Ladies and gentlemen, good day, and welcome to Q4 and FY23 earnings conference call of Nazara Technologies Limited, hosted by JM Financial. 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 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. I now hand the conference over to Mr. Abhishek Kumar from JM Financial. Thank you, and over to you, sir.
Thank you, Ishashri. Good morning, everyone. Welcome to this call of Nazara Technologies to discuss fourth quarter and full year FY 2023 results. We have with us the management team of Nazara, represented by Mr. Nitish Mittersain, CEO and Managing Director, Mr. Sudhir Kamath, Chief Operating Officer, Mr. Rakesh Shah, Group Chief Financial Officer, and Ms. Anupriya Sinha Das, Head of Corporate Development. With that, let me now hand over the call over to Mr. Nitish Mittersain for his opening remarks. Thank you, and over to you, Nitish.
Good morning, and a very warm welcome to all of you to Nazara Technologies Limited Q4 and FY 2023 earnings call. We have uploaded our results presentation on the exchanges, and I hope you have had the opportunity to go through the same. We are delighted to report another milestone year for Nazara. We have delivered a strong performance in FY 2023, with revenues surpassing the 1,000 crore INR mark for the first time at INR 1,091 crores, and our EBITDA coming in at INR 109.7 crores. Revenue growth was at 75.5% year-on-year, with an overall EBITDA of 10.1% and a year-on-year 21% PAT growth.
The healthy year-on-year revenue growth across all business verticals, including gaming, esports, and AdTech, demonstrates our commitment to drive growth aggressively alongside profitability, while prioritizing growth so that we can achieve scale and market leadership in the spaces we operate in. In terms of our performance for the quarter gone by, our revenue grew by 65% year-on-year to INR 289.3 crores. EBITDA grew by 86% to INR 27.7 crores, and the PAT increased by 92% year-on-year to INR 9.4 crores. The company is currently operating in three key segments, which are gaming, esports, and AdTech. Our gaming segment, comprising of sub-segments, mainly gamified early learning, freemium, RMG, and telco distribution, generated a total of INR 406.3 crores, which was up 28% year-on-year, and delivered an EBITDA margin of 17.5%.
Our esports business generated INR 531.5 crores in revenue, up 74.9%, with a 7.8% margin, and our AdTech business generated INR 153.2 crores in revenue, with an 8.8% margin. Through our acquire and scale model, we continue to address pre-identified white spaces in our existing business segments via strategic acquisitions, while being focused on profitable and sustainable organic growth of our existing businesses. Our existing businesses are generating cash, which is being redeployed first to drive organic growth and thereafter for acquisitions, as can be seen in the recent Sportskeeda and Pro Football Network deals. This operating model enables us to create a flywheel that keeps gaining momentum across stable, growing and diversified cashflow-generating businesses in the spaces we operate. On the M&A side, we will continue to expand our presence in gaming, esports and AdTech.
The current market environment provides us with several attractive opportunities, and we are continuing to work actively towards the same. Lastly, on the skill-based real money gaming space, the emerging regulatory clarity is a huge positive for our industry. The Ministry of IT has recently issued a framework for operating skill-based RMG, and clarity on online gaming TDS that was provided in the budget and thereafter has also been helpful. While clarity on GST is yet to emerge, we are hopeful that this will get resolved in the coming months. Since currently, skill-based RMG is only 5% of our total revenues, it provides a significant scale-up opportunity for us going forward.
With regulatory clarity emerging, we are working on a three-pronged approach towards the same, through growth in our existing games, launching and publishing new RMG games, and acquiring existing RMG companies to drive scale for ourselves in this sector. I would now like to hand over the call to Anupriya to give some highlights on our specific business segments. Over to you, Anupriya.
Thank you, Nitish. Good morning, everyone. As you are aware, Nazara operates across three segments: gaming, esports, and AdTech. Gaming includes gamified early learning, real money gaming, freemium, and telco distribution sub-segments. This segment grew by 28%, contributing to 37% in revenues and 56% in EBITDA in FY 2023. Our playbook here is to invest in user acquisition backed by unit economics, while focusing on product and content updates to drive retention metrics. All our key IPs continue to see growth. If you look at Kiddopia, which is our flagship IP within gamified early learning segment, we continue to see subscriber growth in Q4 FY 2023, despite negative impact of seasonality. As we know, Q3 is the festive season in the US, and Q4 typically sees a pullback. But in spite of that, we have seen a growth in the subscribers for Kiddopia.
The subscriber number increased to 311,758, three hundred and eleven thousand seven hundred fifty-eight in March 2023. Kiddopia continues to be the number 2 grossing app for kids under five years in the U.S. EBITDA margin for the business improved to 18.4% in Q4 FY 2023, versus 11.6% in Q3 FY 2023, driven by cost per trial reduction to $35.9 in Q4, from $37.3 in Q3. Moving on to Animal Jam, which is another IP in our gamified early learning segment. We are setting the platform for growth and retention. The team has worked on improving the analytics backend to get actionable product and user acquisition insights. On the product side, we have improved the cadence of content updates to drive growth. We are leveraging group capabilities for user acquisition via Datawrkz.
