F-1: CTW Cayman Files for Initial Public Offering to Fuel Global Expansion of Anime IP-Based Gaming Platform

CTW Cayman, a leading web-based gaming platform specializing in anime IP-based HTML5 games, has filed for an initial public offering on the Nasdaq Capital Market to fund its global market expansion and general corporate purposes.

Summary

• CTW Cayman operates G123.jp, a globally accessible HTML5 web-based gaming platform featuring free-to-play games inspired by popular Japanese animations.
• The company is the largest anime IP-based H5 games platform globally in 2023 by gross billings, according to Frost & Sullivan.
• The business model involves securing IP licenses from holders like KADOKAWA Corporation and Warner Bros Japan LLC, providing these resources and comprehensive support (distribution, marketing, localization, customer support) to game developers, and sharing revenue from in-game purchases.
• CTW Cayman retains an average of approximately 90% of gross in-game purchases from developers after advances are recouped, and approximately 80% after deducting IP royalty costs.
• Historically, top games like Vivid Army and Queens Blade Limited Break have accounted for a substantial portion of revenue, though new titles like 'So I'm a Spider, So What? Ruler of the Labyrinth' are diversifying revenue streams.
• The company reported revenues of US$41.2 million and net income of US$0.6 million for the six months ended January 31, 2025.
• For the fiscal year ended July 31, 2024, revenues were US$68.4 million and net income was US$6.0 million.
• Monthly active users (MAUs) grew by 140.14% from 958,578 in 2021 to 2,301,929 in 2024, and paying monthly active users (PMAUs) increased by 202.5% from 121,835 to 368,568 over the same period.
• The company plans to use approximately 85% of the IPO net proceeds for global market expansion and 15% for working capital and general corporate purposes.
• CTW Cayman will have a dual-class share structure, with founder and CEO Mr. Ryuichi Sasaki retaining approximately 100% of Class B ordinary shares (10 votes per share) and a significant portion of Class A ordinary shares, giving him approximately 90% of total voting power post-IPO, making the company a controlled company under Nasdaq rules.

Sentiment

Score: 6

Explanation: The company demonstrates strong market position and growth in user base and revenue, driven by a unique business model and strategic IP partnerships. However, the significant decline in net income for the most recent interim period due to increased operating expenses and impairment charges, coupled with high dependence on a few games and risks associated with unrecovered advances, introduces notable financial concerns and execution risks for its ambitious global expansion plans.

Positives

• CTW Cayman is the largest anime IP-based H5 games platform globally in 2023 by gross billings, indicating strong market leadership.
• The company has established partnerships with 33 animation IP holders, including major entities like KADOKAWA Corporation and Warner Bros Japan LLC, providing privileged access to popular content.
• The HTML5-based platform offers seamless, instant-play experiences without downloads or registrations, enhancing user accessibility and convenience across various devices.
• The asset-light business model, focusing on supporting developers rather than direct game development, contributes to high profit margins (approximately 80% retention after royalties) and minimizes development-related risks.
• The platform's independence from major app stores bypasses significant fees and compliance costs, allowing for direct reinvestment into platform development.
• User base has shown substantial growth, with MAUs increasing by 140.14% from 2021 to 2024, and paying user base growing by 202.5% over the same period.
• The company achieved a positive Return on Advertisement Spend (ROAS) of 112.6% for the six months ended January 31, 2025, demonstrating efficient user acquisition.
• Net cash provided by operating activities was US$2.6 million for the six months ended January 31, 2025, indicating operational efficiency and cash generation capability.
• Strategic investments in new IPs like Doraemon and Kakegurui, and collaborations with top-tier developers, are expected to drive future growth and global market penetration.

Negatives

• Net income significantly decreased by 83.9% from US$4.0 million in the six months ended January 31, 2024, to US$0.6 million in the six months ended January 31, 2025, despite a 23.2% increase in revenue.
• General and administrative expenses more than doubled (105.5% increase) for the six months ended January 31, 2025, primarily due to expansion efforts and IPO-related audit services.
• Research and development expenses increased by 88.0% for the six months ended January 31, 2025, mainly due to a 169.8% increase in impairment charges related to unrecoverable advance payments to third-party game developers.
• Sales and marketing expenses increased by 50.7% for the six months ended January 31, 2025, driven by intensified promotional campaigns for new game titles and international expansion.
• The company has a history of unrecovered advance fees to game developers, with 3 advances not recovered due to development failure and 6 games going offline before full repayment, leading to significant valuation allowances (29.6% as of Jan 31, 2025).
• The ROAS declined from 131.2% in FY2023 to 110.7% in FY2024, primarily due to a 24.0% increase in average cost to acquire a new user through advertising.
• The company is highly dependent on a few flagship games and related developers, with Vivid Army alone contributing 28.6% of revenue for the six months ended January 31, 2025, and 58.2% in FY2023, posing a concentration risk.
• Paying user retention rates have declined across all periods (e.g., Day 30 retention rate for paying users decreased from 27.9% in FY2023 to 18.47% in the six months ended January 31, 2025).

