Ladies and gentlemen, good day, and welcome to the Nazara Technologies Limited Q2 and H1 FY 2024 earnings conference call, hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of the future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Abhishek Banerjee. Thank you, and over to you, sir.
Hi. Hello, everyone. Welcome to the Nazara Q2 FY 2024 conference call. We have with us from Nazara management, Mr. Nitish Mittersain, founder and CEO; Mr. Sudhir Kamath, COO; and Ms. Anupriya Sinha Das, the Head of Corporate Development. Thanks, everyone, for giving us the opportunity to hold this call. Now over to Mr. Nitish Mittersain for his opening comments. Thanks, sir.
Thank you. Good morning, everyone, and a very warm welcome to all of you to Nazara Q2 FY 2024 earnings call. This call is joined by Sudhir, our Chief Operating Officer, Mr. Abhishek, CFO, Anupriya Sinha Das, AR Kaya. I hope all of you, fortunately, are well the same. In Q2 FY 2024, our revenue increased by 13% year-on-year, reaching INR 297.2 crores. Our EBITDA grew by 30% year-on-year to INR 37.9 crores, and our PAT increased to INR 20.2 crores. For H1 2024, we reported our revenue INR 531.7 crores, and EBITDA for the same period reached 61 crores, which is up 19% year-on-year, and our PAT climbed by 2% to INR 45 crores.
The EBITDA margin for the first half of the year was recorded at 11.1%, compared to 10.6% in the comparative period of the previous year. Our core business segments, gaming and esports, continue to grow, specifically the gaming segment, from year in revenue increased around 43% EBITDA down in the first half. While Q2 saw year-on-year 14% growth and a 46% EBITDA growth. In esports segment, H1 FY 2024 saw in revenue, that's 16% growth in EBITDA. But Q2 saw 26% year-on-year growth in revenue and 61% growth in EBITDA. Our AdTech business is still overcoming the challenges faced earlier due to the loss of a key customer, but our margin profile is improving, improving quite well, especially driven by our products business.
Last two quarters, efforts of building a strong sales pipeline are likely to convert into much better results in the coming quarters. Also, our internal use of Datawrkz's user acquisition capability is yielding promising results as we had originally envisaged. And we have right now, you know, experimented this with Animal Jam and hope to expand it to many of our different businesses going forward. Overall, for the first half of the year, we believe admittedly consolidated well, focused strongly on ensuring that the KPIs or the key performance indicators that we focus on you know are in the right direction. And the businesses are generating cash, which will be discussed in coming quarters for accelerating organic growth as well as through strategic.
Especially on the M&A front, given the opportunities in front of us, we are quite confident that we will be able to deploy, you know, our cash reserves quite well. We have over INR 1,300 crores of cash on our consolidated books, including the INR 510 crores we recently raised in this quarter from Nikhil Kamath and SBI Mutual Fund. I believe Nazara is well positioned to give it acquisition opportunities to further accelerate our growth in the coming years. We also see a promising Make in India opportunity in the gaming industry, where Indian developers can create high-quality games, not only for the home market, but also for the world. Our new division, Nazara Publishing, is here to provide capital and services to assist developers in bringing top-quality games to this growing consumer base.
I would now like to hand over the call to Anupriya, our Head of Corporate Development, to give some highlights of our performance, segment-wide in this quarter. Thank you very much, and over to you, Anupriya.
Thank you, Nitish. Good morning, everyone. Wish you a very happy Diwali. As you are all aware, Nazara operates across three business segments: gaming, esports, and AdTech. Gaming includes gamified early learning, skill-based real money gaming, freemium, and telco sub-segments. This segment grew by 19% year-on-year in H1 FY 2024, and 14% year-on-year in Q2 FY 2024, coupled with EBITDA growth of 43% year-on-year in H1 FY 2024, and 46% year-on-year in Q2 FY 2024. This segment contributed 39% in revenue and 68% in EBITDA in H1 FY 2024. The EBITDA margin for this business is a robust 22.7% in H1 FY 2024, and 20.9% in Q2 FY 2024.
Now, within gaming, if we talk about specific IPs, Kiddopia, the revenue grew by 8% year-on-year in H1 FY 2024 to INR 113.9 crores, and 6% year-on-year in Q2 FY 2024 to INR 56.3 crores. EBITDA for the business increased INR 29 crores, a year-on-year increase of 57%. In Q2 FY 2024, EBITDA increased by 46% to INR 12.9 crores. We've continued to focus on acquiring customers at an optimal cost to ensure healthy EBITDA margins. This has resulted in margin expansion. EBITDA margin increased from 17.5% in H1 FY 2023 to 25.5% in H1 FY 2024, while Q2 margins increased from 16.5% in Q2 FY 2023 to 22.9% in Q2 FY 2024.
