CTW

Good morning and good evening. Thank you for standing by. Welcome to the CTW earnings conference call for the first half of fiscal 2026, representing the six months ended January 31st, 2026. Please note that today's conference may be recorded. My name is Matt Chesler from FNK IR. 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 6-K, our earnings release, and on the investor section of our website. With that, I'd now like to turn the call over to Ryuichi for a video and prepared remarks.

[Non-English content]

Thank you, Ryuichi, and good morning, everyone. As Ryuichi discussed, the first half of fiscal year 2026 was a softer period than we expected from a content performance standpoint. Financially, our priorities were clear: respond quickly to underperforming game launches, allocate capital with discipline, product monetization efficiency, and preserve balance sheet flexibility as we continue investing for long-term growth. Revenue for the first half was $41 million compared with $41.2 million in the prior year period, a decrease of 0.7%. Gross in-game purchases were $43.6 million, down 1.1% year-over-year. These year-over-year changes were relatively modest on the surface. Yet they reflect an important shift in the underlying drivers of performance during the half.

We launched seven new games during the period, but as Ryuichi noted, those launches performed below our expectations, and at the same time, several mature titles continued moving through later stages of their lifecycle and overall user activity declined. That said, one of the more important takeaways from the first half is that even in this softer revenue environment, the quality of monetization across the platform remained resilient. Monthly active users declined to approximately 2.0 million from approximately 3.3 million last year. However, paying monthly active users remained stable at approximately 75,700, compared with approximately 76,700 last year. As a result, the conversion rate improved to 3.82% from 2.35%. In addition, we also saw improvements across key monetization and efficiency metrics. ARPDAU increased to $18.90 from $16.31.

ARPU increased to $4 from $2.50. ROAS improved to 109% from 106%. In practical terms, traffic declined primarily among non-paying users, while the platform continued to attract and retain a higher quality paying audience and generate more efficient returns on advertising spend. We also continued to make gradual progress on geographic diversification. Revenue from users outside Japan increased to 31.6% of total revenue, up from 28.8% last year. Japan remains our largest market. Expanding our international mix remains a key strategy priority. Turning to expenses and profitability. Cost of revenue increased at 39.6% year-over-year to $13.9 million.

General and administrative expenses increased 13.6% to $5.1 million, and research and development expenses increased to 25.3% to $1.7 million, reflecting on ongoing investments in platform capabilities and organizational infrastructure and additional costs associated with operating as a public company. At the same time, sales and marketing expenses declined 15.2% to $22 million, driven primarily by a $5.9 million reduction in advertising spend. This reduction was intentional, reflecting the disciplined response Ryuichi described earlier. When new titles did not meet our internal performance thresholds, we quickly scaled back, making marketing rather than pursuing top-line growth at unattractive returns. This responsiveness is a core strength of our operating model. As a result, we report an operating loss of $1.7 million compared with a half million loss in the first half of 2025.

Net loss was $1.2 million compared with a net income of $0.6 million last year. While we are not satisfied with reporting a loss, it is important to view the net result in the context of a period in which revenue underperformed expectations, combined with the continued investment in infrastructure and long-term capabilities while maintaining minimal cost flexibility. There are also two period-specific items of note. First, we recorded approximately $1.9 million of share-based compensation expense related to stock options granted in December 2025. Second, following early adoption of ASU 2025-06, we capitalized approximately $2.1 million of qualifying confirmed new software and cloud implementation costs. Both items are relevant to understanding the period-over-period financial profile and the level of ongoing investments in the business. On a non-GAAP basis, performance remained solid.

Adjusted EBITDA increased to $4.3 million from $3.7 million, representing a 10.5% margin, and segment profit increased to $18 million from $11.6 million. These metrics highlight that the core economics of the platform remain healthy and responsive to disciplined cost management despite softer revenue and a GAAP net loss. Turning to cash flow and the balance sheets. Net cash used in operating activities was $0.4 million, compared with $2.6 million of cash generated in the prior year. This change was driven primarily by working capital movements, including additional advances made to game developers and higher pre-paid royalties as we invest in future content and platform support.

We ended the period with $90.5 million in cash and cash equivalents, up from $12.2 million at July 31st, 2025, supported by the proceeds from our IPO. We believe this positions us well to invest in selectively content, systems, and international growth while maintaining strong liquidity and financial discipline. Overall, the first half of fiscal year 2026 was a period of softer top-line performance, but also one that demonstrated the responsiveness of our operating model and the robustness of our financial monitoring systems. We acted quickly when new title performance did not meet expectations. We improved key monetization and efficiency metrics. We maintained positive adjusted EBITDA. We ended the half with a solid cash position and the flexibility to continue investing for the long term. Thank you. I will now turn the call back to the operator for the Q&A sessions.

Thank you, Patrick. We're now going to open up the call to question and answers. From Zoom, there are two ways that you can participate. The first is to use the Raise Your Hand icon, which is at the bottom of the screen. Clicking this alert will alert us that you want to be called on to ask a live question, and then you'll be placed in queue and called upon in turn. Just note you're gonna be on mute until you are 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'll 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 pause for a moment to build the queue. The first question is going to be from Steve Silver from Argus Research. Steve, go ahead.