The emphasis on optimization on a non-core cost has led to an improvement in EBITDA margin from 3% in Q3 to 11.6% in Q4 FY 2023, and we continue to we expect this upward trajectory to continue. Moving to WCC, World Cricket Championship, we have significantly improved monetization of users, leading to 38% growth in ad revenues, 26% growth in overall revenue, and improvement in EBITDA margin from 19.1% in FY 2022 to 26.2% in FY 2023. We have also announced that we are acquiring an additional 19.5% stake in Nextwave Multimedia, the holding company for WCC, and this transaction is expected to be completed in the next few days. OpenPlay, which is Nazara's initial step into RMG space.
We've seen a revenue growth of 33% year-on-year in FY 2023, and EBITDA growth of 79% year-on-year due to better cost optimization. We veered out players that were not generating revenue but consuming bonus. We are further improving the acquisition funnel, branding and player journey. Tamil Nadu banned online games of chance of money, including rummy and poker, in April 2023. Tamil Nadu contributed to 20% of our revenue and hence, the ban will have a short-term negative impact on the business. However, we are trying to actively mitigate this downside risk. As Nitish mentioned, with new regulatory clarity emerging for the RNG segment, we are working on a larger blueprint for Nazara in the RNG space, while using organic and inorganic rewards. Moving to our esports segment, which contributes to 49% of our total revenue.
This segment grew by 75% in FY 2023. Talk specifically of Nodwin, the revenue grew by 84% in FY 2023, driven by growth in multiple IPs. The IPs which have seen a strong growth are Playground, PUBG in South Asia, and Digitals, as well as a strong growth in our gaming accessories business. Operating leverage will kick in with scale, so we will see a nonlinear growth in EBITDA to come from own IPs and media rights. Accessories business of to become margin-effective as brands get more strongly established. Nodwin has acquired 51% in Branded Pte. Ltd. for a cash consideration of $1.3 million. Singapore-based Branded Pte. Ltd. has built marquee IPs, including All That Matters, It's a Girl Thing, and CreatorWorld. This acquisition will also drive sponsorship revenue for all of Nodwin's IP in India and internationally.
Sportskeeda revenues grew by 55% in FY 2023, as U.S. revenues grew by 89%. 104% growth in revenue from esports in FY 2023 for Sportskeeda. Direct brands sales now contribute to INR 26.7 crore in FY 2023, which is more than double of the corresponding number in FY 2022. Sportskeeda acquired 73% stake in Pro Football Network, a premier source of coverage and analysis of NFL in the U.S. in March 2023 for $1.82 million. With more than 5 million MAUs, PFN is ranked third amongst the top NFL-focused media websites in the U.S., as per Similarweb rankings in January 2023. AdTech, our newest growth engine, also performed well and grew by 53% year-on-year in FY 2022. This segment contributed to 14% of revenues and 11% of EBITDA in FY 2022.
Datawrkz added 42 new clients in FY23, contributing 34% of total revenues in the same period. The company lost one significant client, however, there'll be a minimal EBITDA impact due to growth in new clients. Datawrkz continues to build all three of its business units, ITD, which is the services for advertisers, Mediawrkz, which is services for publishers, and Vizibl, a self-service demand side platform. The company is ramping up sales capabilities globally and is also actively evaluating M&A. All our business segments continue to be cash-generating. We closed the year with INR 628.3 crores of cash in our balance. Our strong cash position not only provides financial strength for organic growth, but also allows us to deploy capital for strategic M&A. I'll close my remarks here, and we'd like to open the call for Q&A.
I would request Nitish, Sudhir, and Rakesh Shah 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 telephone. 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. We have our first question from the line of Jinesh Joshi from Prabhudas Lilladher. Please go ahead.
Thanks for the opportunity. I have a question on the AdTech business, which seems to have reported a loss in this quarter. Can you highlight the reason behind it? I mean, has it got to do with the loss of clients, which we just highlighted? And if yes, what is the reason behind it, and how much did that client contribute to our business? And by when do we expect the business to stabilize from here on? That is question one. Just a follow-up on that is, this time around, we have not disclosed the EBITDA of AdTech and Telco businesses. If you can just share that as well.
Jinesh, this is Nitish. I didn't hear your question. Can you repeat that, please?
So the AdTech business seems to have reported a loss in this quarter. So the question is: has it got to do with the loss of clients, which we just highlighted? If yes, what was the reason behind that loss, and when do we expect the business to stabilize as such?
Sure. Thank you. Well, second question also.
The EBITDA, EBITDA figures for AdTech and telco business, which we have not given in the PPT this time around, so if you can share those numbers.
Sure, sure. Okay. So just to clarify the Datawrkz, the AdTech business has not posted a loss. It is revenue of INR 39 crores in Q4, with INR 2.7 crores of EBITDA. So it's profitable. It's posted a 6.9% EBITDA in Q4, and total EBITDA of INR 13.5 crores for the year, on revenues of INR 153.3 crores, the total EBITDA being 8.8%. The business continues to be profitable. We mentioned the client that was contributing revenues, you know, was a low-margin client, so we don't expect any, you know, large impact on our EBITDA. And we expect that we will continue to do well in the coming FY 2024. We've been actually adding a lot of new clients.