Seasonally weak quarter, which is the back-to-school post-summer break, coupled with challenges in scaling up U.S. spend via Google, has led to a 2.7% decline in subscribers in the current quarter. However, we are working closely with various ad networks to enhance scale of user acquisition while maintaining the optimal level of CPTs. We are also working on a multi-pronged approach to bring growth back for Kiddopia. This includes going beyond direct-to-consumer acquisition sources to school networks, licensing popular IPs to drive organic growth, focusing on scaling up new markets and opening new revenue streams such as advertising and merchandising. While some of these initiatives will take some time to show up in results, we're hopeful they will create a platform for stronger future growth. Moving on to Animal Jam. This is an IP we acquired in August 2022.
Since then, we have worked on multiple things. We have optimized non-core costs, which has resulted in an EBITDA margin of 24% in Q2 FY 2024, a significant increase from 11.6% in Q4 FY 2023. Within the product, the focus has been on improving monetization loops. This has resulted in a 46% year-on-year increase in ARPDAU in Q2 FY 2024. New user monetization increased to 2.0% in this quarter versus 1.4% at the time of acquisition in August 2022. We are working on licensing deals to introduce popular IP within Animal Jam, which would drive organic growth. We expect to start scaling up marketing spend in the coming quarters to drive revenue growth as well.
Moving to WCC, the revenue for the WCC franchises stood at INR 5.4 crores in Q2 FY2024, with an EBITDA growth of 23% year-on-year. In Q2, we transitioned our main titles, WCC2 to... and WCC3, to online-only mode, where customers who want to play offline have to pay and/or watch a rewarded video ad. This resulted in a lower daily and monthly active users, but we have not seen any dip in ad revenues. Further, this gives us more clarity on the true ARPU of our players, and so we can increase spend on user acquisition that will help us scale up the business to its true potential. We are also increasing focus on launching WCC in global markets where the ARPU would be much higher. Moving to OpenPlay, which is our IP in the skill-based real money gaming segment.
This segment's revenue and EBITDA stood at INR 25.2 crores and INR 3.3 crores respectively in H1 FY 2024. In July 2023, the GST Council decided to levy a 28% tax on the entry fees of real money games. This has come into effect from first October 2023. Due to the implementation of new GST tax regime from October 1st, we expect Classic Rummy to post an EBITDA loss in Q3 FY 2024 before stabilizing to breakeven by Q4 FY 2024 again. There have been industry-wide issues related to large claims from authorities over past tax liability. We continue to monitor the situation closely. With clarity on taxation, Nazara will seek to grow the OpenPlay business once it stabilizes from the GST impact, as well as actively explore attractive acquisition opportunities in the real money gaming segment. Moving to esports.
This segment grew by 21% in H1 FY 2024, and 26% year-on-year in Q2 FY 2024, coupled with an EBITDA growth of 16% in H1 FY 2024, and 61% year-on-year in Q2 FY 2024. This segment contributed to 52% in revenue and 28% in EBITDA in H1 FY 2024. NODWIN, the revenue increased by 15% in H1 FY 2024, and 20% in Q2 FY 2024. A significant development in H1 FY 2024 was the return of BGMI. NODWIN conducted the second season of BGMI Master Series for India, which was telecasted on Star Sports and Rooter. Multiple events, including PUBG Mobile Club Open, PMCO, and PUBG Mobile Pro League, South Asia, PMPL, were held in international markets.
As the popular games have only recently returned, we expect momentum in IPs around these games and associated media rights to pick up going forward. H2 is usually the key period for Nodwin, where we have many established IPs and event schedules. Our gaming accessories business, Wings, launched gaming-focused laptop series for the festive season. Some of the revenues during this period moved into Q3 due to Diwali being in November this year. Moving to Sportskeeda, we have reported a robust year-on-year growth of 50% to INR 87.2 crores in H1 FY 2024, and 47% year-on-year in Q2 FY 2024 to INR 41.4 crores. EBITDA for the business improved to INR 25.1 crores in H1 FY 2024, which is a growth of 44% year-on-year.
Whereas for Q2 FY 2024, EBITDA increased to INR 9.6%, which is a growth of 32% year-on-year. In the month of September, we are happy to announce that Sportskeeda crossed the 100 million user mark for the first time. We've been able to significantly scale Pro Football Network, a business we acquired in March 2023. In September 2023, PFN was ranked as the number two NFL focus website in the U.S. PFN business also achieved profitability, EBITDA profitability in September this year. Moving to AdTech. Over the last year, we've been focusing on reducing low-margin work and moving towards higher margin business clients, and simultaneously expanding our client base to remove any further concentration risks.
The loss of a key client continues to impact revenues in this quarter, resulting in a year-on-year decline of revenue from 50 to INR 50.2 crores in H1 FY 2024, compared to INR 67.6 crores for H1 FY 2023. However, the gross margin percentage has sharply improved from 18%- 24.6%, and total gross margins have also increased from INR 12.0 crores to INR 12.3 crores in the same period, showing that this revised approach is beginning to pay off. While gross margins have improved, Datawrkz's EBITDA has declined from INR 6.8 crores in H1 FY 2023 to INR 3.2 crores in H1 FY 2024. This reflects a significantly higher investment in our sales and marketing efforts in the form of team overheads as well as marketing events.
