CTW Cayman - Earnings Call - Q4 2025

Transcript

Operator (participant)

2025 earnings conference call. Please note that today's conference may be recorded. My name is Matt Chesler from FNKIR. Hosting today's call is Ryuichi Sasaki, CTW's founder, CEO, and chairman, and Patrick Liu, CTW's CFO. Before we begin, please be aware that today's discussion may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These statements reflect management's current expectations and involve risks and uncertainties that could cause actual results to differ materially. CTW undertakes no obligation to update these statements except as required by law. For a detailed discussion of risks and uncertainties, please refer to our Form 20-F and other filings with the SEC. We will also discuss certain non-GAAP financial measures. These measures should not be viewed as a substitute for GAAP results and may differ from those used by other companies.

Reconciliations to the most comparable GAAP measures can be found in our Form 20-F filed yesterday, our earnings release, and on the investors' section of our website. With that, I'll now turn the call over to Ryuichi.

Ryuichi Sasaki (Founder, Chairman, and CEO)

[Foreign language] 皆様、おはようございます。本日は8月にナスダック市場へ上場して以来、初めてとなるCTW Caymanの決算説明会にご参加いただき、誠にありがとうございます。世界中の株主の皆様、パートナーの皆様、そしてチームメンバーの皆様、この場を共にできることを大変光栄に思います。2025年度はCTWにとって節目の年となりました。売上高は過去最高の9,040万ドルとなり、前年同期比32%の増長を達成しました。特に下期には成長率が41%まで加速いたしました。この力強い業績を支えたのは、7音の新作タイトルの成功的なローンチ、グローバルでのプレイヤー一層の拡大、そして将来の成長に向けた技術運営基盤の強化です。現在、当社はプラットフォーム上では29本のタイトルが展開されております。私がCTWを創業した時、単なるゲーム会社を作りたいと思いませんでした。人々の想像力でつなぎ、テクノロジーが壁ではなく影足となるようなプラットフォームを作りたいと考えました。幼い頃、アニメは私の想像力をかき立て、夢を見る力を与えてくれました。その感動を世界中の人々と共有し、それはCTWの原点となりました。当社のプラットフォーム、G123、アニメファンやゲーマーの皆様に新しい手軽さと楽しさを提供していきます。プレイヤーはプラザ上で即座にゲームを開始でき、ダウンロードも不要、煩わしい広告もありません。このシンプルさこそが私たちのビジョンの中核です。アニメの物語やキャラクターとの出会いを、誰にでもどこでもシームレスに楽しめる世界を目指しています。8月のナスダック上場記念レールセレモニーでは、1000年後にも人類に貢献した企業としてCTWが記憶されることを私の最大の願いとしてお話ししました。それは大きな目標のように聞こえるかもしれませんが、エンターテイメントがテクノロジーと総合力と融合することで、人々をつなぎ、世代を超えて前向きな変化を生み出せると私は本気で信じています。2025年度の成果は、このビジョンが現実ものになりつつあることを示しております。日本が依然として最大の市場である一方で、北米や韓国など海外でも高いエンゲージメントを確認できました。日本国外のユーザーによる売上の比率は前年度の19%からなんと30%へと拡大しております。これはアニメやプラザゲームの魅力が世界共通であり、当社の取り組みがグローバルに共感を得ていることを示しております。そして、コモですが何がやアリフレーター職業などの新作タイトルの成功は魅力的なIPを生み出し、優れた外部開発パートナーと協力してファンを喜ばせる体験を生み出した当社の強みを示しております。そして、これはまだ始まりに過ぎません。2026年度では弊社のラインナップはさらにエキサイティングなものになります。中でも注目すべきはドラえもんと本日ローンチとなったクレヨンしんちゃんです。このような作品は世界中のファンの皆様にお届けできることはCTWにとって特別な瞬間となります。さらに他にも多くの期待作品を続々と展開してまいります。これらはすでに事前登録を開始している11タイトルを含む全24タイトルの一部に過ぎません。非常に強いパイプラインになります。当社は自己資金を活用し、グローバル展開をさらに加速させていきます。上海の開発センターではAI技術を活用してプラットフォームの効率やマーケティング精度を高め、対米のアートデザイナーセンターでは開発パートナーに受けたキャラクターデザインや広告制作などのクリエイティブ支援を強化しています。これらの取り組みにより開発パートナーがより迅速にゲームをリリースできる環境を整え、AIによるクロアースサイキカでマーケティングの精度を高め、運営上のタイトルの拡大にも柔軟に頼りきるエコシステムを構築していきます。その結果、2025年度の広告費率である効果ロアスは116.4%と前年度の99.3%から大幅に改善し、下期には125.8%まで向上しました。これはデータに基づいた効率的な運営によってユーザーを効果的に獲得・維持できるという当社の競争優位性を示すものになります。これらの戦略的投資により一時的に利益率が圧迫されておりますが、北米をはじめ新規市場への進出を一斉、持続的で収益性の高い正常基盤の意思と強化されております。現在、CTWは転換点に立っていると考えております。継続的なイノベーション、規律ある実行力、そして創造的なビジョンを核とする当社のビジネスモデルは拡張性と実績を兼ね備え、今まさに大きな勢いを得ています。社員の皆様は心から感謝しています。皆さんの情熱と献身こそがCTW成功を支える原動力です。株主の皆様は上場企業としての第一歩を踏み出した私たちを信頼してくださり、誠にありがとうございます。そして世界中のプレイヤーの皆様、私たちのゲームと夢を信じてくださり、本当にありがとうございます。CTWの本当の挑戦はこれから始まります。創業当初から変わらぬ思い、遊びの力で世界を変えるという信念を胸に、これからも歩み続けるまいります。それでは、当社のCFOであるパトリックさんより財務状況についてご説明いたします。

