Patrick, thanks so much for joining us.
Thank you, Aaron. Thank you for having me, and also thank you to AGP for hosting us here. I think before we begin, for today's discussion, there are going to be some forward-looking statements about the company, so the app results may differ. And those are the things that we have in our SEC filings and since. I am looking forward to also the company CTW and the platform we are building here.
Absolutely. And those should be popping up on the screen. 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?
Yeah, sure. CTW, we turn licensed Japanese anime and manga IP into free-to-play games. You can play instantly in the browser with no downloads, no App Store, and no registration. Our platform is actually called the G123, the domain name 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 secure the IP rights with the IP holders, and we have the developers build the games. We then distribute, market, and operate the games through the platform. We share the in-game purchases with both the IP holders and the game developers. Roughly net of the revenue share with both parties, we retain around 80% of the gross in-game purchases. 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. For FY 2025, we have gross in-game purchases around $107 million, and we reported revenue around $90.4 million. That number is actually up by 32% from last fiscal year we reported. We focus on the licensed anime IP and the instant browser 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, 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 email me at agray@allianceg.com, and we'll get those questions answered either during or at the end. Maybe let's take a step back and talk about the broader H5 browser game category. How large is it globally? How does it compare to the native mobile gaming, and why do you see it as maybe underexploited relative to App Store gaming?
Yeah. I think from my side, I'm probably going to separate those into what mattered from what our view is, right? Frost & Sullivan cites the top 10 H5 platforms as roughly JPY 954 million of gross billings in 2023. And we ranked the third behind Tencent Games and NetEase Games. Our deck also cites much larger mobile gaming estimates for 2026. But I think that is a very different source here in the definition. I would not calculate an actual market share from the two 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 why it fits anime and why it fits our business model.
From our perspective, a fan who sees a clip or a post can play the game actually in a second on any device, and we don't really pay App Store commissions. Our payment processing costs run about 5% of gross in-game purchase amounts. The trade-off is discovery, right? Apps gets the building store traffic, and we buy ours. The underexploited is our thesis, right? Rather than a matter of 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 the users who actually love the anime IP content.
Okay, great. I appreciate that, Patrick. You partially answered this, but would ask a little bit further because your games run entirely on the browser with no app presence.
Yep.
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.
Yeah, sure. I think if we are going to go a little bit deeper into this question and talking about economics and the numbers. Firstly, as I think in today's world, 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. For us to hosting our own platform without relying any app stores, we basically just immediately waive that 30%. What that 30% could possibly equivalent to is think about our model. So we pay roughly 20% in combination to game developers and the IP holders. Plus on top of that, we also pay roughly 5% to the payment processors, right? So that is around 25%, which is still lower than the straight 30% commissions paid directly to the app stores.
What that gives to us is we do not really pay that 30%, so we are able to retain that 30% for additional reinvestments in paid user acquisition , which is going to be owned by us through our own platform. Also we can use those actual money for continued investment in future titles, future IPs, future games, which going to help us to continue the growth, right? Also beyond that, I think from our perspective, I think over the time, it means we have 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.
I think that actually makes. Yes, number is one thing, but 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 or app stores. I think that is the most important thing.
Well, appreciate that. Going further in terms of that enhanced user experience, another thing you have elected to do is you have chose not to run in-game advertising and more so relying on in-game purchases. Why forgo that revenue stream, and how do you think about the trade-offs and potential incremental average revenue per user that it could unlock?
Yeah. I think from that is actually a very good question. I think for that, it is actually a product and IP decision as much as a financial one. For most of our players, they come to our platform, they come to the games for the characters and the stories. Beyond that, our licensors, the IP holders, they also care very much about their IP and especially how their IP is presented. Interruptive 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 on the actual in-game content. That is why we rely on in-game purchases where free players can progress meaningfully with optional spending, and also from the economics perspective.
Our economics show that for the players, most of the time they are highly engaged the one we do not 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 over $100 per month in the first half of fiscal year 2026, and also on average only $4 per month across all monthly users on the platform. 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 advertisements where the economics returns is really not even comparable to the actual in-game purchase. I think that is why we stick with in-game purchase, 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? Licensing anime IP, it's key to your model.
Yep.
Can you walk us through how you identify and secure IP and what the economics of a typical licensing deal might look like?
Yeah, sure. We always just make sure that we respect the original work of the IP, whoever, which IP we work on. Most of the typical process looks like this. We try to find or identify IPs with very strong character attachment and enough depth in the storyline to support a live game with regular events. Also, we want the IP itself can be played well in a browser environment because that's where our platform, our games are on. Right? Practically, we license the IP from the right holder, and then we pair it with a very experienced game developer who bring the game genre with the storyline, the original storyline, and combine them together. Then we prepay both IP holders and the game developers. From that perspective, we assure the downside per title is actually known upfront.