These investments in marketing during Q2 FY 2024 and the ongoing efforts in the current third quarter have significantly bolstered our pipeline and started leading to a higher conversion rate from our sales pipeline and the formation of key partnerships. Additionally, we have recently welcomed a senior marketing head, who will spearhead marketing initiatives across all verticals. Mediawrkz, the dedicated publisher monetization solutions division of Datawrkz, has earned the prestigious Google Certified Publisher Partner certification. This is expected to help with increased market penetration in conjunction with new ad monetization products being rolled out by Mediawrkz. We continue to benefit from a close working between Datawrkz and Animal Jam team, and expect to expand this to various other companies within our group. With this, I'll close my remarks here, and we'd like to open the call for Q&A.
I would request Nitish, Sudhir and Rakesh to join me for the Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Jinesh Joshi from Prabhudas Lilladher Private Limited. Please go ahead.
Yeah, thanks for the opportunity. In the opening remarks, you mentioned that, due to this implementation of, new GST rate from October first, we expect, Classic Rummy to post an EBITDA loss in Q3, but, we expect that to, stabilize in 4Q. So what I want to understand is, what changes are we instituting to kind of, get a break even within a quarter, given the fact that, the tax rate on, full bet value is quite, discouraging? Also, also in order to attract players, I mean, do we plan to reduce our platform fee or give a higher joining bonus? What is, our plan here, basically?
Hi, Jinesh, this is Nitish. So the way the GST has been implemented, right, there is a 28% tax on deposit now effective first of October. At this point of time, all the market players, including us, are absorbing the entire impact of this increase in tax, and not passing the player. What that means is basically erodes our margins, and therefore, we made a comment saying that, you know, in Q3 some level of EBITDA loss as we optimize the business. The way we are looking to come back to a breakeven, and the early signs are quite positive, is one, of course, as we knew that this change is coming up, you know, we had undertaken significant cost optimization measures. I think they are helpful to us.
Second, is, you know, we will slightly increase our, our, commission that we charge, or the rates that we charge, which will increase our net revenues. And the third, we have also, for example, incentivize the users to withdraw less. You know, there's usually a very circular loop, people keep, withdrawing and again depositing. So we are kind of incentivizing the users to keep money in the system, rather than continuously withdraw and deposit, to reduce our outgoing tax liability. So I think these are some ideas I'm sharing, but there is a lot of work and lot of ideas that the team is implementing, and we are very confident that the business will stabilize, very... and, then set a base for, future growth.
I think from a Nazara perspective, all along, you know, we have been saying that for us, getting clarity on taxation and regulatory aspects of the real money gaming space was very important before we took, much, you know, more aggressive moves. I believe that that has largely been achieved now, and therefore we are in a good position to both push, aggressively for growth in OpenPlay going forward, as well as look at, you know, potential acquisitions in that space.
Sure, sir. Got that. My second question is on eSports. Now, I believe eSports was a medal event in the recently concluded Asian Games. So would you have any specific data to share on viewership and sponsors, which can give us some idea on the acceptance of the sport as such? Also, I believe this time around, the competition was on some seven titles. So how does the selection of the game happen, and do you expect the titles to rise going forward?
Dinesh, the first part of the question just broke up a bit. Can you just quickly summarize it, please?
Yeah. So, esports was a medal event in the recently concluded Asian Games. So, do you have any specific data on viewership and sponsors, which you would want to share, that can give us some idea with respect to the acceptance of the sport as such?
So, answering your second question first is that the Asian Games are, you know, currently chosen by the Olympic Committee, OCA, and... Sorry, not Olympic, by the OCA, and it was broadcast on SonyLIV. We do not have very specific data on it, but I think it’s a great first start for, you know, eSports to be, you know, brought into the Asian Games. I think it just helps create that credibility of eSports being seen as a, as a, you know, proper sport. And even the recent comments, they would look at bringing on eSports into the Olympics soon. So I think, all in all, it’s a very positive sign. There were no separate sponsors other than the Asian Games sponsors specifically for this.
Got that. Thank you so much, sir, and all the best.
Thank you. Would like to remind participants that if you wish to join the question queue, you may press star and one now. The next question is from the line of Mr. Abhishek Kumar from JM Financial. Please go ahead.
Yeah, hi. Good morning, and congratulations on fundraise. Really some marquee investors there. So my question is on the utilization of these funds. You know, while, you know, it’s given in one of the slides, the area that you’re looking at, but in terms of timelines, do we have any timelines by which we want to deploy these funds? And then I have a follow-up.