We've also appointed some sales teams in the U.S. So we're actually on a pretty aggressive growth path over there and feeling very confident about the business. On the Telco business, we had INR 52.8 crores of revenue with INR 13.9 crores of EBITDA, which was a 26.3% margin.
Sure, sir. Actually, I was looking at the EBIT number, which was negative and hence the confusion. Thanks, thanks for the clarification. Sir, my second question is on Nodwin. So if I look at the content views that we have shared in the PPT that have gone up in FY 2023, even the distribution hours are up when I compare it with the last financial year. Yet the contribution of media rights, the revenue has come down from about 39% odd to about 21% in this financial year. So does it mean that pricing has taken a hit over here? If not, can you explain the reason behind it?
Also, if you can share, I mean, what kind of EBITDA margin can we make on matured IPs solely from media rights licensing? Because apparently, it appears to be a high-margin business for us. So just wanted your thoughts on that.
Sure. So, on the media rights revenue, right, I think, for the FY 2023, while our percentage contribution has dropped, you know, from our absolute terms, the revenues are broad, have been broadly flat for us. And, one of the large contributors for that reason is that, you know, because a lot of the popular games got banned, some of the media deals we had in place kind of dropped off. We should have generated, you know, the significant growth in media revenue. So I think despite the games being banned, you know, us being able to also maintain the media rights where they were, was a good performance, and we expect in the coming year that to normalize. So that's one aspect.
I think for an established IP with media rights, you know, we should be able to get to, in the short near term, right, about 20%-25% kind of EBITDA margins once there is stability on the games, the popular esports titles. Hope that answers your question.
Yes, sir. One last question from my side. The PFN business that we acquired recently apparently seems to be marginally loss-making at the operating level in FY 2022. So, just wanted to know what can be the steady-state EBITDA margin in this business, and by when do you expect to achieve that?
Jinesh, sorry, which business are you referring to?
The Pro Football Network business that Sportskeeda acquired, the PFN business.
Yeah. No, I think, I think that's a fantastic plugin for Sportskeeda. It's a top three destination in the U.S., and it deepens Sportskeeda's vertical in that space. The team there is fantastic. And even it's early days, we are already seeing some very strong growth in KPIs. So we are very confident of, you know, delivering good profits and good EBITDA on that business in the current year. We think the synergies between Sportskeeda and PFN will play out very well, and we should see, start seeing that from as early as, you know, this and next quarter.
Would you like to share a indicative steady state EBITDA margin number over here?
It's very early, Jinesh, so I'd like not to do that.
Sure, sir. Thank you so much, and all the best.
Okay.
Thank you. A reminder to participants to press star and one to ask a question. We have our next question from the line of Abhisek Banerjee from ICICI Securities. Please go ahead.
Hi. Just, a couple of questions. Firstly, on the cost per trial in Kiddopia,
Sir, I'm sorry, can you use your handset mode, please?
Hello?
Yes.
Is it clearer?
Yes.
Yeah. So, yeah, first of all, great set of numbers. Just a couple of questions. First, on Kiddopia, the CPT decline of close to $1.4, if you would give us some, you know, clarity on how that happened, and what is your outlook going forward? So could we see another, you know, a $1 kind of decline in that CPT, which would have a, you know, very, very big impact on your margins going forward? Or is it likely to stabilize, stabilize at this level?
Yeah. I think you know, the team has been working hard on getting the right optimum mix of you know, cost per trial and the volumes that we are able to spend and acquire users. And I think Q4, because Q3 usually is October to December, Christmas season in the U.S., and it's you know, a peak season. Q4 usually is a bit slower, and I think we've focused on optimizing our CPT in this period. You can see the result in front of you. I think there have been a lot of things we have done in the Kiddopia business in the last few months, which includes the price increases. It includes you know, trying to start scaling up the volumes again.
We've kind of overcome that IDFA issue, gone back to spending a lot on Google, which we had earlier stopped. So I think this quarter has been for us to stabilize the business, just check out our, all our key metrics, healthy and stable, which we are finding they are. And I think, the way to look at it is, the CPT range will still remain between this $35-$37. Now, our focus going forward is going to be how can we also finally start scaling up, some of the spend volumes, to start increasing the subscriber base. If you see, in Q4, our EBITDA margins actually improved, quite significantly, 18.4%, you know, versus successive quarter of 11.6%.
I think we're on the right track with Kiddopia, stabilizing the business and getting it back on growth track.
Got it. So but, I mean, on one hand, you're saying that you stabilized the Kiddopia business and CPT came down, and even in a lean season, you managed to grow subscribers. So is there some tailwind which is happening in the sector? I mean, are people coming into the segment?
I think, Kiddopia business itself is, the Kiddopia app, right, is, quite a loved app, continues to be very popular, and the team continues to work very hard on the product side. As you might have seen, you know, even Tim Cook, the CEO of Apple, recently came to India and met the Kiddopia team and also tweeted about how Kiddopia is impacting positively to kids all over, all over the world. So that's a big validation of the product. And I think, that's what's helping us, you know, I would say, outperform competition.