We use the live data from our platform to optimize user acquisition, to optimize the advertisement marketing efforts. For each individual game, the deal, definitely for sure the contract is provided by each title, each IP. The individual contract term is still confidential, but roughly as I think high level, I 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 develop the game and own the games. Normally, the terms of our agreements with developers and IP holders range have an initial term of around three years from the launch of the games. Most of time we do have renewal rights in those agreements.
We do not really have an exclusivity on the agreements with IP holders typically, but we do have a distribution exclusivity on our contract with game developers. 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 of how you get a concept of a game to it becoming live. How you have different stages of it, and part of that including the pre-registration. We've actually seen pre-registration shrink from 13 to five over the past year.
While live titles has grown from 28 to 14-- to 42, I'm sorry. Maybe talk about that cycle and whether or not we're seeing a deliberate shift towards converting that pipeline from pre-registration to live games.
Yeah, sure. Typically, the process looks like this. We talk, we identify the IP, we negotiate the IP licensing agreements with IP holders, and then we bring that IP to game developers so they're able to develop the game. After we all test it, and also the IP holder review it, we then make sure that it's actually launched on platform with our marketing 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 in pre-registration for a bit in there. A lot of times could be because there are some still review points or some comment feedbacks from either our side or from the IP holder side on the games. I actually appreciate that you just noticed that there's a change in the number count of our pre-registration games.
From that side, I just want to highlight the pre-registration count is really just a snapshot for that period of time, right? I don't think that a lower number alone means the slowdown in our licensing efforts or in our continuing launches. I think what maybe makes more sense to actually view is from the end of fiscal year 2025, when we reported we have 29 live games, to early August of this year, we now have 42 games. You do see that we continue launching new games through our platform. I think that actually means a lot. Also beyond of just the pre-registration, pre-registration just means that the game development actually bring to a status where we are happy and the original IP holder is also happy with the development, and we are able to publicly disclose that.
But beyond of the pre-registration games, we do have other in-development games that we are not able to just put into pre-registration yet. From that perspective, I think through the end, early August of beyond of the five games in pre-registration, you see we also have an additional of 12 games in our backlogs. I think that basically means we have sufficient games in our backlogs that we are continuing to launch. The entire company, 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.
Appreciate that. With each launch, you do not 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 FY 2025. How do you think about game launches, concentration risk, and what is the strategy in terms of reducing any single title dependence over time?
Yeah, I would say that is actually also a good question. From our perspective, we actually know that there is a risk of revenue concentration, and also we actually disclose it as a risk in our annual filings with SEC. I do want to highlight that the trend is actually what matters more, I believe. Vivid Army is actually one of our most successful games since we launched the G123 platform. Historically, Vivid Army actually contributed a much larger percentage of our revenue. In FY 2023, Vivid Army accounted for almost 60% of revenue. That percentage actually dropped down to around 40% in FY 2024, and then 30% in FY 2025, which is actually the number you are referring to, right?
Also, in a very similar pattern, Queen's Blade, which used to be the second-largest game on our platform, it also went from 31% to 20%, and then to 11%. I think our approach to address the revenue concentration issue you highlight is we continue launching new games and continually expand our outreach outside of Japan. Through that, we do see that newer titles actually filled in really fast. One very good example is in October of 2024, we launched a new game. It is called So I'm a Spider, So What? right? October 2024 is actually in the fiscal year of 2025. For that year, the very first year this game was launched, it is already contributing roughly 16% of that year's revenue. I think that is actually what really matters over the time when we talk about revenue concentration, right?
We do launch new games which actually contribute a lot more revenue over the time. I think that overall is our approach that we continue to do to make sure that we have a management to tackle down the revenue concentration problem.
Yeah, absolutely. Let's talk a little bit about your marketing playbook and how you think about the return on ad spend. It had dipped below 100% in fiscal year 2024, rebounded in 2025 and first half of 2026. Maybe talk about your marketing playbook and any targets you have in terms of return on ad spend.
Yeah, sure. But before I dive into the more detailed, how we can address marketing and what we have done after fiscal year 2024 to improve that, I do want just to maybe highlight one thing. Firstly, the ROAS you see disclosed on our SEC filings 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. For us, ROAS is calculated as in-game purchases from users acquired in the period, divided by the advertising spend in that period. It is actually a near-term measure based on actual purchases rather than an estimate of lifetime value. That means that this figure actually moves with our launch calendar and the spend decisions. A single period's rating needs to be viewed alongside what we were launching. Right?