Sure. So, Abhishek, we’ve, you know, built a pretty strong pipeline in, I would say, in most of this year and last, last 12 months, I would say. And the market is very conducive for us to be able to, you know, potentially acquire businesses at, you know, attractive prices and that, businesses that we believe can grow well for us in the future. So we, we are having a strong pipeline. We’re looking at, you know, trying to take some of these across the finish line in the next couple of quarters. But, we are not in some tearing hurry. We want to make sure that just because we have raised capital, you know, we don’t randomly buy anything, which is not helpful for us. So we want to be very prudent about how we deploy.
At the same time, I think, we’d love to see, you know, some deployment of this capital before the end of the current financial year.
Okay. And maybe a related question was that, see, we are already, even before this, preferential money comes in, we were sitting at INR 820-odd crore of cash, and it is well distributed across our subsidiaries. So, I mean, I was just wondering, what was the need of... I mean, do we really need INR 500 crore additional? And is the money which is lying in different subsidiary, you know, fungible enough for us to, kind of, make acquisitions at the corporate level?
So, to answer your second question first, you know, we see a lot of opportunities on the M&A side for the specific, you know, subsidiaries running their own businesses. And therefore, it is most efficient for us to deploy the capital directly from there, rather than bring it back to the corporate at this point of time. If we had not seen opportunities in each of these businesses, then we would probably, you know, try to do that. But at this point of time, we have, you know, acquisition pipelines in each of our businesses, whether it is the gamified learning business, whether it is the eSports business, Sportskeeda, et cetera. So the idea is to really deploy from there to buy businesses or opportunities that will add value to each of that segment.
In terms of why did we pull in additional capital, I think we’re really at a point of time where the value opportunity for us is significant, and I’d love to see us be able to take, you know, some larger, transactions, than what we have done in the past. And therefore, we wanted to make sure that we have, money in the bank. It puts us in a very strong, negotiation, you know, space. We can negotiate hard and close some good deals. That was really the intent to preempt our stategy.
Maybe one last question on the strategic direction from these, you know, acquisitions. So on one hand, we are saying that we are, you know, so we have, we have already launched the publishing business, and at the same time, you know, we are looking to acquire, and from what I read on the, on the presentation, some of the game studios.
So, just wanted to understand where do we want to position ourselves, you know, as a, as a publisher, publishing platform, allowing game studios and developers, you know, an opportunity to really build games, et cetera, or, you know, in the medium term, I mean, or do we really want to be ourselves, you know, game studios building these games, you know, for various platforms? Thank you.
Yeah, I think, both of these activities, which is acquiring and owning, our own game studios, as well as, providing a platform that allows publishing, especially in a market like India, which is, you know, much anticipated to grow big, and a lot of Indian developers as well as global developers, you know, want to access this market, are both very complementary and synergistic. A lot of our learnings from, the studios that we operate can be, you know, replicated in the publishing, initiative and be very helpful to the third-party developers, that we bring in. Publishing, of course, will be without equity to the developers, but, the studios that we really like, we may also acquire. So actually, the publishing can also become a fantastic funnel for future acquisitions by Nazara.
That's very helpful. Thank you, and all the best.
Thank you so much. The next question is from the line of Mr. Mukul Garg from Motilal Oswal Financial Services. Please go ahead.
Yeah, hi. Thanks for taking my question. So Nitish, just, following up on, on this, Nazara Publishing, can you just share some thoughts on, you know, how, you, you are seeing the, you know, value emerging from, you know, this model over the medium term, while you have committed for minimum INR 1 crore investment in each game? Generally, how, it will play out if a game is start gaining traction, will your investment be more about, you know, kind of, as a stake thing or, you know, as a publishing, you know, kind of platform, you know, what other kind of return opportunities you can generate out of it in the longer term? And then I have a subsequent question.
Sure. So there are two aspects to this, when we allocate capital in our publishing. One is, developers who require capital to develop the game, build their teams, fund the teams, et cetera. I think if we deploy capital there, that would go in the form of equity, and we would have a stake in the company. And then there are developers who may have games that they have already made or already self-invested in, and they are just looking for a publisher to, you know, bring it to the market, you know, invest capital in user acquisition, for example, provide some additional support in terms of game design, live operations, et cetera. So I think, depending on which developer on a case-by-case basis, we may take equity stakes, you know, upfront or not, in these developers.
In terms of the long-term strategy for publishing, we believe that, you know, how can Nazara create a very large consumer base across, you know, a large number of high quality games that we publish? We also intend to launch a Nazara SDK, which will be embedded in each of these games, and hopefully that will help us build a very large network, which can then provide additional value additions as the ability to cross-promote, have, more first-party data, et cetera. So we're not looking at this purely from a standalone, success of a game, but also building out the publishing network over a period of time.
Right. And just, two follow-up question on this. You know, you know, are you kind of now beginning to look at, you know, kind of, positive, you know, kind of spend from users, on, you know, these games in India? And you can kind of like, you know, talk a little bit about WCC also, how you see the longer term profile, because, it has been in a fairly narrow range, and the, you know, obviously, monetization hasn't been, that positive as of now.
