publicly disclose that. But beyond the preregistration games, we do have other in-development games that we are not able to just put in the preregistration yet. So from that perspective, I think through the end of -- the early August of beyond of the 5 -- again, in preregistration, you see, we also had an additional of 12 games in our backlog. So I think that basically means our -- we have sufficient games in our backlogs that we are continuing to launch. And we always the entire company, the entire marketing team, entire operating team will continue working very hard to try to secure more IPs, secure more agreements with game developers, make sure that eventually, there's more games on the platform for the fans to enjoy.
I appreciate that. And obviously, with each launch, you don't know how successful the game is going to be. Some more successful than others. Talking about one of your most successful Vivid Army alone accounted for almost 30% or over 30% of your revenue in 2025 fiscal year. How do you think about game launches, concentration risk? And what's the strategy in terms of reducing any single title dependence over time?
Yes, I would say that's actually also a good question. So from our perspective, we actually know that there's a risk of revenue concentration. And also, we actually disclose it as a risk in our annual fillings with SEC. But also, I do want to highlight the trend is actually what matters more, I believe. So Vivid Army is actually one of our most successful games since we launched the G123 platform. Historical Vivid Army actually contributed a much larger percentage of our revenue. So in fiscal year 2023, Vivid Army accounted for almost 60% of revenue. And then that percentage actually dropped down to around 40% in fiscal year '24 and then 30% in fiscal year '25, which is actually the number you are referring to, right? So also in a very similar pattern, Queen's Blade, which is used to be the second largest game on our platform. And it's also went from 31% to 20% and then to 11%. So I think our approach to address the revenue concentration issue you highlights, is we continue launching new games and [indiscernible] expand our outreach outside of Japan. So through that, we do see that newer titles actually filled in really fast. One very good example is in August. October of 2024, we launched a new game its called So I'm a Spider, So What? Right? In that October 2024 is actually in the fiscal year of 2025. And for that year, the very first year, this game was launched is already contributing roughly 16% of that year's revenue. So I think that is actually what really matters over time when we talk about revenue concentration, right? We do launch new games, which actually contribute a lot more revenue over the time. So I think that overall is our approach that we continue to, to make sure that we have a [indiscernible] to do tackle down the revenue concentration problem.
Absolutely. Let's talk a little bit about your marketing playbook and how you think about the return on ad spend. In a dip below 100% in fiscal year 2024 rebounded in 2025 and first half of '26. So maybe talk about your marketing playbook and any targets you have in terms of return on ad spend?
Yes, sure, sure. So -- but before I dive into the more detail how we can address the marketing and how -- what we have done in fiscal year '24 -- or after fiscal year '24 to improve that. I do want just to maybe highlight one thing. So firstly, the ROAS, you see disclosed on our SEC fillings in our annual reports the definition of ROAS of ours is quite different from the same term used by a lot of the other gaming companies out there. So for us, ROAS is calculated as in-game purchase from users acquired in the period divided by the advertising spend in that period. So it is actually a near-term matter based on actual purchases rather than estimates of lifetime value. So that means that this figure actually moves with our launch calendar and spend decisions. So a single period rating needs to be viewed alongside what we were launching. right? So our ROAS was 130% in fiscal year '23 and then dropped to 99% in fiscal year '24 and back to 116% in fiscal year 2025. So in fiscal year '24, advertising rose about 100%, while in-game versus rose about 4%. We were spending ahead of the returns on new launches and especially considering the fact that we actually doing a lot of testing in the emerging markets for this business. So that is the main reason why you see there's a slight dip in fiscal year 2024. But the dip is actually -- I don't think it's insignificant, but it's a small dip. It's just 1% below our internal stat benchmark of around 100%. And then in fiscal year 2025, we tightened our spend. So you see that in fiscal year '25, the ROAS reported immediately come back to over 100%. So we end up with 116%. So what has changed in the playbook. So for each title, we launched, that we test the unit economics, our lab data early and their capital prepayments and have been more deliberate in selecting which games are allocated greater spend based on early success of those titles. So -- and also we try to react as fast as possible. So this is also something that you're probably going to see in the first half first half of this current fiscal year. So for the first half of this current fiscal year, we react very fast. We cut off around 24% advertisement spending year-over-year. And the revenue stays the same. So we are actually preserve a lot of capitals and react fast to make sure that we have a very healthy ROAS and we can continue the growth of the business.
Okay. Great. That's helpful color on that. Another thing we wanted to ask about in terms of the monthly average user and it fell sharply in the first half of 2026, despite in-game purchases holding up. So how should we think about that divergence? Was it temporary, an intentional move? Or was it more of a structural change?