Understood. Also, also in terms of, you know, the acquisition pipeline going forward, so, so you have been very active in this space, right? But at some time, you know, management bandwidth becomes a constraint, you know, to, to support such a wide portfolio. So, would you give us some clarity on what kind of acquisitions you will try to do in the next year?
Yeah. I think, the pipeline we have, right, is a distributed pipeline. So what I mean is that, you know, let's take, Sportskeeda, for example. You know, Nazara went and acquired Sportskeeda three and a half years back, and, grew it from, let's say, a INR 15 crore revenue to, you know, this year's... I think we've done, one second. Yes, two. Yeah, Sportskeeda, INR 122 crore revenue, right, with a 38-39 crore EBITDA this year. Three and a half years back when we acquired the business, it had, you know, 0 EBITDA. So this company has accumulated cash over the last two years, generating profits, and we built a strong management team there. We have a CEO in place. We have a Chief Strategy Officer in place, who's very focused on M&A.
Through our experience, we've kind of, you know, guided these teams. The Pro Football Network is an acquisition done by Sportskeeda, and it's being completely managed by the Sportskeeda team under our guidance. So what this structure allows us is to continue doing this M&A activity without it sucking up a lot of our operational bandwidth at Nazara level. While Nazara may be selective in doing acquisitions, you may see bolt-on acquisitions happen at a more rapid pace at the companies below, because they are generating cash, accumulating cash, and it's a great deployment of their cash to further their businesses. That's where we kind of bring in our experience and expertise in, you know, doing these transactions. The actual operations of these M&As are done by the teams, you know, of the subsidiaries. I think that's working very well for us.
At the Nazara level, I think our thought process going forward is that we will be taking fewer and larger bets on M&A, whereas bolt-on acquisitions will largely happen at a subsidiary level.
Understood. Understood. And, and, if you're talking about larger acquisitions, does that mean, you know, taking on some leverage?
Sorry, can you repeat that?
If you're talking about larger acquisitions, does that mean taking on some debt?
At this point of time, we've not, you know, looked at it, but I would say that from zero debt to moving to a low debt could be an option, but largely any debt, if we were to take it, would be purely against the cash flows of the target company and not backstop by Nazara.
Understood. That is it. That is very clear. Thank you so much, sir, for your time.
Thank you. We have our next question from the line of Abhishek Bhandari from Nomura. Please go ahead.
Thank you for the opportunity. Nitish, I had one question. If I go to your slide number 32, you know, I'm just trying to reconcile, you know, the slowdown of EBITDA into operating cash flow. You know, while we have generated INR 100+ crore of EBITDA in FY 2023,
Yeah.
The net cash flow from operations is just on INR 8. A part of it is explained because of, you know, working capital. But if you could, you know, elaborate, how are you thinking to, you know, bridge the gap between the two? Or is it a, is it a nature of the business that this kind of gap will always exist?
No, I think this year we've seen a slight increase in working capital in many of our businesses. I think also there's some, you know. For example, in the case of Kiddopia, right, because we had a DSP issue, we kind of advanced significant amounts of money to places like Google, where we advertise, to kind of secure those funds. So I think it also got skewed because of that. I think we should continue generating good cash in FY 2024. We expect to generate good cash. I think the other place our working capital got stuck or got sucked in is the, you know, gaming accessories business in Wings, which is a working capital-intensive business.
So we are working closely with the team on how can we create, you know, better cash flow management, so that, you know, working capital doesn't get sucked in there continuously.
Got it. So, is it fair to say that, you know, the steady-state EBITDA, EBITDA to operating cash flow conversion would settle at a higher rate? Like, would it be like 40, 50% of your-
Yes, absolutely.
Got it. Thanks, Nitish, and all the best.
Yeah.
Thank you. We have our next question from the line of Deep Shah from B&K Securities. Please go ahead.
Hey, good morning, sir. Thanks for the opportunity. So the first question was around some qualitative commentary on the Valorant Challengers Tour. The context is last year we had a deal with Star Sports, thanks to BGMI. And,
Yes.
I hear you alluded that some media deals have lapsed because of games being banned. So any rough metrics I can call out as to what is the engagement levels for Valorant, and that can give us some guidance on when those media deals come back? Because if I understand correctly, more than the monetization, it is the reach, which would have been large with Star Sports as a partner. So that's my first question.
Sure. Shall I... I'll just answer that first. So the BGMI on Star Sports, you know, was the first program we ran with Star Sports, and that was extremely successful. We had, you know, great response and, you know, Star Sports was very excited about season two of same. However, because of the BGMI ban, we could not kind of continue with that, and that was also one of the reasons our media revenues kind of dropped or not, didn't grow as we expected in the previous year, FY 2023. Valorant is early days. The league has just launched, and we will be building up. You know, Valorant versus BGMI, the difference is that Valorant is a PC game with a slightly smaller community compared to BGMI.