Everybody, thanks for taking the questions. I was hoping you guys could discuss a little bit about how the company's using technology to build in the capabilities of reacting quickly to changing user behavior. Just trying to get a sense as to any of the metrics you look at and how much time you give to a new title before making the determination that a title is underperforming and requires a change in the marketing strategy.

Okay, thank you. Thank you very much for the question, Steve. In regards of your question, I think you asked about how our technology works and how we actually monitor new game launches and how we react in regards to the early performance indicators of a new game after it was initially launched, right? Basically, I think we have been communicated with the market before the company. We have internally developed a set of AI-backed systems and tools to help us monitor the performance of each new launch games as well as every live games that is our live our G123 platform.

One of the very important system that we are using internally is the AI-backed advertisement amendment system, and also the user data monitoring tool that we are able to see the real-time performance of each individual game that is actually live on G123 platform. For example, for each of the new games that launch on our platform, we basically, most of the time we do a relatively soft launch. Means we may spend a small amount of advertisement in day zero to day three, immediately after the game is launched.

During that period of time, we're gonna continually monitor the performance, including, you know, paying user retention, paying user conversion rates, and all those key KPIs that we believe indicates the, you know, potential of any new game launched on the platform. Based on the results of those games basically between day zero to day three, we, the marketing team of the company gonna decide, is this really a hit title or this is somehow performed not as expected. Based on that result, we will further adjust advertisement spending as well as strategies for day four and seven, and we're gonna continue monitor the performance of that game through that period of time.

Eventually, we're gonna roll into day seven to day 14, and then, you know, continue adjusting the advertisements proactively. I would say that is how internally we use our AI-backed tools to monitor game performance and adjust our advertisement marketing cost allocation and spending.

Great. Thanks. In, in the context of the trend in terms of active users, do you get a sense as to whether a lot of that has been attributable to the customer excitement over some of these new underperforming launches? Or do you get a sense of whether there's any macroeconomic trends affecting those results as well?

In regarding of these new titles that launched for the first half of the fiscal year 2026, I don't think it's as simple as say, "Oh, it's a bad IP," or, "It's a single game format problem." I think broadly speaking, we believe the first half underperformance was primarily related to monetization quality and unit economics rather than traffic acquisition or initial user interest. I think several of the new titles generated reasonable engagement and user acquisition metrics initially, but the payer conversion, monetization depths, and long-term return on advertisement spends profile were below our internal expectations. I think in some cases we believe certain titles attracted broader casual audiences with lower monetization behavior relative to several of our stronger performing historical launches.

As a result, while top of funnel traffic and engagement were acceptable, the long-term monetization efficiency did not justify aggressively scaling advertising investment. Also, we think that it is actually very important to recognize gaming performance can vary significantly by timing, audience fit, monetization design, live operations execution, and broader market conditions, even while underlying IP awareness is strong. I think basically that is the, you know, the observation we have been seeing from the first half of the current fiscal year.

Great. One more, if I may. The prepared remarks or the press release cited 20 titles in the backlog.

I'm curious as to whether there's any context around the number within that 20 in terms of maybe titles that might move into pre-registration in the back half of the fiscal year.

Yeah. Basically regarding of the future releases, the pipeline we have, so far you will be able to see on our website we have, I believe six games that is actually five or six game that is actually in pre-registration. For the remaining of those titles, we are still working very actively with the app holders, with the game developers to assure that the game is actually under development and also is actually in a or we're making the progresses in the correct way.

Because the factor that for any of those games that we haven't really released their pre-registration for the game, so we are because of the contract we have with the app builders, we are still not able to explicitly disclose the specific name or IP related to those games. We would say that a lot of those games are associated with very popular anime IPs, and some of them are very, also, like, recently popular in North American region. We do have a lot expectations when those games are ready to be released to the public.

Great. Thank you for taking my questions.

Thank you, Steve.

Our next question is from Vincent Fernando from Zero One Research. Vincent, please go ahead with your question.

Hi. I see that, you know, your segment margin expanded from 23.7% to about 37%, you know, despite flat in-game purchases. That shows there's some operating leverage in the platform. I'm just wondering, can you walk us through maybe the dynamics behind that? Like, is it that, you know, you're able to detect where certain products and in-game purchases are doing well and you divert resources into that? Just wanna understand the dynamics. Like, how are you able to increase, you know, the percent of the margin from the in-game purchases? Thank you.

Okay. Got it. In regard of the margin of the in-game purchases versus the revenue, the main factor of that is actually reflecting the new combination or mix of all the games that is actually on our platform. Historically, I believe you probably see that we have been disclosed that, well, there's a significant portion of our revenue is actually generated by the game which is called Vivid Army. For that game, we historically has a slightly higher revenue share percentage with the game developer of that game.

