CTW — FY2026 (Annual) Financial Report Analysis

CTW (renamed from CTW Cayman in May 2026) runs G123.jp, a Tokyo-based platform for browser games built on Japanese anime and manga brands such as Queen's Blade, Goblin Slayer and High School of the Dead. Players open the games in a web browser with no download, and CTW earns a fixed share of what they spend on in-game purchases; outside studios build the games, and CTW supplies the anime licences, hosting and marketing. In its first full year as a Nasdaq-listed company (fiscal year ended July 31, 2026), revenue fell 8.7% to $82.5 million and the company swung to a $4.1 million net loss from a $3.8 million profit. The filing gives two reasons: the year's new games earned less than the year before, and the company kept adding staff, servers, outside design work and public-company costs while revenue shrank.

At a glance

• Revenue down 8.7% to $82.5 million. CTW launched 15 new games, which together brought in $22.0 million. A year earlier it launched 7, which brought in $32.3 million. More launches produced less money.
• Operating loss of $7.3 million, up from $1.1 million. Cost of revenue (the cost of running the platform and paying licence holders) rose 29% while revenue fell, and advertising cuts only partly made up for it.
• Monthly players down a third, paying players flat. Average monthly active users fell 33.2% to 2.26 million, while paying users held at about 89,000 a month. Each paying user spent less, though: $90.60 a month, down from $100.74.

Where the revenue went

The whole decline came from new games. Revenue from games already on the platform rose 4.1% (about $2.4 million), because some of the fiscal 2025 launches kept players engaged and spending. The 15 new launches were the problem: on average each earned far less than the previous year's crop. Two did well. Crayon Shinchan My Sugoroku Great Strategy (launched November 2025) brought in about $7.1 million, and High School of the Dead Day 0 (launched April 28, 2026) brought in about $6.0 million in just over three months. That made it the platform's top earner over that stretch, ahead of the long-running Vivid Army. It arrived too late in the year to offset the weaker launches.

The business also depends heavily on a few games. Vivid Army was 20.2% of revenue, down from 30.1% and 40.3% in the two years before. The studio behind Arifureta and two other titles was 17.5%. Relying less on one game is healthy, but it also means each year's results depend on whether new launches catch on.

By region, Japan fell 16.1% to $52.8 million (64.0% of revenue, down from 69.6%). Taiwan, Hong Kong and Macau grew 71.2% to $8.0 million, and South Korea rose $1.2 million to $10.5 million. North America fell about $1.3 million to $6.2 million, despite a new New York office opened in early 2026.

Why the loss widened

• Cost of revenue rose 29.2% to $28.5 million, from 24.4% of revenue to 34.5%. Staff costs for platform and game-support teams rose $2.6 million to $10.2 million. Outside creative consultants for new-game art cost $2.5 million, up from $0.1 million. Servers and software rose $1.9 million to $5.9 million. Payment-processing fees fell $0.7 million because players spent less.
• General and administrative costs rose 37.9% to $11.7 million. Professional fees rose $1.9 million (audit, legal and advisory work that comes with being listed), rent rose $0.5 million, and a $0.5 million Taiwan business tax charge partly relates to earlier years.
• Advertising fell $11.4 million (21.7%) to $41.0 million. That was the main offset. Management says it cut ad spending on underperforming games and kept spending where return on ad spend, or ROAS (revenue earned per dollar of advertising), justified it. The filing says the lower ratio of marketing to revenue came from these cuts "rather than an improvement in advertising returns": overall ROAS was slightly lower than in fiscal 2025.

What the headline numbers hide

• Last year's profit was mostly a one-off. Fiscal 2025's $4.4 million pre-tax profit included a $4.7 million recovery from a cryptocurrency investment the company had written off after the Mt. Gox exchange collapse. Without it, fiscal 2025 was roughly break-even before tax. This year's recovery was only $0.24 million, the last of the claim. So the real drop in earning power is smaller than "$3.8M profit to $4.1M loss" suggests, but the trend is still clearly worse: the operating loss grew sevenfold.
• A tax benefit made the net loss look smaller. The pre-tax loss was $5.8 million. A $1.7 million tax benefit, mostly deferred-tax accounting rather than cash coming in, brought the net loss down to $4.1 million.
• R&D spending fell only on paper. Research and development expense dropped 31.2% to $3.8 million. The filing says this mostly reflects an accounting change (early adoption of ASU 2025-06): $4.1 million of software development pay is now recorded as an asset on the balance sheet instead of an expense, "rather than a reduction in our development activities." Counting the capitalised amount, total development spending rose.
• New stock-based pay. $2.0 million of share-based compensation (pay in shares and options, which doesn't use cash but dilutes shareholders) appeared for the first time, most of it ($1.1 million) in sales and marketing. Without it and the partly one-time Taiwan tax charge, the operating loss would have been about $4.8 million. That is still a loss, and still much bigger than last year's.
• Cash flow was weaker than the loss. Operating activities used $3.2 million of cash. Add $4.1 million of capitalised software and $0.4 million of equipment, and the business used roughly $7.7 million of cash in the year. Cash advanced to game studios for games still in development rose $6.0 million, and $2.6 million of earlier advances were written off as unrecoverable. Year-end cash rose to $14.4 million from $12.2 million only because of the $10.5 million net raised in the August 2025 IPO, and the company says it has used all the IPO proceeds.
• Founder control. Founder Ryuichi Sasaki, through CTW (BVI) Ltd., holds 96.0% of the shares and 98.5% of the votes, so outside shareholders have almost no say.

Takeaway: CTW's spending is now set for a bigger business than its game launches are producing. Costs went up with 15 launches, while revenue fell because those launches earned less than last year's 7. The prior-year profit was mostly a crypto recovery, and the IPO cash that kept the balance sheet steady has been spent.

What to watch

Management says the public-company setup is "now largely in place." It expects general and administrative costs to rise "only modestly" in fiscal 2027, even with a full year of New York rent, and staff costs to keep growing as it hires selectively. Marketing will follow the ROAS rule, so ad spending rises only when a new game is earning. The company gives no revenue or profit guidance.

Our read: fiscal 2027 depends mostly on how long High School of the Dead Day 0 keeps earning. It averaged about $2.0 million a month, and the filing says it "has continued to perform" early in fiscal 2027, but warns that game revenue "generally declines over time following launch." If it holds near that pace, it alone would be worth more than a quarter of fiscal 2026 revenue on an annual basis. The other thing to watch is cash: about $14 million, with the business using cash at a rate of roughly $7-8 million a year and more studio advances already paid in August 2026. The next check is the half-year report for the six months to January 31, 2027, which CTW filed in mid-May this year.