It is more intense community, but from a visibility point of view, viewership point of view, it's a bit smaller. So we are kind of building it out before we take it, you know, with a large channel. The other media content that has done well for us is the Playground series. Season one, you know, got about 17 million viewers. Season two got about 40 million viewers. We have Season three launching in June, and that, which is actually changing the format a bit and going to run a year-long season. So I think that should also be very positive for us.
Right. So second question: So I hear in your opening remarks, and correct me if I'm wrong, but I hear that operating leverage had start playing out in the esports vertical this year. But I was rather thinking that profitability would be protracted, given that we have a lot more new IPs, a lot more marketing required, given that, as you rightly said, Valorant is a different game than BGMI. So how could we think about this, this profitability piece? Will it be protracted, or we'll see a lot of operating leverage start flowing right from FY 2024? And, as a parallel question, what is the plan for new IPs? Anything that you can help us understand.
Sure. So, I think just to summarize, if I understood your question, you're asking about the esports margins in FY 2024?
Yes. So should we see a pickup right in FY 2024, or will it take some time? And second, on the new IPs or where do you see scaling up of existing IPs that we have? Any, your thoughts on what the blue sky there would be helpful?
Yeah. So, I think in terms of margins, you know, we are still projecting specifically for Nodwin Gaming. You know, we are not in FY 2024 projecting large, you know, very large enhancements in EBITDA. We will try and optimize where possible, but our focus is going to continue driving strategic growth in that business. I think, in terms of your second question of IPs, right? Valorant is one that Nodwin has already launched. They launched a chess league, which is also doing very well. There are two or three different leagues that Nodwin is currently in the midst of launching or has launched, which we think will build, you know, strong IP. There is a Kingfisher India Premiership 2023, which has been announced. This is having games like Tekken 7 and Clash of Clans.
There's PUBG New State Pro Series Challenge of Banan, which was done. I think there's a lot of IP work in progress, working with major gaming publishers who want to do a larger India play. So I think there's a lot of activity happening there, and you will see that build-up happen throughout FY, FY 2024.
Sure, sir. This is very helpful. Thank you so much.
Thank you. A reminder to participants to press star and one to ask a question. We have our next question from the line of Mukul Garg from Motilal Oswal. Please go ahead.
Thank you. I hope I'm audible.
Yeah, hi, Mukul.
Hey, Nitish, good morning. So this is just a follow-up on the Nodwin point. If you look at either the content view or the distribution between Q4 FY 2022 and Q4 FY 2023, it obviously has come up a bit. I just wanted to get your sense on how should we think about the opportunities playing out over the longer term? This quarter, we were trying to do that through Valorant and ESL, but clearly the response has not been up to what BGMI or Free Fire were kind of receiving from players. So how are you kind of visualizing the longer-term opportunity capture, which is out there in the space?
Because, you know, you have been able to grow your revenues quite smartly, but that is probably more because of broadening of offering rather than the, you know, viewership or distribution.
Yeah. No, absolutely. So I think, you are bang on that in terms of, you know, the viewership, which obviously got impacted, due to the games that got banned. See, we need very popular mobile gaming titles in a country like India to drive maximum viewership. And, one of two things will happen: either the space that is currently there will get built up by some new title or titles, or you will have some of the, you know, existing titles come back, which is also an up, which is also possible in, the next few months. So I think, while that happens, obviously we are working on creating many other IPs. We do see Valorant, et cetera, also building out, you know, we are working closely with them and, building it out.
To see a large surge, I think you need to get those large mobile esports titles, on the back of which a lot more viewership can be generated.
Right. So, you know, just to follow up on this, you know, are there any potential names which you are seeing, which are in the pipeline? Or are you in discussions with the government in terms of what the scenario in terms of these Free Fire or BGMI, which were quite popular in the country, to kind of get them back as an option?
Yeah. So, no, we actively, as an important stakeholder in this whole space, right, we are obviously interacting both with government, as well as the publishers to see what solutions can be found here. And we are very hopeful that some positive news will come in, in the coming months, right? That said, there are, you know, other games like Call of Duty Mobile, et cetera, that we are working with. So I think, focus is on expanding, the titles that we work with, as well as working closely with the publishers to see whether some important titles can be relaunched.
Sure. And the second question was, you know, again, probably a related question. When I look at, WCC performance, you know, it obviously, has been weaker than what it was same time last year. You have, on the other hand, increased your stake, in Nextwave. So, any thoughts on, you know, how, you are kind of visualizing, your investments into the space? There's a lot of strategies happening on the mobile gaming side. You know, are you, hoping to kind of, aggressively expand, and create an alternate opportunity here?
Yeah. So I think, we are at a point where we think that WCC can be starting to scale, you know. We've always been focused on KPIs, and I think our LTV/CAC equation over that is starting to make sense. So we will hope... I think for the franchise that World Cricket Championship is in India, the kind of monetization we do today or even the kind of user base we have is relatively low, and there's a lot more that can be done in terms of scaling this up.... So I think that's hard to for FY 2024, that how do we monetize this product better and how do we, you know, scale up the user base so that we have a multiplier effect on the overall business?