Yeah.
And second, you know, what was the impression you got at IGDC? Are you seeing, you know, an improvement in the quality of games coming out and the interest in people?
Sure. So I think, with growing consumer base and the more time consumers are spending, Indian consumers are spending playing games on their phone, the more they are evolving into starting to pay for it. So I think incrementally, you're definitely starting to see better IAP conversions, although they are still far behind what you would see as global standards or, you know, evolved markets like U.S. But I believe that this will accelerate, and that's what we are kind of, gearing ourselves for. Also, you know, micro payments, UPI, digital payments in India have progressed so well, that they are going to be a very strong tailwind for users making these, IAPs.
Secondly, your question on WCC, I think we are surely a little frustrated in terms of how WCC has not scaled up, because the franchise is so strong and the game is so, you know, well developed over many years. I think there's a lot more that can be achieved over here, and for towards that, there's several things we have done. One is we kind of brought in a new CEO who's, you know, coming from background of Electronic Arts, et cetera, and he spent the last six months doing a lot of groundwork to get the game ready for a much larger launch. The other thing you must have noticed in our presentation is that, we're making some key decisions, which may disrupt the status quo that has been for the last many quarters or years.
For example, you know, we moved all our users to online-only mode because there were a lot of users playing offline, which we were unable to monetize. Now, by moving users online, we are able to increase the ARPU per user, and therefore our LTV gap equation becomes much better, and that should allow us to scale up. A lot more focus has been increased on live, maintaining much more live operations versus just content updates. I think there's a lot of activity happening in the back end, and I'm hopeful that by Q4, we should be able to, you know, start spending a lot more in WCC to scale it to the level it really should deserve. The last question you had was on IGDC. Nazara was a diamond sponsor at IGDC this year and was very well received.
What we are seeing on the ground is there is a lot of energy and a lot of enthusiasm by many indie and young developers. There were a few thousand developers there. We also hosted, in fact, we hosted a lunch exclusively for, you know, new and upcoming developers, which was very well received. And we've had, for our publishing, new launch of our publishing division, already, I think close to 100 applications that have come in, from developers for the games. I think, very great start. I'm enthused that the Make in India story in India is going to be very big for gaming, and that's exactly an area we're focusing. It may not become a very large source of monetization for Nazara immediately, but I think strategically and eventually, this will be very important for us.
Sure. And just if I may ask one more question, you know, on Kiddopia, the activation rate continues to moderate down. Any, any color on that, or is it more, volatility and should not be kind of, stay there for longer term?
No, I think, you know, we've been using Google as the main source of, user acquisition. And, unfortunately, we have not been able to scale our spends. You know, we have been trying to scale our spends, but, the spend has not grown beyond, you know, the steady state, $800,000 a month, $900,000 a month. So there, there are two, three things we are doing. One is we are very actively working with very senior teams at Google, and they are responding very well with us to try and solve this, scale-up problem. You know, we are getting activations in the range that we want, but we are not able to scale. So hopefully, both the teams working together will, find some solution.
We're also considering going back to some of the other strong ad networks that we were working with earlier, where we hope we can open more scale. And then, as we mentioned, and Anupriya spoke a bit about it, we're also trying to find alternate ways of growth versus just linear user acquisition spend growth. I think, I think generally for our kids' games, not specifically just Kiddopia, but even Animal Jam or any other game that we may acquire, I think IP licensing could be a very powerful way to break through this logjam of user acquisition. And we're in advanced conversations with a few IPs, well-known IPs, to bring them into our games. That would boost our ability to do better user acquisition as well as drive a lot more organic growth.
These are the ideas we're currently working on.
Perfect. Great. Thanks for answering my question.
Thank you so much. Participants who wish to join the question queue may press star and one at this time. The next question is from the line of Mr. Manan Poladia from MKP Securities. Please go ahead.
Hi, good morning. Am I audible?
Yes.
Sorry?
Yes, sir, you're audible.
All right. Thank you. Hi, good morning, team. First of all, congratulations on posting a great set. So, I have a couple of questions. The first one is on the esports side, specifically NODWIN. So what I want to understand is, I understand that currently we're in an investment phase for NODWIN, et cetera, and we are not really focused on driving EBITDA margins or EBITDA per se. What I want to understand is, in the long term, say, from a five, 10 fiscal sort of perspective, what sort of margin would we be aiming at in the future for the NODWIN? And just, follow up on that, the content views from H1 FY 2023 to 2024 have dropped from 377 million to 221 million. Is there a specific reason for that?
Maybe certain IPs being pushed, like BGMS coming here and the Diwali IP going afterwards. So if you could just clarify on that.
Sorry, your second question was?