Patrick Liu (CFO)

Thank you, Ryuichi, and good morning, everyone. I will provide a digital context around our financial results for the fiscal year ended July 31, 2025, focusing on the key factors behind our profitability, cost structure, and financial position. As previously mentioned, fiscal 2025 was a year of strong growth and global expansion, as revenue grew 32% year over year to $98.4 million. Our seven new game launches generated approximately $32.3 million in revenue during the year, led by two strong performing titles: So I'm a Spider, So What? - Ruler of Labyrinth, which contributed approximately $14.2 million, becoming our second-largest grossing title of the year, and Arifureta: Rebellion's Soul, which contributed about $9.3 million despite only operating for a little over six months.

This strong performance was partially offset by a $10.4 million decline in older titles as they progressed through the later life cycle stage, which is expected for the portfolio of our sites. Additionally, as Ryuichi mentioned, growth was strong across all major regions. From a financial perspective, this broader geographic mix has helped diversify our revenue base and contributed to a more balanced resilience performance. We continue to see encouraging trends outside Japan as we scale internationally. Behind that top-line growth, we continue to enhance our financial efficiency through disciplined execution and data-driven marketing and optimization. While we recorded a small operating loss of $1.1 million compared with operating income of $6.7 million last year, this was probably due to strategic investment in AI-driven optimization, creative capabilities, and marketing to support the launch of new ISOs and to optimally expand our gaming platform.

These are fundamental expenses that will drive long-term scale and marketing improvement. Internally, we monitor segment profit, our key performance metric, which increased year over year by $4.3 million to $31.3 million, reflecting improved operational efficiency and monetization across existing titles. On a non-GAAP basis, Adjusted EBITDA remained positive at $8 million compared with $12 million in fiscal year 2024. The decline reflects higher personnel and marketing investments as we prepare for our next growth phase. Despite these investments, Adjusted EBITDA continues to demonstrate the underlying strength of our asset-light scalable model. Our return on advertising spend improved from 99% in fiscal year 2024 to 116% in fiscal year 2025 and reached 126% in the second half.

While we significantly increased advertising spend to support new launches and live games, this shows that even with larger ad budgets, our AI-driven marketing system and the return-focused culture continue to allocate marketing dollars wisely and efficiently. Regarding cash flow and balance sheet, we closed the year with a solid financial position and no debt. Cash and cash equivalents were $12.2 million as of July 31, 2025. Subsequent to the fiscal year end, we completed our initial public offering on the Nasdaq and raised $12 million in gross proceeds in the process. Thus, our balance sheet is strong and provides sufficient flexibility to continue supporting global expansion and technology investments while maintaining financial discipline. Operating cash flow remained positive in fiscal year 2025, reflecting healthy business fundamentals and disciplined working capital management.