We also brought in a chief operating officer recently, who's joined us from a large gaming studio and is working very closely with the team to kind of action some of the things we want to implement.
Sure. Also, should we expect, you know, kind of front-ended investments to you know, kind of generate the required growth, or are we already seeing a tipping point and, you know, we feel that the growth can happen while you are still kind of getting a favorable returns on the investments?
Yeah. No, I think, we don't anticipate large investments in terms of, you know, SG&A costs, et cetera. But, I think, in the near future, we will potentially, you know, ramp up our user acquisition on that, product, to scale the user base.
Got it. Thanks for answering my question, and best of luck for the quarters ahead.
Sure. Thank you.
Thank you. We have our next question from the line of Abhishek Kumar from JM Financial. Please go ahead.
Yeah, thank you for taking my question. First, I just noticed that we have not given any guidance for FY 24. So just any sense on how are we looking at the overall portfolio growth, and also, how should we look at margins now, things appear to have stabilized.
Yeah.
Any color on growth and guidance for next year? Growth and margins, sorry.
Yeah. So, Abhishek, we are not giving a guidance at this point of time. As you've seen, since we listed, we have usually given guidance in September, once we have a better grip of the whole year. But our intent this year is to obviously, you know, enhance margins in businesses where we can, and choose certain businesses which will continue to drive strategic growth, for, you know, market leadership. So I think we'll continue following the same approach. Generally, overall sense of mind today is that there should be some margin improvement in the overall year.
Great. Now, second question is on real money gaming. You know, a lot of regulatory clarity has emerged over the past couple of months with a self-regulatory body and even on TDS.
We have also talked about a larger blueprint now in RMG. So just wanted you to flesh out, you know, what would that mean? What would that entail, both in terms of organic and inorganic strategy?
Yeah. So like I mentioned in my opening remarks, there are three ways we are approaching this. One is, how can our existing RMG businesses, especially OpenPlay, which runs Classic Rummy brand, grow fast and more aggressively? Well, Anupriya mentioned there was a short-term blip because of the Tamil Nadu ban, where this game is quite popular. I think that's a short-term noise for us, but we are looking at the larger picture, how can we scale that business up? That's point number one. Point number two is we are working with many new game developers, Sorry, many developers and global companies to publish RMG games in India, which are innovative and new, and, you know, scale them up. And I think with this framework is we can do it a lot more confidently.
We can invest more aggressively in them, build our user base and, you know, scale revenue. So I think that's the second thing we've been actively working in. And the third is we are in talks with various existing RMG peers to see whether there is consolidation or what should be possible. So I think, based on these three actions, we are looking to definitely start scaling our RMG business going forward.
Okay, just one clarification. You said you're working with global publishers, so are we also looking at expanding beyond Rummy in RMG?
Yeah, most definitely. So just to clarify, our focus on RMG is the Indian market. But, we are definitely looking at launching new games outside of Rummy as well, in the Indian market, which are fresh and new and will be appealing to the consumer base here.
All right. Okay. Okay, thank you, and all the best.
Sure. Thank you.
Thank you. We have our next question from the line of Rahul Jain from Dolat Capital. Please go ahead.
Yeah, hi. Thanks for the opportunity. My question is pertaining to the Gamified business, Kiddopia and Animal Jam. I know you shared some of your thoughts earlier, but to, I think from a real growth addition point of view, I think this segment would play an important part in this year. So if you could share beyond what you just shared in terms of the stability and eventual progress. So how you see the demand based on the revised pricing and the churn behavior? And when you think would be, what is the data point that you would watch out for before you, you know, kind of speed up the pedal to drive your marketing spend here to drive growth?
How the revival on the cost side and in terms of content side shaping up in Animal Jam, and what kind of growth one should envisage over the next four-to-six quarter there?
Sure. So on Kiddopia, one thing we've done is we've launched a lot of new, content and features which are quite appealing to the consumers, both parents and kids. For example, the coding, for kids, which has been launched in Kiddopia, has been very well appreciated. And I think, parents are willing to spend the extra money that we have, you know, increased prices, right, from $7.99 to $9.99, without, without hesitating. And that reflects in our KPIs like churn, which is if you see the last four quarters or five quarters that we have shown, in this, it's pretty constant, you know, irrespective of the price increase.
I think that is the good news that, and the way that's going to help is, you know, with our cost per trials in control and the price increase, our margins in FY 2024 are going to look much healthier than what they were in FY 2023, because, LTV CAC ratio has, you know, improved significantly. So I think that's, that's one aspect. Now, what we are basically seeing is, while keeping our cost of trial, let's say between $35-$37, how can we increase our spends from $1 million a month to, you know, significantly more? What we don't want to do is, again, break the cost per trial, you know, range that we have established. So we don't want to, you know, take it to $40 plus.
So we've kept a guardrail there, and the team is working actively on various channels to see how we can start increasing spends within this guardrail of cost per trial, so that our margins are also protected. Coming on to Animal Jam, I think we are very excited with what we've seen in the last few months after the acquisition. We spent a lot of time getting our grip on data. I think the data is very interesting and is showing some healthy results already. In Q4, if you see, we've also worked a lot on optimizing various costs that were built into the business.