ROAS was 130% in fiscal year 2023, then dropped to 99% in fiscal year 2024, and back to 116% in fiscal year 2025. In fiscal year 2024, advertising rose about 100%, while in-game purchases rose about 4%. We were spending ahead of the returns on new launches, and especially considering the fact that we are actually doing a lot of testings in the emerging markets for this business. 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 stats benchmark of around 100%. Then in fiscal year 2025, we tightened our spend, so you see that in fiscal year 2025, the ROAS we reported immediately come back to over 100%. We end up with 116%.
What has changed in the playbook? For each title we launched, we tested the unit economics on lab data early, and there are capped prepayments and have been more deliberate in selecting which games are allocated greater spend based on early success of those titles. We try to react as fast as possible. This is also something that you are probably going to see in the first half of this current fiscal year. For the first half of this current fiscal year, we acted very fast. We cut off around 24% advertisement spending year-over-year. 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 is helpful color on that. Another thing we wanted to ask about in terms of the monthly average user, it fell sharply in the first half of 2026, despite in-game purchases holding up. How should we think about that divergence? Was it temporary and intentional move, or was it more of a structural change?
I would say, the MAU decline you see there is mostly the result of the advertisement cut that I just mentioned. It is actually a discipline decision rather than a change in the model or a change in the market demands. When we put back on titles that were not really meeting our return thresholds internally, we actually cut off a lot of advertisement and user acquisition spend. That is why you see for the first half of fiscal year 2026, advertising fell 24% to around $19 million , and we reduced the paid acquisition on those titles. That is the main trigger why MAU fell 39%. The other thing that I do want to let you know too, to actually also monitor or see, is that even though, yes, MAU fell 39%, but the PMU, the paying monthly users, is actually stay up there.
It has declined a little bit, but the users still really like the content we put out there, and they stick with us. That, I would say, is the most important things about this business model and how we make decisions when see not so good performance from certain launches. We immediately cut off advertisement spending, and we do not just chase top line growth without considering the overall economics or the returns from those investments.
Yeah. Let's dive 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. How do you think about widening that funnel versus deepening spend from your existing payer base?
Yeah. I think from our perspective, we don't really think that is kind of like an either/or question because the numbers show the trade-off. From FY 2023 to FY 2025, growth came mostly from widening the payer base. So average paying monthly user went from about 57,000, from roughly $144 to about $101 per month. So in the first half of FY 2026, payers were flat at around 76,000, and the spend per payer was about $107. So the ratio of paying monthly user 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 denominator shrink. That's the decrease in MAU number we just mentioned, we just talked about. I think from that perspective, when we say widening, right?
Widening actually means we're going to have contents that converts more first-time payers and international expansion. Deepening 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. I think we are definitely 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're really just started globalization a few years ago, and we do see that could be the near term, more significant driver or more noticeable drivers of the revenue growth.
But over the time, we still focus doing a lot of things, trying to deepen the spend by working with game developers, working with different IP owners, try to make sure that there's continually new content updates in each of the games. But you probably, as investors or as the company, we probably will not be able to see that impact as significant as the widening effect.
Mm-hmm. No, it'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. Revenue from outside Japan grew from 19% in FY 2024 to over 32% in the most recent fiscal half of 2026. You just opened a New York office earlier this year. 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.
Yeah, sure. Definitely. I like that you bring this up. For us, since the past couple of years, we have been doing a lot of globalization, global expansion outside of Japan. We do see very plausible outcomes of that. Just as you mentioned, we do see revenue from outside of Japan grew from roughly 19% from FY 2024 to 32% in the first half. Also beyond of just the revenue number, we also see user base is actually more international today than the revenue mix. From some data we have, we see roughly 57% of FY 2025 active users were actually outside of Japan. For all the markets outside Japan, we do see that our second largest international market is actually in South Korea, and the third one is actually U.S.
I believe that North America is where we see the biggest long-term opportunity, and also that is where we prioritize for our globalization strategy. That is also the essential reason why we opened our New York City office earlier this year. 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. Regarding replicating the Japan playbook, I think that takes a few things to actually make it work in any market outside of Japan. A few things like how the IP is going to resonate locally with the rights and that cover the territory. We do considering a lot about that.
When we pick new IPs, we always consider the target markets we're going to try to put those IPs in. Also beyond of the IP selection, we also try very hard for game localization. When I talk about localization, is not really just the mean, just translating. It's not just translating the content from Japanese to English. It also means that we have set local marketing strategies.