So I would say the MAU decline you see there is mostly the result of the advertisement cut that I just mentioned. So it's actually a discipline decision rather than a change in the model or a change in the market demand. So when we put back on titles that weren't really meeting our return threshold internally, we actually cut off a lot of advertisement and user acquisition spend. So that's why you see for the first half of fiscal year '26, advertising fell 24% to around USD 19 million and we rebuild the paid acquisition of those titles. And that is the main trigger why MAU fell 39%. But the other thing that I want -- I do want to let you know to actually also monitor or see is that even though, yes, MAU fall 39%, but the PMU, the paying monthly users is actually stay up there. So it has declined a little bit, but the users still really like the content we put out there and stick with us. right? So that, I would say, is the most important things about this business model and how we make decisions once we see not so good performance from certain launches, we immediately cut off advertising spending, and we don't just chase top line growth and without considering the overall economics or the returns from those investments.
Yes. So let's talk a bit more in terms of those paid users. Only about 2% to 3% of your monthly users convert to paying users. They're spending about $100 a month. So how do you think about widening that funnel versus deepening spend from your existing payer base?
Yes. I think from our perspective, we don't really think that it's quite easier of a question, because [indiscernible] showed the trade-off. So from fiscal year 2023 to fiscal year 2025, growth came mostly from widening the payer base. So average paying monthly user went from about 57,000 to about 88,500 while the spend per payer went from roughly $144 to about $101 per month, so in the first half of fiscal year '26, payers were flat at around 76,000 and the spend per payer was about $107. So the ratio of Paying Monthly Users to Monthly Active User rose to 3.8% from 2.4%. But I think most of that is actually because that we do see the monthly active [indiscernible] shrink that the decrease in the MAU number we just mentioned, which is to talk about. So I think from that perspective, when we say widening, right, one of the actually means we're going to have content that convert more first time payers and international expansion. So deeing actually means that we have more live events for the current games and more collaborations, more updates that could possibly give existing payer reasons to keep engaging and keep playing the game and keep making the in-game purchase. So I think we are roughly trying to do both as much as possible. But from the short term, I would say probably you would see more revenue or more growth come from the widening side, right, because we are really just started globalization a few years ago and we do see that could the near-term more significant driver on more noticeable drivers of the revenue growth. But over time, [indiscernible] doing a lot of things, trying to deepen the spend by working with game developers, working with different IP holders, try to make sure that there is continually new content updates in each individual games, but you probably ask investors or ask the company, we probably will not be able to see that impact as significant as the widening effect.
That's helpful. Let's talk about geographic exposure a bit. You've obviously originated and have your primary focus in Japan, but you've been expanding really from outside Japan grew from 19% in fiscal '24 to over 32% in the most recent fiscal half of '26. You just opened a New York conference earlier this year. So maybe talk about your international strategy and which markets you're prioritizing and how you plan to replicate the success you've had in Japan?
Yes, sure, definitely. So I like that. So you bring this up. So for us, since the past couple of years, we have been doing a lot of global -- globalization, global expansion outside of Japan. We do see very possible outcomes. Of that, just as you mentioned, we do see revenue from outside Japan grew from roughly 19% from fiscal year '24 to 32% in the first half. And also beyond just the revenue number, we also see user base is actually more international today than the revenue mix. So from some data we have, we see roughly 57% of fiscal year '25 active users were actually outside of Japan. And so for all the markets outside Japan, we do see that our second largest international market is actually in North Korea and the third one is actually U.S. So I believe that North Korea -- sorry, North America is where we see the biggest long-term opportunity and also that is where we prioritize for our globalization strategy. So that is also the essential reason why we opened our New York City office earlier this year. And also, I think some of you guys may already noted that we sponsored Anime NYC in August. Anime NYC is one of the largest Anime conventions on the East Coast in the U.S. So regarding replicating the Japan playbook, I think that takes a few things to actually make it work in any market outside of Japan. Right, a few things like how the IP is going to resonate locally, with the rights and that cover the territory. So we do considering a lot about that. When we pick new IPs, we always consider the target markets we put -- we then try to put those IPs in. And also beyond the IP selection, we also try very hard for game localization. So when I talk about localization is not really just a mean of just translating, right? It's not just translating the content from Japanese to English is also means that we have such local marketing strategies. We make sure the game genre actually meets the local audience's or local fan's demand. And beyond that is also as an international platform, we also try to make sure we always make sure for the target markets, we have -- we cover all the local payment methods. That's also very important, right? Otherwise, the user may stuck with some -- not be able to pay us when they really -- even though sometimes they are really interested in the in-game content, right? And also the local market presence, right? So that goes back to our New York City office that we just debuted earlier this year. So we hired marketing people here who actually know the markets, who know what to do, and then we try to utilize their talents and their resources to make sure that when we communicate with the local market, it's actually communicated to the local market in the right way. So those are a couple of things that we think is very important to replicate the Japan playbook and make sure that it is actually going to be a success in the future.
Yes. Diving a bit more into localization. Does localization and IP licensing get more complicated as you move into non-Japanese markets where maybe some of the source anime is less known?