Looking ahead, in fiscal year 2026, our priority is to translate recent investments we made into both growth and operating leverage. As our AI systems and creative infrastructure mature, we expect to see efficiency gains across marketing, user engagement, and partner support. For the upcoming year, we expect to see continued top-line growth, driven by our expanding global presence and the strength of our upcoming releases. As we grow, we also expect operating expenses to increase, including investment in talent, infrastructure, and marketing expansion. To support a larger global footprint and a broader title portfolio, we will continue to invest with discipline. Every major spending decision will be validated based on expected returns, ensuring we allocate resources efficiently and maintain a strong focus on long-term value creation. We are also expanding our footprint in the United States and will be opening a new office in New York City.

This represents both incremental investment and a strategic commitment to the U.S. markets, enabling us to build local capabilities, better support partners, and accelerate our growth in the region. To summarize, fiscal 2025 was a year of purposeful investment and disciplined execution. Despite a temporary operating loss, we increased our top-line and segment profit, maintained positive Adjusted EBITDA, and improved marketing efficiency, demonstrating the scalability and resilience of our platform. Those results reflect our continued commitment to building for the long term. We intentionally deployed resources to prepare for our public listing and global expansion while keeping our balance sheet healthy, debt-free, and supported by positive operating cash flows. Looking ahead, we enter fiscal 2026 with strong momentum. With a solid foundation, growing operational leverage, and a deep content pipeline, CTW is well positioned to deliver sustainable and profitable growth in the years to come.

Thank you, and I will now turn the call back to the operator to begin the Q&A session.

Operator (participant)

Thank you, Patrick. We're now going to open up for the question-and-answer session. From Zoom, there are two ways you can participate. The first is to raise your hand using the icon, which is at the bottom of your screen. Clicking this will alert us that you want to be called on to ask a live question, so you'll be placed into queue and called upon. Just note, you're going to be on mute until you're called upon. The second way to participate in Q&A is to use the Q&A widget, which will allow you to type in and text the question. We will take questions from there as well, but just note, if we run into a time constraint, we'll get back to you if your question is not asked on today's call. With that, we'll now begin and pause for a moment to begin the queue.

The first question is from Vincent Fernando from ZER0 0NE. Vincent, please go ahead.

Vincent Fernando (Director)

Hi. My question's just on the growth side. You know, revenue growth accelerated in the second half of the year. And also overall, obviously, we've had, you know, pretty robust MAU growth. I just want to get maybe some color on what's driving accelerated revenue growth in the second half. I guess within MAU growth, are there certain pockets of MAUs that are growing stronger? Are there certain—was it certain games? Just get some color on that. Thank you.

Patrick Liu (CFO)

All right. Thank you, Vincent. I think I will respond to your question on that part. Regarding the strong growth of the second half, the majority—the main reason for that is really because of the fact that we are doing both—we are adding our titles to our platform. For this fiscal year—for the past fiscal year of 2025, in total, we added seven titles, and two of them are actually added in the first half of the fiscal year. The remaining—oh, it's actually three of them are actually added in the first half of the fiscal year, and the remaining four of them are actually added in the second half of the fiscal year. That is one reason for the increasing in the second half of the fiscal year in both revenue and MAU.

Beyond that, it's also partially due to the fact that we are also growing internationally. We have enhanced our advertisement spending and marketing spending on markets outside of Japan, even though Japan still remains our largest market for now. The company's intention is we intentionally allocated a significant amount of advertisement money in markets outside of Japan to support the growth outside of Japan. Both of those two factors drive the significant growth in both revenue and MAU you see for the second half of the year.

Vincent Fernando (Director)

Just a quick follow-up, if I may.

Patrick Liu (CFO)

Sure.

Vincent Fernando (Director)

You had seven new games launched in FY 2025. You show you have 12 in pre-registration, 21 in backlog. How can we—what's the expected timeframe that you'd be launching, let's say, the 12 in pre-registration and then the 21 in backlog? Would these, for example, can they all launch in 2026? I just want to understand the timeline for those games that are coming.

Patrick Liu (CFO)

Sure. One thing, before I even go deeper into your question, there is one thing I do want to clarify with you. Right now, as of now, we have actually 11 new games in pre-registration. We actually just launched a new game, Crayon Shin-chan, earlier today. One of the games has actually moved from pre-registration to live today. We are expecting very great performance of that game. Regarding the pipelines and the games in the backlog, first of all, we do expect that we will launch games at a faster pace in this upcoming year. We are expecting that most of the games that are actually in pre-registration, we will be able to launch those in the current year, in the current fiscal year.