So if you see, Q4 FY 2023, you know, we've seen a growth in EBITDA margins to 11.6%, and we think we should get this business very quickly to about a 20% EBITDA margin and grow it from there. A lot of product work is happening on, you know, features that can help monetization better. Because one of the challenges with Animal Jam we found was that, you know, the conversion to monetization was fairly low because, you know, the features that were implemented did not make the people pay, play a lot. 95% of the game was being played for free. And I think we are tweaking some of those things, which will help us improve conversions and scale the revenues. So very excited about Animal Jam as well.
It's a very strong IP within that consumer base. I think in game, gaming, as long as you are owning good IPs, there's a lot more you can do with it. Kiddopia and Animal Jam are, you know, strong IPs in this sector, and there's a lot more we can do with them going forward.
Does that answer your question, Mr. Jain? Ladies and gentlemen, to ask a question, please press star and one on your phone. We have our next question from the line of Mohana Kumar, an individual investor. Please go ahead.
Congrats on a great set of numbers, and it's been a pretty solid last couple of years. So I just wanted to get some qualitative understanding of what the growth could look like over the next year. I understand that, you know, it's still very early and you probably are comfortable providing numbers towards the second half of the year. But do you feel that the growth trend that we have seen can actually continue to grow organically? If not at the same rate as last couple of years, but at a, at maybe like a 10%-15% range of what we've seen in the last couple of years.
Yeah. Yeah, I think again, without giving any specific guidance, I think we will continue to drive, you know, for growth in all our businesses, so wherever we can. And as the businesses continue to generate cash, we will keep redeploying this cash, you know, that's accumulating into organic as well as inorganic growth. So I think we will see good organic growth. I don't want to give a specific number there, but it should be north of what you just spoke about.
Which is the business where you feel that the margin expansion is going to drive the expansion for the broader group right now? You mentioned that you're expecting in a few of these sub-segments, but where are you expecting the biggest chunk to actually come from?
I think we should see good margin expansion in our gaming business overall, with Kiddopia and, you know, WCC as well as Animal Jam. So I think these products should continue to drive fairly good margin expansion in FY 2024. We also expect Sportskeeda to do well in terms of margins. So yeah, I think, leaving aside our not even esports business, where we are not projecting large margin expansion, I think other businesses all will be upwards, seeing an upward tick on margins.
Sounds good. Thanks a lot, and all the best for coming here.
Thank you.
Thank you. We have our next question from the line of Rahil Shah, an individual investor. Please go ahead.
Hi, good morning. Am I audible?
Sure.
Yes, sir. So, I understand, you're not giving any guidance on the EBITDA margins, but my question is a little more far ahead in the future. So I wanted to ask, what have you envisioned a number, a potential or steady state EBITDA margins when your investments in new business verticals reduce and the business has stabilized? So have you, have you targeted any number, or if not targeted, can you just share with us any number which is, you know, you're confident is possible? Yeah, sure. Sudhir, do you want to take this one?
Yeah, sure. Rahil, just so I can understand what you were saying, you're asking for each of the businesses or overall?
No, no, no, overall. So, you know, you are in a process of scaling up, you know, investing a lot in new business verticals, correct? So I'm just asking, when you, when you're done with this and when this business is stabilized, what kind of potential of steady-state EBITDA margins you, you are confident that you will be able to achieve?
Sure. So, I think, Manish, each of our segments, if you look at it, right, right now we are very much in a very fast growth phase. So there's a lot of investment which is happening in the current year, in the previous year, as you've seen. And we do expect that phase to continue for a little bit. So I think, when we say what are the steady-state EBITDA numbers, we may need to look a little further in the future than just six months or a year or two years even then.
So if you look at segment by segment, if you start with esports, I think definitely on that, you will see at least a similar kind of margin structures to what we have today for the near future, because that opportunity is probably the largest in terms of absolute growth numbers currently. Down the road, we do expect it will be, especially as the media properties kick in and the IPs get much higher value, that should be a very highly profitable segment as well, in line with what you would see in the media world. So I'd prefer you to sort of look at steady-state EBITDA, steady-state, EBITDA margins there.
On the gaming side, we definitely see already about a 20% kind of margin structure in the businesses, and that number will expand in the near future. Longer-term, steady-state, I mean, if I were to guess, I'd probably go around a 30% kind of a number. But again, it might take a bit more time and investment before we get there. AdTech is a different kind of business. That's more of a services business, and in that, current numbers are closer to 9% or 10%, as you would have seen, which will expand a bit, but not hugely, as long as it stays focused on services. There are some product possibilities in that as well, which, if those come through, then that increases the margin significantly over time.
But, at this point, we don't have significant amount. Sorry, I hope that answers.
Okay. Okay, yeah, that's helpful. And, another would be, why have profit margins dropped significantly in Q4 compared to Q3? So I'm just trying to understand, is, is it because of, like, the seasonality factor, or what happened in Q4, and when do you expect it to revise?
I think I was just actually looking more at a broader picture for the year rather than, because there are these seasonal variations as well, business-specific ones as well, which I think we called out at the different business segments rather than giving a breakdown from this.