So my second question was on the content views dropping from 377 million to 221 million in HY, H1 FY 2024 versus H1 FY 2023. I just wanted to understand the disparity between this. Is it because some IPs have been postponed or Q1 didn't have BGMI IPs?
Yeah. No, so on the second question, a lot of, you know, as you know, a lot of these games were some of the popular games or brands which came in in Q1. And, it takes, you know, some time for... Also, some of these popular games, when they came in, you know, the government had announced that they will review it in three months or six months, I think. I think it was three months. So I think a lot of the launches around these were tentative and, while we did successfully do the BGMS on Star Sports, I think, there is some lag effect. There's been some push, you know, into the next quarters.
In terms of the IP spread, you know, across quarters, you will see much more back-ended into H2. We've got a slew of IPs happening in October, November, December, which is our main season, and also in the first quarter of Q4 of this year, which is January to March. In terms of margins, I think, I mean, our stated policy on NODWIN has been that we need to strategically grow. Over a period of time, we are very hopeful that these margins will, you know, increase upwards of 10, 15%. But we don't have a specific guidance on that at this point, okay?
Correct. I understand. Thank you so much. Secondly, my other question is basically an accounting question. All I want to understand is, so if you look at your PNL for this quarter, sequentially at least, there has been this large jump in purchase of stock in trade and change in inventories of stock in trade. And I'm guessing, it has something to do with gaming, but I'm not completely sure. If you could just provide some clarity on that.
You're talking about stock?
No, when you look at the P&L, there is the first expense line item, which is purchase of stock in trade, and the second line, which is change in inventory.
Got it. This is basically to link to our Wings gaming accessories, because this is the main season, you know, the Big Billion Days on Flipkart, et cetera. So you would see more stock acquired for the sale of that.
Okay. Okay, correct. So this will, the profits of this will start showing in Q3, I assume?
Yeah. I mean, again, this business has grown very well for us from the time we acquired. So, we're still building out the brand, et cetera, so it's a low margin business still for us, but, growing, quite well. We've got, you know, Shubman Gill and good brand ambassadors and all on it. So we're right now looking to grow the, grow the brand and the scale of it, while remaining profitable. That's our approach.
Correct, sir. I understand. Thank you so much for answering my questions.
Thank you. The next question is from the line of Mr. Rahul Jain from Dolat Capital. Please go ahead.
Yeah, hi. Thanks for the opportunity. Just wanted to check about this Animal Jam business. The metrics on ARP, ARU, or the 30 basis monetization has improved, but we see that the revenue have been pretty stable, although we have done well on the margin. So what kind of thought process we should imply here? Do we see some scalability challenges from a demand side of it? Or, because if these metrics are up somewhere, possibly the churn might have gone up. So if you could explore on this thought and how we could see growth here from medium-term perspective.
Rahul, thanks for that question. So let me take that one. So I think if you look at Animal Jam, and WildWorks , the company in Genix said, so since we acquired it last year, the emphasis has very much been on, fixing a lot of the underlying basics first. The first couple of quarters was really around that. And since then, as you would have seen, the result has been that the margins are now increased significantly. So our revenues are still, if you look at it, slightly flat, but that's a misleading picture, because this is also seasonal. And the peak season for Animal Jam, which targets kids in the U.S., is actually this current quarter and the next quarter, with Halloween, New Year's, et cetera, events coming up.
So that's where you'll actually see the revenue scale up begin to happen. But just to step back, essentially what we're saying is that, we've kind of fixed the margins of the business well. The last couple of quarters have been steady now at 22%, 24% kind of margins, compared to maybe in single digits when we started. And the revenue scale-up is something that, is beginning to happen. There is a lot more that needs to be done in terms of both user acquisition and, maybe brand-related investments in that in the coming months. But we're fairly comfortable that those initiatives are available.
Right. Sorry, I missed the part in case you shared about the churn. What has been the behavior on a one-year basis?
This is not a subscription business, so I don't think churn is the right word here.
Or you can say maybe the paid user, whatever way you want it, right?
So the paid numbers had dropped slightly, but they've actually been coming back quite strongly now. So if you look at the total number, I mean, it's eventually the revenue that you will see, and we're quite comfortable that in the coming quarters you will see much better numbers there.
Understood. Understood. And on the ad tech side, given that, you know, we have a lot of positioning in the Western world, and there, what we are seeing with other ad tech businesses, the challenges continues. So, what are the thought here from a one or two year perspective?
Datawrkz, which is our primary vehicle for ad tech, is, if you look at that, that's a services business. So it's definitely not immune to what is happening in the broader ad tech space or advertising space, actually. ECPMs are definitely under pressure, globally. That said, what Datawrkz does is we provide the service to customers who are looking to deploy money for user acquisition. What we've seen is that, we've been focusing on moving towards higher margin clients.