As you may know, because these games are actually IP-related, eventually, it is also going to be depending on the marketing. It depends on how the initial original IP holders, their review progress. From the company side, we definitely are pushing very hard internally to assure that, you know, we can launch those games as soon as possible. Regarding the ones that are actually in backlog, we have not really released the pre-registration yet. The company ourselves, as well as the IP holders and the game developers, all of them, all of us, we are actually working very hard to try to get games developed on those titles, and we will release those in pre-registration as soon as possible as well.

Operator (participant)

Thank you. The next question is from Steve Silver from Argus Research. Steve, your line is unmuted. Please go ahead.

Steve Silver (Senior Equity Research Analyst)

Thank you, and thanks for taking the questions, and congratulations on all the milestones this past year. The prepared remarks talked quite a bit about the expansion efforts globally, North America in particular, being in the early stages of growth. Curious as to your thoughts around the size, the potential size for the North American market and whether it could ever achieve a similar level to that of Japan.

Patrick Liu (CFO)

Yeah. So first of all, thank you very much for your question. Regarding the U.S. and North American region markets, we definitely, the company definitely has a great expectation of this region because the fact that historically, North America has been one of the major gaming markets in the world. Beyond that, we also noted that there are trends in the recent couple of years that the fandoms in the North American region have actually built very well because of the fact that those international entertainment platforms like, you know, Netflix and Amazon Prime and all those, you know, entertainment platforms. We definitely expected that in the long run, eventually, the North American region, in certain titles, based on, you know, titles and the game types, some of those ones maybe the North American region market will actually lead the Japanese market.

As of now, the Japanese market is still the largest market of the company. We do expect that the North American region, as soon as we started the launch of the opening of our office, and we are starting to hire local specialists to explore the local market, we will see even faster growth in the North American region.

Steve Silver (Senior Equity Research Analyst)

Great. Thank you. One more, if I may as well. Given the competition in the industry broadly, can you just talk a little bit about what sets CTW apart from its peers, just in terms of its ability to secure rights to the most attractive anime IP?

Patrick Liu (CFO)

Yeah, sure. So basically, there are a couple of strengths we have that we do not believe that the other competitors in this very competitive industry have. First of all, we do have a very strong relationship with our IP holders, partners who are based in Japan. We have consistently delivered very strong monetization performance for the partners like Kadokawa, Toei, and other top licensors. These performances basically ensure that these IP holders will continue to work with us and continue to provide us new IP licenses that we can distribute and launch games on. Beyond that, I think it is also because of the fact that we have our pre-priority frictionless HTML5 platform. IP owners actually like that players can instantly enter the game. There is really no install friction. There is no fragmentation across app stores or anything like that.

Eventually, I think it's also because of the fact that we do have historically developed and continually enhanced our AI-backed marketing tool that supported the expansion in the market. I think that is partially proved through the increased return on advertising spent for the second half of the year. Those three things, I believe, are main competitive advantages of CTW versus all the other competitors in the industry.

Steve Silver (Senior Equity Research Analyst)

Great. Thank you so much.

Patrick Liu (CFO)

Thank you.

Operator (participant)

The next question is a follow-up question from Vincent Fernando from ZER0 0NE. I am going to call on you now. Vincent, I think your line is up.

Vincent Fernando (Director)

I think I'm on. Yeah. Thank you. Thank you. Okay. Just want to speak a bit on the U.S. side. What are the initiatives and strategy that you have for growing the U.S.? Obviously, there's organic growth. Are you also looking at M&A?

Patrick Liu (CFO)

Yes.

Vincent Fernando (Director)

My second question on that, just on a follow-up, is, you know, the U.S. obviously has a lot of spending power. I've seen some research that even on anime, they already spend quite a bit. Do you expect that the U.S. users, once they've kind of, you know, become, I guess, more regular on the platform, become some of the higher spenders maybe than even Japan? Those are my two questions.

