CTW Cayman (NASDAQ:CTW) reported lower fiscal 2026 revenue and in-game purchases as several new titles underperformed and mature games progressed through later stages of their life cycles, while the company reduced advertising spending to preserve returns.
Chief Financial Officer Patrick Liu said fiscal 2026 revenue declined 8.7% to $82.5 million, while gross in-game purchases fell 9.5% to $96.8 million. The company launched 15 games during the year and ended the period with 42 active titles. Liu said launches in the first half fell short of expectations, though High School of the Dead Day 0, released near the end of April, gained traction in Asia and North America.
The title generated about $6 million during its first three-plus months after launch and was the platform’s highest-revenue-generating game over that period, according to Liu. He said the contribution from the game was only partially reflected in fiscal 2026 results.
Advertising discipline supports segment profit
CTW reduced advertising expense by $11.4 million, or 21.7%, to $41 million. Total sales and marketing expense declined 17.2% to $45.9 million. Liu said the reduction was intentional, as the company scaled back marketing for titles that did not meet internal performance thresholds rather than pursuing growth at unattractive returns.
Return on advertising spend, or ROAS, was 105.8%, down from 116.4% in fiscal 2025 but remaining above the company’s 100% benchmark. Liu said this indicated that in-game purchases generated by newly acquired users continued to exceed the advertising costs required to acquire them.
Segment profit increased 3% to $32.3 million, representing 33.4% of in-game purchases, compared with $31.3 million, or 29.3% of in-game purchases, a year earlier. Lower advertising expense more than offset reduced in-game purchases and higher server costs.
The company recorded an operating loss of $7.3 million, compared with an operating loss of $1.1 million in fiscal 2025. Net loss was $4.1 million, or $0.07 per share, compared with net income of $3.8 million, or $0.06 per share, in the prior year. Fiscal 2025 net income included a $4.7 million contingent gain related to recovery of previously impaired assets, while fiscal 2026 included a $1.7 million income tax benefit.
Adjusted EBITDA was $3.5 million, or 4.2% of revenue, compared with $8 million, or 8.8% of revenue, in fiscal 2025. Liu noted that fiscal 2026 also included $2 million of non-cash share-based compensation expense, largely related to options granted in December 2025.
User trends and international expansion
Monthly active users declined 33% to approximately 2.26 million, from approximately 3.38 million a year earlier. However, paying monthly active users increased slightly to approximately 89,100 from approximately 88,500, lifting the paying-user ratio to 3.95% from 2.62%.
Liu said the decline in activity was concentrated among non-paying users, who tend to be more sensitive to changes in advertising and promotional spending. Average revenue per paying monthly active user declined to $90.60 from $100.74, while paying daily active users declined 13% and overall daily active users fell 7%.
Revenue outside Japan rose 8.2% to $29.7 million and accounted for 36% of total revenue, compared with 30.4% a year earlier. Revenue from South Korea increased 12.4% to $10.5 million, while combined revenue from Taiwan, Hong Kong and Macau climbed 71.2% to $8 million.
Combined revenue from South Korea, Taiwan, Hong Kong and Macau grew 31.9% to $18.5 million, or 22.4% of total revenue. North American revenue declined to $6.2 million from $7.5 million, reflecting reduced user-acquisition spending on underperforming titles. Japan revenue decreased 16.1% to $52.8 million.
Liu said CTW’s New York team, established in February 2026, is focused on partnerships, user acquisition, localization and corporate communications. The company also attended Anime NYC in August, its first active participation in a major North American anime convention. Liu said the company does not disclose event-specific traffic data but viewed the event as an opportunity to build brand awareness and develop relationships with licensing, gaming and other industry professionals.
Content selection and browser-based distribution
In response to analyst questions, Liu said CTW does not regard newer anime properties, catalog titles or original games as inherently more attractive than one another. The company evaluates content based on fan engagement, expected monetization, licensing costs, royalty rates, revenue-sharing terms and developer advances.
As of the end of fiscal 2026, CTW had partnerships with 38 anime intellectual-property holders and held 48 IP licenses. Liu said the performance of High School of the Dead Day 0, based on a manga first serialized in 2006, showed that older catalog properties can still have commercial potential when paired with games that meet fan expectations for gameplay, engagement and monetization.
The company assesses new titles in the first weeks after launch using metrics including user acquisition, character creation, first-day retention, paying-user conversion, early monetization trends and expected ROAS. CTW generally increases advertising when a game produces attractive returns and reduces spending when performance is below expectations.
Liu also said the company has observed growing interest from developers and publishers in distribution outside traditional app stores. He said CTW’s browser-based G123 platform can offer global access without app downloads, payment processing through third-party providers, user-acquisition support, localization services and access to anime and manga IP.
Cash, platform investment and outlook
Net cash used in operating activities was $3.2 million, compared with $0.1 million of cash provided in fiscal 2025, reflecting the net loss and working-capital movements. CTW advanced $6 million to game developers during the year as it invested in future content.
The company ended fiscal 2026 with $14.4 million in cash and cash equivalents, up from $12.2 million at the end of the prior fiscal year, supported by $10.6 million in net IPO proceeds. CTW reported no debt.
CTW also capitalized $4.1 million of internal-use software development costs for the G123 platform after early adopting ASU 2025-06. Liu said approximately $3.5 million remained after amortization, including about $2.5 million of software and services already placed in service. The company expects roughly $1 million in annual amortization for each of the next two fiscal years.
Liu said CTW expects to continue investing in platform capabilities, including AI-enabled tools, data analytics and workflow automation, to support game launches, localization, marketing and operating efficiency. He said the company’s objective for fiscal 2027 is to return to sustained growth while maintaining its ROAS-focused marketing discipline and debt-free balance sheet.
About CTW Cayman (NASDAQ:CTW)
CTW Cayman Limited is a holding company associated with CTW Inc, a Japan-based developer and operator of online games. Through its G123 platform, the company provides browser-based games that can be played without downloading dedicated applications.
The company’s games are generally based on popular anime and other entertainment properties and are offered through a free-to-play model, with revenue generated from in-game purchases and related digital content. Its platform is designed to support the development, publication and operation of games for users across desktop and mobile devices.
CTW serves players primarily in Japan and also distributes its games internationally.