Yeah, but just to add to that, our margins, our EBITDA margin for Q3 was 9.7%, which came at 9.6% in Q4. Given Q3 is, you know, a high margin business for many of our products, because sports data, for example, in the U.S., realizes very high ECPM during this period, and similarly to some of the other businesses, Q3 is a high seasonal business quarter.
I think, we've done fairly well with the margin actually in Q4, 9.6%. If you compare it to the previous year also, we grew it to 8.5% in Q4 of FY 2022, whereas it's 9.6% in Q4 of FY 2023.
Okay. Okay. Okay, sir, all the best. Thank you.
Thank you. We have our next question from the line of Rahul Jain from Dolat Capital. Please go ahead.
Hi, Rahul.
Hi, I hope I'm audible. Thanks for the opportunity again. Just one more incremental input on the AdTech business, specifically that we are more targeting this in the U.S. market. So, how you're seeing that market shaping up? We also saw a client impact. So how you see in light of a relatively weakening macro trend in that market, and of course, we have a very strong client addition matrix. So how it should balance out during this year, in your view?
Rahul, we see that the services that Datawrkz offers and also backed by some of the new products they've launched, they've launched a platform called Mediawrkz, and they've also launched a product called Vizibl. We think there's a lot of value proposition for clients, and because Datawrkz operates much of its, you know, team and operations from India, there's a lot of arbitrage savings that they can offer to the clients, besides, you know, better results. So I think the weakening markets in U.S. should not hurt Datawrkz much, because clients will look to optimize costs, and actually, Datawrkz may benefit from that. New clients signing up has been going on at a very good rate. There's a lot of efforts that the team is doing there.
So we're very optimistic about this business into FY 2024. We also see some very interesting bolt-on opportunities there, which can actually enhance margins by, you know, acquiring pricing entities in the U.S. and Europe, which we are currently looking at. So I think overall, we can, you know, see good growth, good margins in this business. And the new products that we have launched will also add value to that over a period of time.
Right. Right. And, you did this transaction of Pro Football. I think it's a fantastic transaction given the large opportunity. And I was looking at some of the peers, which are much, much larger than what this company is, it has achieved. Of course, this is a very young company. So, if you could give more input in terms of what are the scalability opportunity here? Is there any synergy to existing SK business? And also, is there any meaningful seasonality in terms of the way they recognize their revenue?
Yeah, sure. So I think, of course, NFL season probably happens in Q2, Q3. So Q1, for example, is the lowest season for Pro Football Network. But the team at Sportskeeda has a lot of ideas, a lot of synergies actually with Pro Football Network. So even in the leading season, we've actually seen significant uptick in some of the KPIs of Pro Football Network since we've kind of acquired them. So it's probably a small transaction within you know, our network, but we are very excited about this opportunity at this point of time.
If I may just add a couple of points there.
Yeah.
So Rahul, I think, I want to emphasize that, Pro Football is about American football, obviously, which is, what we in India sometimes call rugby, but American football, and that's actually the largest sport in the world, not just in the U.S. or North American market, larger than, soccer, football, or larger than cricket. And, PFN is a unique, property in the, I mean, they've built something very interesting, and they're growing very rapidly, obviously. Seasonality-wise, the American football season lasts broadly corresponding to Q3-Q2 and Q3 of our year. So for us, we've seen this quarter, Q1, as an opportunity to sort of build a lot of, build further on the product side there and look at the synergy between, Sportskeeda and then the PFN.
Q2, Q3 is what will actually show the results, we hope, in that. But we do expect this to be a significant driver of value for Sportskeeda overall in the upcoming years.
Right. Thanks for that additional color. Just a little bit more curious about the opportunity size. Because when I see this space, I see that there is one or two players which are significantly larger than what we are. And of course, they are very old business that way. And there are a lot of sites which are dedicated to particular league or team, and that is also a huge market. So is there something that we could do to consolidate this space? Because otherwise, I think there is a lot of loyalty-led volume or content consumption that happens in this market for us to scale to a meaningful level.
Or you think independent entity covering the entire sport is what could trend in the future?
Sudhir, I'll take that. So, I think that's definitely an interesting and important point there, right? Which is, the way, customers and viewers consume content on this. Many of them will be very loyal to specific teams or, regions and, or even say, college football teams, and they follow that with a great deal of passion. So one way to grow this segment, which, the Sportskeeda and the PFN team are very focused on, is looking at how do you target those individual communities or segments. And, there are different kinds of answers on that, and the team is, kind of, very focused on, on using that insight and sort of doing that. I'll be just a bit careful on what we say here, because, it's not just one website.
It is definitely much more that they do, and that insight which you shared, Ram. That's definitely one thing that they leverage.
Sure, sure. Thanks for that. Thank you so much. That's it from my side.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to management for closing comments. Over to you.
Thank you very much, everyone, for spending the time today on the call. We look forward to continuing to strive hard to deliver, you know, good results in FY 2024 and beyond, and look forward to your ongoing support and feedback. Thank you very much.
On behalf of JM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.