Patrick Liu (CFO)

All right. Thank you. Thank you so much, Vincent. First of all, regarding your first question, what are we going to do in regard to our expansion plan in the North American region? Definitely one thing beyond, you know, organic growth and beyond opening up our office and hiring local folks who are familiar with the local markets, we definitely are generally looking forward to any potential M&A opportunities here in the U.S. as well. The primary targets we are looking for right now are some small to middle-sized, you know, marketing channels that, you know, have already reached out to, have their own reach out to the local fandoms and already are well-known by the local anime fan bases.

If in case there are any potential great opportunities for us to be part of that, we definitely would love to have an M&A over those opportunities. Beyond that, regarding your second question about, you know, customer spending and the so-called whale customers in North America, yes. We definitely are already seeing there are some large, you know, whale customers in the North American region. For now, because we have actually just started the expansion in the North American region, in the absolute number-wise, I think Japan and South Korea remain as the highest monetization market for per capita for now. We do, as I mentioned earlier, because of the great potential of the North American region, believe in the midterm to long term, we will definitely see more and more whale customers in the North American region.

Eventually, for certain games, I believe that North America definitely will have the chance at having, you know, leading the revenue generation and leading the spending per capita even before, you know, Japan or any other region in the world.

Vincent Fernando (Director)

Great. Thank you.

Operator (participant)

Thank you, Vincent. I'll pause to see if there are any more questions.

Vincent Fernando (Director)

We have time. I actually wouldn't mind asking one more, if that's okay.

Operator (participant)

It's quite fine. Please go ahead.

Vincent Fernando (Director)

Sure. So I just would like to understand a bit more on capabilities you've been developing in your AI-driven user acquisition. I know there was some, you know, there was a lot of description in some of your previous disclosures, but I just want to understand. I know you've been investing heavily in that. Could you maybe share maybe some of the new initiatives or the new capabilities that you've been investing in?

Patrick Liu (CFO)

We have continually invested in the AI areas, basically. In regard to advertisement management systems and optimization, most of the time that the resources we had internally are spent on is really trying to find appropriate or optimizing the localization of the advertisement management system. Originally when we built up the system, a lot of the data is actually coming from users based in Japan. Because of the fact that we are actually expanding globally and we are seeing more and more users from the other parts of the world in South Korea, North America, we are actually building up and/or refining our models that are based on the, you know, the user information and the data we collected from the other markets of the world to continually enhance our AI-backed advertisement management system. We are seeing some progress so far.

As one thing you can see is return on advertisement spending. From the global-wise, that number actually has increased significantly from the first half of the fiscal year to the second half of the fiscal year. Part of the reason is because of the fact of the continued enhancement in our model. Also, by increasing, you know, more data from global users, we're able to adapt that model to different markets we're really targeting to. That is one thing we are working on regarding AI. Beyond the advertisement marketing optimization, internally, we also have AI teams to work on other AI-backed tools that also support the successful and continued launch of the new games. For example, we have continually enhanced and developed AI tools regarding the support of the arts and design centers.

For example, because a lot of the games on our platform are actually based on Japanese anime IP, and every single time when we have a new development or there's a major update of a game, there are a lot of, you know, new drawings and new designs. We are internally enhancing the AI tools to streamline the internal, you know, drawing and art creative tasks. Those enhancements will continue to support the company to be able to launch new games in a faster pace.

Vincent Fernando (Director)

Great. Thank you. That is, I guess, just one little quick follow-up. That means that when you have the IP, that includes the ability to use, I guess, the visuals of the IP or the characters and create marketing creatives for those. Is that right?

Patrick Liu (CFO)

Yes, exactly. That's part of the.

Vincent Fernando (Director)

You can use AI to produce those creatives based on the original IP. Is that right?

Patrick Liu (CFO)

Yes. Yes.

Vincent Fernando (Director)

Got it. Thank you.

Operator (participant)

Thanks for those additional questions, Vincent. There are no more questions at this point. Patrick, I'd like to turn the call back to you for some concluding remarks.

Patrick Liu (CFO)

All right. Thank you. Thank you, Matt. All right. Really appreciate everyone's time today. We are very happy that we shared our great performance of the fiscal year of 2025. We are looking forward to our upcoming year, the performance of our upcoming year. We are expecting that we will launch more and more games. We are expanding globally, especially in the North American region. Again, thank you all for your participation today. Hope you enjoy the rest of your day. We definitely expect to see everyone in our next conference when it comes. Thank you.

Operator (participant)

You may now disconnect your lines.

Patrick Liu (CFO)

Thank you.