Ladies and gentlemen, good morning, and welcome to Nazara Technologies Limited Q1 FY 2023 earnings conference call, hosted by IIFL Institutional Equities. 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. Rishi Jhunjhunwala from IIFL Securities Limited.
Thank you, Michelle. Good morning, ladies and gentlemen. Thanks for joining us today on the first quarter of fiscal 2023 earnings call of Nazara Technologies. On behalf of IIFL Institutional Equities, I would like to thank the management of Nazara for giving us the opportunity to host the call. Today we have with us Mr. Nitish Mittersain, Joint Managing Director, Mr. Manish Agarwal, Group Chief Executive Officer, Mr. Rakesh Shah, Group Chief Financial Officer, and Ms. Anupriya Sinha Das, Head of Corporate Development. With that, I will hand it over to Nitish to take the proceedings forward and start with the opening remarks. Thank you, and over to you, Nitish.
Thank you. Good morning, and a very warm welcome to all of you to Nazara Technologies Q1 FY 2023 earnings call. I have with me Mr. Manish Agarwal, our CEO, Rakesh Shah, our CFO, and Anupriya Sinha Das, who has recently joined us as Head of Corporate Development, and SGA, our IR firm. We have already uploaded our results presentation on the exchanges, and I hope everyone has had an opportunity to go through the same. On behalf of Nazara, I am happy to share that for the quarter, we generated revenues of INR 2,231 million, up 70% year-on-year, and EBITDA of INR 301 million, and a PAT of INR 165 million, which is up 22% year-on-year.
We are glad to report that the key business segments are all profitable, and we continue to focus and drive growth while maintaining profitability and strong cash flow, which has been our strategy since day one. Our strategy to leverage opportunities that are coming our way and synergize with our existing offerings through our network are yielding positive traction, and I'm happy to share that we are on track to achieve our targets for the year. We continue to remain committed to building multiple growth engines across gaming value chain, comprising of eSports, gamified learning, freemium, ad tech, and skill-based real money gaming. We will continue to deliver 50%+ growth from our existing portfolio, and we will also continue to cover pre-identified white spaces in the above segments via inorganic acquisitions.
This strategy, which we call the Friends of Nazara strategy, has worked well for us in the last four to five years, and we expect to double down on the same. I would like to extend and thank all of you, our customers, colleagues, investors, business partners, who have allowed us to evolve. We are on a great journey to build something phenomenal and everlasting together. I'm looking forward to the most exciting years ahead of us. I would request Manish to walk through the quarterly highlights. Manish, over to you.
Thanks, Nitish. Thanks, Rishi, and thanks, Michelle, for just organizing this and hosting us. And good morning to everyone for tuning in to Nazara's Q1 earnings call. I would like to just kind of again reiterate that our Q1 performance, we are very pleased, and we hope that you will be pleased with, with the revenue numbers, with the profitability growth, as well as the segment-wise performance, which we have really delivered. We are happy to kind of note and share that this is a great testament to the large addressable markets which we operate, the tailwinds which we see in each of our segments. And that's why we have created a multi-growth engine kind of strategy, which is diversified across business models, across consumer cohorts, across geographies. I will take you through each of the business segment.
Our eSports segment, which contributes to 46% of our revenue, grew by 92% year-on-year. As all of you are aware, that the seasonality in this segment is pretty high for us. Our H2 has always been much higher than H1, and some of you have already noticed that our Q1 performance is not just 92% year-on-year growth, but we have also delivered a sequential quarterly growth of 12%, which means that our Q1, which is typically a low quarter, is kind of bigger than a Q4 of previous year, and this segment is poised for massive growth this year. Both opportunities here, NODWIN and Sportskeeda, are doing exceedingly well. Sportskeeda has grown by 103% year-on-year. It is on back of 130% growth, which they did last year.
Nodwin has grown very, very handsomely, again, on account of amazing amount of IPs which has been created, as well as the inorganic acquisitions which are made, and Anupriya will cover company-wide performance in detail subsequently. The segment has not only kind of grown for us 92% year-over-year, but has also delivered 24% year-over-year growth EBITDA, and we continue to be very, very mindful of investments which we are doing, both in Sportskeeda as well as in Nodwin, to build our IPs, to expand our portfolio of offerings, and to really kind of build our brand. We do not have a concept of adjusted EBITDA as many other players give.