We make sure the game genre actually meets the local audience or local fans' demands. Beyond that, as an international platform, we also try to make sure we always make sure for the target markets we cover all the local payment methods. That is also very important, right? Otherwise, the user may stop with some, not be able to pay us when they are really, even though sometimes they are really interested in the in-game content, right? Also the local market presence, right? That is what goes back to our New York City office that we just debuted earlier this year. We hire marketing people here who actually know the markets, who know what to do, and we try to utilize their talents, their resources to make sure that when we communicate with the local markets, it actually communicates to local markets in the right way.
Those are a couple things that we think is very important to replicate the Japan playbook and make sure that is actually going to be a success in the future.
Yeah. 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?
Yeah. Two things, right? One thing is on the licensing side, right? 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 and countries we're targeting. 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., is going to cover English, right? Beyond that, on the other side of this is really more on the localization, is more on translation, just as I mentioned earlier. It also means that onboarding, pacing UI, the monetization expectations, all those things are very different market by market. So we try to adapt those without changing the original identity of the IP.
We also use some self-developed AI-backed tools to speed translation and make sure the quality of the translation is actually good. We also use both technologies plus our internal resources to make sure the assets adaption is actually very strong and have the high quality that we really expect. One good example I would say, that we have recently is The Apothecary Diaries franchise that we just launched a game on, I think a couple months ago. It is actually a very, very popular IP. I think they actually sold more than 54 million copies worldwide. For that one, we try to do the localization.
We actually have somebody who have very strong connection with the anime community in the U.S. and know the original content a lot and overview the overall translation and assets design process to make sure when we actually deliver is deliver something that actually meeting the local fans' expectations. I think that's how we handle localizations and IP licensing 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? What do you think is defensible about your position as more players aim to chase those same IP licensees?
Yeah. I think this is actually a very interesting question. From competition landscape, I think this may be the easiest way is 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, they show that for global H5 platforms by gross billings, we're actually the third one behind Tencent Games, NetEase Games. Beyond those two really giant names in the gaming sector, there's also other smaller names in that list, including something like DMM Games, which is originally from Japan. There's also Poki and there's 4399 Games. These are also some of those popular H5 companies out there to also do H5 games. But I think we are actually in a very interesting intersector ourselves.
Our platform, we actually not just do anime gaming or we not just do H5 gaming. We actually combine the two concept together. We're not really just competing directly with just Tencent, NetEase on H5 or we're not just competing with the other anime-focused game studios. 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. It's not really the, oh, we have the IP games and not the fact that we have the H5 broader gaming platform. It's execution. It's actually everything we have that combined together make sure that we are able to compete with all these different competitors. What those couple things that actually makes our competition success is longstanding relationships with the right holders and we have a repeatable process for pairing 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. I think those things in combination help us a lot when we compete with the other competitors. I would say that is how I see when we compete with our closest competitors in the world.
No, that's great. 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?
For now, because we are still a very young public company, we do not really publicly disclose so-called long-term margin targets. I do not also want to give you a number just because we are on this call and try to give a number for a number. What I can do is maybe I can describe the levers and give you the history. I think for us, the levers are advertising efficiency and payback discipline. The content mix, meaning hits with strong engagement, are operating leverage if revenue grows faster than platform and team costs, and the payment cost advantages of browser distribution comparing to app store distribution. I think those are the levers we have. Also on the history side, we do report the adjusted EBITDA.
Adjusted EBITDA margin was about 70% in fiscal year 2023 and 2024, and close to 10% in fiscal year 2025, when we started investing heavily in launches and expansion, and also around 10% in first half of fiscal year 2026. Also beyond adjusted EBITDA, we also report segment profit. Segment profit has been 29%-32% of gross in-game purchases on a full year basis across fiscal year 2023 to fiscal year 2025, and 24%-37% across half years, most recently the 37%. Our aim is profitable growth at the GAAP operating level. But we are not giving a target really of the timing for now. That is what I can say.
Okay, great. Really appreciate that, Patrick, and I think that is a great place to close things out. Again, thank you everyone for tuning and listening in. Patrick Liu, CFO of CTW, traded on the Nasdaq ticker, CTW. Also feel free to open up your browser and play a game. No need to download it on the app. With that, I will kick it off to you, Patrick, for any closing remarks you might have.
All right. Thank you. 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, CTW, we operate G123. Our only instant gaming platform for licensed anime IP. We build up the platform so we can have the direct connection to bring games to markets, learn, work, engage players, and allocate marketing dollars with the discipline. The first half of fiscal year 2026 is a little bit softer, but we do expect that we can continue launching new games, continue to expand globally to help reboost our growth. We appreciate the support of our shareholders, and we thank AGP for hosting us, and we look forward to updating you when we report our fiscal year 2026 results.
Thank you 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