Yes. I mean, two things, right? So one thing is on the licensing side, right? For -- on the licensing side, most of the time, we try to obtain the global rights to our titles and make sure we have the license that covers the markets, [indiscernible] we are targeting. So that means for now, definitely, we're going to make sure that whatever license we have from the IP holders is going to cover U.S., it's going to cover English, right? So -- and beyond that, we -- on the other side of this is really more on the localization is more than translation just as I mentioned earlier. So it also means that onboarding, pacing UI, the monetization expectations it's those -- all those things are very different market by market. So we try to adapt those without changing the original identity of the IP and use -- we also use some self-developed AI-backed tools to kind of speed the translation and make sure the quality of the translation is actually good. And also we use both technologies plus our internal resources to make sure that asset adoption is actually very strong and have the high quality that we really expect. So one good example, I would say, that we have recently is the The Apothecary Diaries franchise that we just launched a game on in, I think, a couple of months ago. It is actually a very, very popular IP. I think they actually sold more than 54 million copies worldwide. And for that, when we try to do the localization, we actually have somebody who have a very strong connection with the Anime community in the U.S. and know the original content a lot and overview the overall translation and as such design process to make sure when we actually deliver, its delivered something that's actually meeting the local fans expectations. So I think that's how we handle localizations and IP licensing and stuff.
No, thank you for that. Maybe think about the broader competitive environment. Who do you see as your closest competitors? Is it other H5 platforms, mobile gaming publishers with anime, something else entirely? And what do you think is defensible about your position as more players aim to chase that same -- those same IP licenses?
Yes. I think -- this is actually an interesting question. So from competition landscape, I think this is maybe the easiest way to try to bring back the Frost & Sullivan report. I know it's a little bit old now, but in their report, based on their industry research, which they show that for global H5 platforms by gross billings, we're actually the third one behind Tencent games, NetEase games. And beyond those two really giant games, giant names in the gaming sector, right? There's also other smaller names in that list, including something like DMM Games, which is originally from Japan. And there's also Poki there's 4399 Games. These are also some of those popular H5 companies out there to also do H5 games. So -- but I think we are actually in a very interesting inter-sector ourselves. Our platform, we actually not just to do Anime gaming or we're not just do H5 gaming. We actually combine the two concepts together. So we're naturally just competing directly with just in Tencent, NetEase on H5 or we're not just competing with the other Anime-focused game studios. So from that perspective, I think, what we think is something actually defensible for us when we're competing with all those other companies is actually the execution. Its not really we have [indiscernible] the IP games and not the fact that we have the H5 broader gaming platform. Its execution. So it is actually everything we have that combined together and make sure that we are able to compete with all these different competitors. So what those couple of things that actually makes our competition success is long-standing relationships with the right holders, and we have a repeatable process for powering IPs with developers. We have our own platform. We have our own user data. We have our own marketing tools that can make sure that when we acquire users, we are able to acquire users the most efficient way. So I think those things in combination, help us a lot when we compete with other competitors, right? So I would say that is how I see when we compete with our closest competitors in the world.
That's great. And maybe just lastly before we close things out. Let's talk a little bit about profitability and margin targets as you're launching these new games, looking to grow the top line, how should we think about profitability for the company and potential long-term profit targets?
So for now, because we are still a very young public company, we don't really publicly disclose so-called long-term margin target. And I don't even -- I don't also want to give you a number just because we are on this call and try to give a number for a number, right? So what I can do is maybe I can describe the levers and give you the history. So I think for us, the levers are advertising efficiency and payback discipline. So the content mix, meaning hits with strong engagement. Our operating leverage, if revenue grows faster than platform and team costs and the payment cost advantages of browser distribution comparing to as app store distribution. I think those are the levers we have. And also on the history side. So we do report adjusted EBITDA. So adjusted EBITDA margin was about [ 70% ] in fiscal year '23, and 24 and close to 10% in fiscal year '25 when we started investing heavily launches and expansion and also around 10% in first half of fiscal year '26. And also beyond of adjusted EBITDA, we also reported segment profit. Segment profit has been 29% to 32% of gross in-game versus on a full year basis across fiscal year '23 to fiscal year '25 and 24% to 37% across half years most recently, the 37%, right? So our aim is profitable growth at the GAAP operating level, but we are not giving a target really of the timing or timing for now. So that's -- that's what I can say.
Okay. Great. Really appreciate that, Patrick. I think that's a great place to close things out. Again, thank you, everyone, for tuning in and listening in. Patrick Liu, CFO of CTW trade on the NASDAQ ticker CTW. And also feel free to open up your browser and play a game, don't need to download on the app. So with that, I'll kick it off to you, Patrick, any closing remarks you might have.
All right. Thank you, Aaron, again. And also thank you for the very thoughtful questions, and thank you to everyone who joined us today. I think to leave you with some essentials. So CTW, we operate G123. Our only instant gaming platform for licensed Anime IP. We used -- we built up the platform so we can have the direct connection, bring games to markets and learn, work, engages players and allocate marketing dollars with the discipline. And the first half of fiscal year '26 is a little bit [ softer ], but we do expect that we can continue launching new games, continue to expand globally, to help re-boost our growth. So we appreciate the support of our shareholders and we thank A.G.P for hosting us, and we look forward to updating you when we report our fiscal year 2026 results. And thanks again, and have a great rest of your day.
Thank you very much, Patrick, and thanks everyone for joining in. Have a great day.
Thank you.
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