Focusing more on the product side of things, that is definitely beginning to have an impact. We, of course, our scale is way too small, so we don't, there's a lot of room left to grow that business and to keep growing the margins from where we are. We also see that as more of a strategic capability, which we can use for our other games. So we've done that in Animal Jam, that have had a very positive impact. We're starting to do a lot of work, also using Datawrkz on Next Wave now, and potentially on other companies that we acquire.
One very interesting data you shared is that PFN, we have possibly scaled to the number two position, and what I understand, it's a very, very large market when I look at the top guy out there. So, do you see a very, very hyper scalability potential in near term in that business, just like we saw for the main SK business?
Sorry, can you just repeat that? I couldn't get the last part of it.
So the last part was like, I mean, in a way, we could say that the Sportskeeda growth and margin profile scaled up very, very sharply in the last couple of years. So do we see? And the market for PFN is also very, very large. So that way, you see that that scale up on a very small base could be very, very steep in the next couple of years.
Yeah. So I think, when we acquired, PFN, around April time, so if you remember, at that time it was still a negative margin business. And, I think we had mentioned at that time that, we are looking to have a breakeven year with them. I'm glad to kind of note that in September, we already had a breakeven month, for PFN. We do expect the margins to keep increasing on that business. And, Sportskeeda has proven a playbook of how to grow, EBITDA margins and profitability, and they're, deploying that quite well in PFN as well. The amount of scale that it can reach in terms of revenue is definitely much higher than where they are today.
I think it's a good combination of both revenue as well as profitability growth that we should see on that business.
Understood. Understood. Thanks. That, that's it from my side.
Thank you so much. The next question is from the line of, Nitin Jain from Fairview Investments Limited. Please go ahead.
Yeah. Thank you for the opportunity, and congratulations on a good quarter. So, my first question is, you know, last year you gave out a full year guidance, for the company, entire company, after the Q2 result. So this year you have, not given any guidance. So, like, how should we interpret this? Is there, you know, uncertainty in the business going forward, or if you can elaborate?
I'll take this. This is Nitish. No, I think we are quite confident that the Q3, Q4 will, you know, pick up from H1. I think what we found in the last couple of years is when we give a hard guidance, right, in trying to make sure we meet that guidance, a lot of strategic decisions kind of, you know, become questionable in terms of, you know, whether we should go or not. We really don't want to box ourselves by giving a guidance. If we believe, for example, that let's say Kiddopia or Animal Jam, we get fantastic acquisition opportunity, and we're able to massively scale up our user acquisition, right?
So now we don't want to be saying, you know, we'll give the X EBITDA guidance, and therefore we should restrain ourselves, and we need to be able to take such opportunities. So we just don't want to box ourselves by not being able to take important strategic decisions. That's the purpose.
Okay, got that. So just to follow up on that, like, I'm not looking for numbers, but, directionally, how do we see the year panning out compared to FY 2023?
Yeah. So I think, directionally, we should continue to see higher growth than H1, in terms of the revenues, and also a higher growth on EBITDA, for the rest of the year. That's what we are working towards.
Okay. No, I mean... Okay, great. So in terms of the margin, we should be better than last year, or?
Yeah, definitely.
Okay, perfect. Thank you. And my next question is on Kiddopia. So, the unit economics seem to have deteriorated, like, for a second quarter in a row. And also, our margin improvement is more, you know, out of the inability to scale up our spend. So, how do we read this? Like, is it out of increased competitive intensity in the business? Because, you know, larger players, like, ABCm ouse, they're seeing a good growth. And also, on Kiddopia, last year, I think there was a mention of taking this business to specific geographies in Europe, like, I think Germany. So is that still on card? Thank you, and that's all from me.
So the unit metrics, we generally call them largely in a range, once you factor in seasonality. I'm not sure if there are, you know, talking about any specific metric you want to highlight.
Yeah. So I mean, the CPT is back to, like, around $39.
Yeah.
Our subscriber growth has, you know, second quarter in a row, it has declined.
Yeah.
ARPUs, again, they are, you know, kind of on a declining trend.
No, so you know, we've been doing a lot of experiments. Yeah, CPT has been largely in the range of $36-$38, but in an attempt to unshackle, you know, the scalability issue. We've been experimenting, trying to see whether, you know, increasing the CPT a little bit increases our scale, et cetera. So I think a lot of that you are seeing is, you know, experimental work. Even the ARPU slight decline this quarter, which will recover in Q3, is because we did add some summer promotions, to see, you know, whether that gives us a spike. So I think because we want to obviously break out of this plateau that we are at, we obviously are doing a lot of experimentation. So I think that is what you're seeing. Nothing much beyond that.
In terms of competitive pressures, actually, if you look at some of the Similarweb type of or App Annie data, even ABCm ouse has declined in the last two quarters. So it's not that it's specific to Kiddopia. Kiddopia, in fact, continues to remain strongly a number two behind ABCm ouse. So we are not so worried about that. I think in our mind, we have to find alternate ways to break through this logjam, and we are, as mentioned in our, in a, you know, elaborated copies, we have, you know, started working on a few of these ideas. Lastly, on the Germany thing, we had done an experiment at that point of time, it had not done great. So we are kind of focused.