If the adjusted EBITDA concept were to be done, the margins would be much, much higher because we do not CapEx in this business at all, and everything is up, done, treated as an OpEx. The second segment, which is a new entry to our segmenting, is EdTech. With the consolidation of Datawrkz from April thirteenth, we have added this segment. This segment, as you all know, that it's a $700 million opportunity. The digital spends are increasing. More and more advisors are shifting their spends to digital from traditional media. U.S. leads the way in terms of spends, and Datawrkz's entire revenue, or the bulk of the revenue, really comes from U.S. markets. As of this quarter, this segment contributes to 14% of our revenues.
Datawrkz has grown 67% year-on-year, and we believe this is just the beginning of the huge market which lies ahead of us. This segment can be a very, very big growth driver while maintaining to deliver 10%-12% EBITDA margins. We are also working together with different companies within the group, as this EdTech is a capability acquisition for us. How do we really work with Sportskeeda? How do we work with Paper Boat? How do we work with Nextwave, Nodwin, OpenPlay? We are all in the discussions, and initiations have been initiated, and the results of those synergies we will see down the line as we keep really working together and seamlessly working together. The third segment, which has been the segment, of gamified early learning. Gamified early learning is a 26% contribution for us.
Most of you are really very, very familiar with this segment in terms of strong product engagement, retention data, strong LTV, 24-month LTV, which this Kiddopia product has. We continue to be the top two in the App Store Kids category, two to seven ranks. Our relative position has not changed. This segment, not just for us, has really for the entire industry, has seen massive amount of headwinds since last year, April, where the Apple changed its policy. And we have, on this call and many other calls, discussed that ad nauseam, the entire industry has faced the brunt of increased customer acquisition cost, which has kind of put a margin pressure, as well as the growth rates have come down because your ability to spend on the performance marketing is very limited.
This is true for the entire industry, not just gamified learning, but whether you are a gaming publisher, you are a subscription service, you are an ad network, or you are a gamified early learning operator. After one year of all experimentation, iterations, tribulations, I think everybody in the market is now very clear that the Apple policy is an increase in cost is a new normal. That's not really gonna change. Hence, how do we really go back to the growth? How do we really create positive unit economics which were existing before Apple policies? One of the things which gamified early learning as a category has shown a high amount of resiliency, where consumers are willing to pay higher price. Our competitors have taken a price increase of 35%... 25%-35%.
Kiddopia, we also took a price increase of 10%-15%. I'm very happy to note that there is no regression on our KPI in the month of June when we did it. What it really delivers for us are $38-$39 of CPT, cost per trial, which is a new normal. We are able to spend $900,000-$1 million per month, which also kind of paves way for growth of subscribers in coming quarters. The new subscribers which are coming in, they are coming in at an $8.4 ARPU, while the blended ARPU would be lesser because the past users do not see them - you do not get the impact of price increase from past users.
But at $8.4 of ARPU, at 38-39 of cost per trial, our product strength ensures that our LTV/CAC are again in the order of two and greater than two, which was the case when we were looking at pre-Apple days. So there is a very, very strong positive news coming from this gamified learning segment. We are far more comfortable and confident of really ushering that into a growth path, leveraging the headroom which we have on the price increase as compared to our competitions. The other segment, which is very, very important and we are very closely watching, is skill-based real money gaming.
There are a lot of activities and interactions of industry environment are happening, both on the GST as well as on what defines game of skill and putting as a regulation in place. We are very hopeful and optimistic that these discussions will lead and clarity, which will assure a massive amount of investment and into this segment. As we have mentioned in past, this is a consolidation play for us in real money gaming to do scale, to create a network effect. We are very much on it. As we are really hopeful that this opportunity on policy clarity will emerge, we will look for consolidation. Our OpenPlay business has continued to grow.
For those who do not understand, in the month of IPL, the sports fantasy really kind of grows big, and the poker and rummy businesses take a hit. But we have been, because of our very strong cohort base, player retention and engagement, we have been able to grow sequentially in Q1 over Q4. And we have also improved our EBITDA margin considerably because we are not aggressively stepping up on user acquisition costs on account of GST overhang. Our freemium business, we continue to be marketing leader on World Cricket, on cricket simulation games. The segment is performed very well, but the scale is relatively low, and in order to kind of really make this segment much, much larger and large revenue and a better contributor for us, we are aggressively looking for M&A.