Risks

• The online gaming industry is intensely competitive, and the company may struggle to distribute successful games or compete with larger players with greater resources.
• Success depends on efficiently attracting and retaining end-users who make in-game purchases, and revenue is highly sensitive to changes in player spending behavior.
• Reliance on third-party game developers means business success is tied to their ability to produce commercially viable and appealing content, and the company faces competition for key licenses and developer partnerships.
• It may become increasingly difficult and expensive to acquire players, and there is no guarantee of a positive return on user acquisition efforts.
• The company relies on third-party intellectual property; failure to secure or renew key licenses on favorable terms, or potential infringement claims, could adversely affect the business.
• Dependence on flagship games means a significant decrease in their popularity would materially affect financial results.
• Inability to fully recover advance fees provided to game developers if a game fails to launch or generate sufficient in-game purchases could materially and adversely affect financial condition.
• Exposure to technology upgrade risks, including delays and additional costs, and the need to adapt to rapid changes in web-based technologies, network infrastructure, payment systems, and cloud computing.
• Reliance on a small percentage of end-users for all in-game purchases makes the company vulnerable to changes in spending habits of these high-value players.
• Dependence on effectively operating the platform with operating systems and network infrastructures not controlled by the company; changes to these systems could harm player retention and engagement.
• Reliance on a limited number of data storage and cloud infrastructure providers exposes the company to service disruptions or fee increases.
• Vulnerability to server capacity loss or insufficient Internet bandwidth, which could disrupt services and affect profitability.
• Reliance on third-party payment processors introduces risks related to managing these relationships, potential service disruptions, and difficulty accessing banking services.
• Content policies or regulations adopted by regulators, consumer opposition, and litigation (e.g., related to age appropriateness, sensitive content, gaming disorder) could negatively affect game distribution.
• Security breaches or other disruptions could compromise information, leading to loss of players, increased costs, liability, and reputational harm.
• Periodic and annual operating results are dependent on the timing and success of hit title releases, leading to potential significant fluctuations.
• Inability to successfully manage current and future growth, especially international expansion, could materially and adversely affect results.
• Changes to U.S. tariff and import/export regulations or uncertainties in tax systems in operating countries could negatively affect financial condition.
• Data privacy and security laws and regulations in various jurisdictions (U.S., EU, UK) are evolving and could increase operational costs and subject the company to penalties.
• The commercial use of artificial intelligence (AI) is in early stages and raises social, ethical, legal, and intellectual property ownership concerns.
• Acquisitions or investments in other businesses may not be successfully integrated or realize anticipated financial goals.
• Use of open-source software may pose risks to proprietary software, including unknown bugs, security vulnerabilities, and license compliance issues.
• The company is subject to risks related to corporate and social responsibility and reputation, including negative reactions to its platform or services.
• Catastrophic events and climate change may have a long-term impact on the business and critical infrastructure.
• No prior public market for Class A ordinary shares, leading to potential price volatility and liquidity issues.
• Immediate and substantial dilution in net tangible book value for new investors.
• Material weaknesses in internal control over financial reporting identified (lack of proper system data change control, user access review control, and lack of independent directors/audit committee).
• Substantial increased costs as a public company due to compliance requirements.
• Potential adverse effect on market price if substantial amounts of Class A ordinary shares are sold in the future.
• No intention to pay dividends for the foreseeable future, meaning investors may only see returns from share price appreciation.
• Dual-class share structure and concentration of voting control in the founder may limit other shareholders' ability to influence corporate matters.
• Management has broad discretion over the use of IPO proceeds, which may not always enhance results or share price.
• Failure to satisfy Nasdaq listing requirements could lead to delisting.
• Anti-takeover provisions in articles of association may discourage changes in control.
• Difficulty enforcing judgments against the company due to its Cayman Islands incorporation and primary operations in Japan.

Future Outlook

CTW Cayman is committed to investing in high-quality IP content and collaborating with top-tier developers to deliver games appealing to a wider global audience, expanding its presence beyond Japan and increasing market share in the mobile game segment. The company plans to explore new opportunities presented by advanced technologies, including artificial intelligence and data analytics, to drive future growth. Over the next five years, it aims for significant global expansion into major markets across America, Europe, and Asia, with plans to launch world-renowned animation IPs like Doraemon and Kakegurui. The company is also exploring a proprietary virtual currency for in-game transactions powered by blockchain technology to reduce reliance on third-party payment providers.

Management Comments

• Our mission is to unlock the potential of Japanese animation-based games, offering game developers the digital floor with commercial opportunities and essential supports to turn their craft into financial success, while creating an unforgettable, ad-free, immersive gaming experience featuring beloved Japanese animations for end-users.
• We believe that our overall profitability will increase in the long run, primarily driven by our continuous focus on acquiring high-quality content and strategic partnerships as well as our growth momentum attributed by the expansion into the global market.
• We are committed to investing in high-quality IP content and collaborating with top-tier developers to deliver games with appeals to a wider audience globally, furthering our presence in global markets beyond Japan and increasing our market share in the mobile game segment of the gaming industry.
• We are also dedicated to exploring new opportunities presented by advanced technologies, including artificial intelligence and data analytics, to drive future growth.