Because the fact that along the way of along the half, fiscal half year of fiscal year 2026, we actually launched, you know, historically, we have been launching, continually launching new games and the product mix, the game mix has actually changed slightly. Right now, Vivid Army is actually not the-- I mean, it's still the largest game by itself, but the game developer of that game is actually not the largest game developers that generates revenue for us. For the newer games, we tend to give a slightly lower revenue share to the game developers. You know, because of the change of the revenue proportion generated by higher revenue share games, the overall average revenue share percentage has actually declined year-over-year.

That explained why you see, yes, even though the top line softer, but, the, you know, from in-game purchases to revenue, we actually see a slightly improved margin.

Great. Thank you. Another question. You know, I see that, you know, your ROAS was 109%, and obviously you've optimized your marketing title by title. This kind of maybe goes back to the question the previous asked a bit, but I just want to understand, like, how do you know, what is that kind of the level that's like kind of a target, and then your engine is kind of optimizing to make sure you maintain that level? And how quickly does it respond to that? And just want to understand how the engine operates relative to ROAS.

Yeah. Basically, in regards of the ROAS, internally we do try to set up a target for each individual game. Overall, I think if we just do a quick calculation of the average ROAS target we set for all the games, I think we do expect to see return on advertisement spending over 100% from the platform in total overall. To monitor that, I think I kind of explained that earlier one, Steve asked about how we monitor new game launches. Basically, it's a step-by-step procedures, when we launch a new game, we monitor the first, basically from day zero to day three to see, you know, the early performance indicators.

Based on those, we adjust our advertisement spending, basically proactively and then continue to monitor the, you know, return, ROAS plus other, you know, key KPIs that indicate the performance of the game and adjust the advertisement spending allocation accordingly. I think that is the way how we maintain a relatively high ROAS compared to, you know, industry average.

Got it. The other thing I want to go into is basically, you know, despite your top line being a little softer, you've had paying monthly active users, you know, sustained. How does the engine look at paying monthly users? Are you, do you market to them when you see that they're paying so that you, like, redirect spend to the people who are paying? Do you have loyalty programs, things like that? Just want to understand the dynamic, how the engine maintains the paying active users.

In regard of the Paying Monthly Active Users, I would say, the main efforts where, you know, we put as the company to maintain their activity within the games and within our platform is actually not through a lot of the advertisements. For those Paying Monthly Active Users, a lot of time they have already spent a significant amount of times as well as money in the game on our platform. They kind of like know us already a while before. To maintain the active activity level for those Paying Monthly Active Users, we tend to work a lot with the game developers and ask them to continually update the game content.

Every single time when the user come back to the game, they are seeing something new, and they still, you know, basically keep the interest up, right? In regards to the online advertisements, a lot of times, the online advertisements is mainly to attract the new users and the new paying users. That is also explains a little bit about, you know, while we do see advertisement expense go down a lot because we're actively monitoring how we should spend the advertisement money. The paying monthly active user doesn't really change much, but you see MAUs is down a lot, and that is actually a factor of, you know, a lot of those new users or non-active users are attracted by those online advertisements.

Okay, just one more question, if I may. Revenue outside Japan rose from 29% to 32%. You've said you've opened a new New York office. I guess with, you know, anime culture being increasingly a global trend, even a huge thing in the U.S., how do you view how large the international opportunity is for CTW over the next two to three years? I mean, I guess, you know, if we think about, you know, where are you targeting, let's say, in like two to three years? Where can international revenue go, you know, as percent of total?

Yeah. Basically, I think one of the company's strategy regarding marketing is we definitely I think we have been continuously saying this, is that we are aggressively expanding into the North American region, U.S. markets in particular. The rationale behind of that decision is we realize that there is a lot of marketing potentials, as you just mentioned.

In regarding to, you know, our expectation for the next two or three years, like how we see revenue generally from outside of Japan versus Japan, we do I mean, we do believe that, you know, as long as we are able to efficiently do the localization and, find new partners in the new regions and, you know, adapt our model to the new regions, we should be able to eventually get around, say, you know, 50%-60% of our revenue generated from regions outside of Japan. That also depends on a lot of, you know, external factors, marketing trends and everything.

Great. Thank you. I'll leave the queue for other questions.

Thank you. Thank you, Vincent.

At this time, there are no more questions in the queue, so I am going to turn the call back to Patrick for some concluding remarks.

Okay. All right. Thank you everyone for joining today's earnings release for the first half of fiscal year 2026 of CTW. We are looking forward to keeping everybody informed as we progress. Again, thank you, everybody.

Thank you everyone for joining us today. You may now disconnect your lines.

Thank you.

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.

[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。

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.

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.

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.

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.

Just a quick follow-up, if I may.

Sure.

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.

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.

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

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.

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.

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?

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.

Great. Thank you so much.

Thank you.

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.

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?

Yes.

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.

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.

Great. Thank you.

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

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

It's quite fine. Please go ahead.

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?

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.

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?

Yes, exactly. That's part of the.

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

Yes. Yes.

Got it. Thank you.

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.

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.

You may now disconnect your lines.

Thank you.