Then the IDFA issue had happened, so we've gone back to focus on the U.S. markets. But one of our growth strategies now is to try and aggressively open new markets as well.
Okay, great. And just one last follow-up on Kiddopia again. So, last time we took a price hike, you had given some data, you know, showing how we are, how Kiddopia was still cheaper compared to the other subscription. Do you see ourselves, you know, exploiting that that gap going forward or not, not yet?
No, we are not looking at immediately doing further price hikes. I think our focus right now is singularly on how do we raise further acquisition.
Okay. Sounds good. Thank you so much. Happy Diwali.
Wish you the same.
Thank you. The next question is from the line of Mr. Manan Poladia from MKP Securities. Please go ahead.
Hello. Hi, am I audible?
Yes.
Yeah. Thank you for giving me the opportunity again. So what I also want to understand is, when we speak about Sportskeeda and PFN, so PFN, I think, going forward, is going to be a much larger portion of Sportskeeda, from what I understand. And the larger player is significantly larger, right? I just want to understand, what kind of scale are we looking at with respect to PFN, say, in the next three to five years?
Sudhir, you want to take it?
Yeah, sure. See, Manan, I don't think we can give specific guidance on PFN itself, but, one thing I can definitely say is, if you look at NFL, right, NFL is the largest sports market in the U.S., in fact, even in the world. It's if I recall correctly, something like 56% of the total, sports market in the U.S. PFN is still quite small, as you said, compared to the leader. There's a lot of room to grow from where we are. I think our focus is very much that we want to keep scaling up the number of users, and we've seen that successfully starting to happen. The main, NFL season itself is September onwards, so we are still in the second month of this year's season, it runs until about January.
We do expect to see much higher user numbers compared to last year. I think back then, we will start giving you some more, breakup or clarity on, what is the kind of revenue and user numbers we're beginning to see from these sports leagues. I think at this point, it's too early to look at how much it can grow. We just know that it can grow a lot.
Great. Thank you. My second... Sorry?
Sorry, there's one other small point on this which I should mention, which is,
Right.
When we acquired PFN, one of the key things we're also looking at is the synergies between PFN and Sportskeeda. And Sportskeeda, as you know, also has a strong presence in the US. And combined with PFN and Sportskeeda, we think that now provides us a critical mass to start looking at much more direct sell to customers, which also then will help drive profit and profitability much more than or even higher than what it is, right? Especially for PFN, I think it makes a big difference. So we just want to mention that.
Great. Thank you. Thank you so much for answering that question. My second question is with regards to the new war chest that we've built, about INR 1,300 crore or so. So what I wanted to understand is, when we are looking at acquisitions, from here going forward, is there one, specific scale or size that we're looking at? Secondly, are we looking at acquiring in different businesses than we already are in, or are we looking at acquiring with respect to, say, bolt-on acquisition, where we can develop synergies?
I'll take this. So in terms of the scale of acquisitions, like I mentioned, if something is very strategic to us, we may do a bolt-on for a smaller business, and most likely that will happen at the subsidiary level and not at the corporate level. We're looking at larger acquisitions at the corporate level. While there's no necessarily any specific number, but I would say we would look at at least businesses generating INR 100 crore of revenue at a minimum level, ideally. So that, that's what's... And largely being profitable. So I think that's what we're looking at it. We are definitely not looking at launching any new segments of business at this point of time.
I think there's a lot more that can be done in our core gaming, IT, sports, e-sports, and even ad tech business. So I think whatever acquisitions will be done will be one way or the other, synergistic to our existing businesses.
Correct. So I have just a small follow-up to that. Now that we've spoken about RNG in this call as well, right? Where, all the regulation has happened and that 28% GST slab has come in. So are we looking at RNG now more positively, or are we still looking at, letting the industry stabilize for a bit and then get into RNG acquisitions? What is the situation there? Plus, what kind of games? Like, are we only focusing on Rummy or are we going to do Poker, Teen Patti as well?
So specific to RNG, we are looking at it as glass half full, which means we're leaning positively towards seeing what are the opportunities. Even earlier, we were in very active discussions with a lot of players. So I think within the OpenPlay business, there could be bolt-on acquisitions for sure, and there are some discussions going on. We could look at some, some new formats outside of the existing OpenPlay business as well, where we will be—we will only go into new formats if we believe that we can be a leader in that segment, else we will not. But within the OpenPlay business, we'll definitely look at consolidation. I think the only one thing we need to figure out at this point of time is the past.
Many of these companies are sitting with past tax claims right now, and how do we navigate that piece while doing any M&A activity is something we're trying to figure out.
Correct. Correct. Thank you. Just thank you for answering my questions.
Thank you so much. As there are no further questions, on behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.