Industry Context

The global online gaming market is experiencing robust growth, projected to reach US$219.7 billion by 2028, driven by increased investment in game development, rising gamer numbers, and expansion of online multiplayer experiences. The mobile games market, a significant segment, is expected to grow to US$123.9 billion by 2028, fueled by smartphone adoption and technological advancements. While the overall H5 games market has seen a slight decline, the Anime IP-based H5 games market is growing, projected to reach US$870.8 million by 2028, driven by IP licensing, content innovation, and cross-media cultural influence. CTW Cayman operates within this niche, leveraging popular Japanese anime IPs to attract a dedicated global audience. The industry value chain involves game developers, IP holders, publishers, distributors, and players, with a strong synergy between player engagement and developer innovation.

Comparison to Industry Standards

• CTW Cayman ranked third in the global H5 games platforms market in 2023 with gross billings of US$87.3 million, behind Tencent Games (US$222.4 million) and NetEase Games (US$98.8 million).
• In the more specific Anime IP-based H5 Games platform market, CTW Cayman is the top contender with gross billings of US$87.3 million in 2023, surpassing Tencent Games (US$77.8 million), Poki (US$59.1 million), GameSamba (US$57.7 million), and DMM Games (US$48.9 million).
• The company's ROAS of 112.6% for the six months ended January 31, 2025, and 110.7% for FY2024, indicates efficient marketing, though it declined from 131.2% in FY2023 due to increased advertising costs across major digital platforms.
• The company's business model, which involves providing upfront advances to game developers and retaining an average of approximately 80% of gross in-game purchase amounts after royalty costs, aligns with industry practices of revenue sharing but emphasizes a higher retention rate for the platform compared to some traditional app store models.
• The company's focus on HTML5 games allows it to bypass high fees and restrictive requirements often imposed by major distribution platforms like Apple App Store or Google Play Store, which typically take 15-30% of revenue.

Management Changes

Corporate Governance

Legal Proceedings

• The company is not currently subject to any significant legal proceedings.
• The company may, from time to time, encounter actual or threatened legal actions, claims, investigations, and government inquiries in the ordinary course of business, including matters related to anti-money laundering, gambling, intellectual property, data privacy, consumer protection, and employment.

Related Party Transactions

• No material transactions with related parties occurred during the six months ended January 31, 2025, and fiscal years ended July 31, 2024 and 2023, other than employment agreements with executive officers.

Stakeholder Impact

• **Shareholders:** Potential for dilution from the IPO, immediate and substantial dilution in net tangible book value for new investors. Share price volatility is expected due to lack of prior public market. Voting power is concentrated with the founder due to dual-class share structure.
• **Employees:** Continued investment in attracting and retaining key talent, particularly in software engineering, creative arts, and AI technologies. Company provides free meals and snacks, and fosters an inclusive work environment. Subject to non-compete and confidentiality clauses.
• **Customers (Game Developers):** Benefits from upfront advances, comprehensive platform support (IP access, distribution, marketing, localization, customer support), and a revenue-sharing model designed for monetization. Risk of unrecovered advances if games underperform.
• **End-Users/Game Players:** Access to a diverse selection of free-to-play HTML5 games based on popular Japanese animations, with no downloads or registrations. Enhanced experience through AI-driven optimization, 24/7 customer support, and a wide range of payment methods. Risk of declining engagement if new content is not consistently appealing.
• **IP Holders:** Benefit from expanded reach and monetization of their intellectual properties through game adaptations on the platform.
• **Suppliers/Creditors:** Company relies on third-party data storage, cloud infrastructure, and payment processors, exposing it to potential service disruptions or fee increases from these providers. Financial health and operational efficiency impact ability to meet obligations.

Next Steps

• Launch Doraemon, Kakegurui ALL IN, and seven other games based on globally recognized animation IPs in the rest of 2025 and early 2026.
• Continue to invest in high-quality IP content and collaborate with top-tier developers.
• Further broaden global reach, particularly in America, Europe, and Asia, by optimizing SEO and integrating with global social media channels.
• Fully explore AI-driven opportunities, including streamlining internal processes and offering AI-based packaged solutions to external clients.
• Expand in-house capabilities, including establishing gateway and payment hubs and exploring a proprietary virtual currency powered by blockchain technology.
• Remediate identified material weaknesses in internal control over financial reporting by the fiscal year ended July 31, 2025.
• Appoint independent directors and establish an audit committee and nominating and corporate governance committee upon the effectiveness of the registration statement.

Key Dates

Recommendation

Keywords

Gaming platform, Anime games, HTML5 games, IP licensing, Game distribution, Free-to-play, In-game purchases, Mobile gaming, Japan, Global expansion, CTW Cayman, G123.jp, Online gaming, Game development support, User acquisition, Monetization, Dual-class shares, SEC F-1 filing, Initial Public Offering