We have now a dedicated M&A team, which is looking at game studios across the world, especially in Europe, where you get very good quality studios. We also believe in the current trends, our opportunity to get very solid companies, high quality companies that have relatively better value, is very much on the cards, and we are actively working towards that. Last but not least, our telco subscription business is flat quarter on quarter and continues to be the same on the EBITDA. With that, I'll take a pause, and I will request Anupriya to take you and walk you guys through the company-wide performance before we come into Q&A. Over to you, Anupriya.
Thank you, Manish. Good morning, everyone. Moving to esports segment, Nodwin G aming grew by 68% year-on-year in Q1 FY 2023. This increase is driven by distribution-led organic.
Ma'am, ma'am, sorry to interrupt. Ma'am, your voice is echoing. We can hear your voice back.
Is this better?
Yes, ma'am. Please proceed.
My apologies. So Nodwin Gaming revenues grew by 68% year-on-year in Q1 FY 2023. This increase is driven by distribution-led organic growth in own IPs, increased monetization across all IPs, as well as increase in esports-focused B2C revenues. The company invested in multiple growth initiatives, including scaling of its own IPs, leading to EBITDA margin of 1.2% in Q1 FY 2023 versus 6.3% in Q1 FY 2022. Adjusting for these growth initiatives, the EBITDA margin will be much higher for the quarter. Benefits of operating leverage will kick in as we scale revenue and own IPs and media rights revenue will show non-linear EBITDA growth as IP. Also, B2C business will become margin accretive once such brands are established. Moving on to Sportskeeda. Sportskeeda has delivered growth of 103% in revenues in Q1 FY 2023.
U.S. revenues, which are 55.7% of total revenues in this quarter, grew by 423%. Sportskeeda is growing its U.S. footprint and expanding its WWE playbook to new sports, such as American football and basketball. In India, the company is focusing on growing branded video content business. Due to these content investments, the company's EBITDA margin declined to 34% in Q1 versus 43.9% in Q1 FY 2022. Moving to Gamified Early Learning. Kiddopia has very high product strength. The app is a No. 2 grossing app in its category and continues to maintain very high ranking. The category has shown that consumer propensity to pay is high in this, and players across the board have increased subscription pricing to pass on the higher marketing costs, post increased CPT post Apple IDFA.
In June 2022, Kiddopia subscription pricing was increased to $8.99 for monthly subscription and $69.99 for annual subscription. Even post this increase, our pricing is lowest versus competitors, leaving significant headroom for any further price increase in the coming quarters. I'm very happy to announce that post this price increase, our LTV/CAC increased to 2x for the new customers, and the unit economics for model for this business has stabilized. Now, going forward, assuming 80% monthly subscribers in last, in line with the past trends, average ARPU is $8.4. As the old subscribers churn out and the proportion of new subscriber increases, our ARPU will keep increasing in the coming quarter until it reaches $8.4. Moving to Datawrkz.
We have added a new growth engine with Datawrkz, a U.S.-based programmatic advertising and monetization company. Datawrkz operates in a large $700 billion addressable market, and the company has seen good growth in the past quarter, with 65% revenue growth year-on-year. Datawrkz works with around 57 brands, and out of the total revenue, 67% of revenue is from retained clients. This retained revenue has grown by 18% year-on-year in Q1 FY 2023. In terms of growth initiatives, the company is establishing an on-ground sales presence in the U.S., as well as Europe and APAC as well. AdTech companies with deep data processing capabilities and first-party data ownership will emerge as winners in game-focused AdTech, and will help Datawrkz to create value for itself as well as for Nazara shareholders.
Moving to the freemium segment, the business has demonstrated good growth on the back of IPL season. The monthly retention metrics are strong. Day one retention of 48%, day seven retention of 18%, and day 30 retention of 6% for WCC. Now, moving to skill-based real money gaming, despite events like IPL and others, which lead to a drop of revenue in non-rummy segment, the company managed to achieve a revenue growth of 18% year on year in Q1 FY 2023. EBITDA margin increased to 16.7% in Q1 FY 2023 on back of various tech optimization and marketing optimization initiatives. Like Manish mentioned before, we are looking at consolidation and scaling once clarity emerges for the segment. Moving to our telco business, the business has declined by 16% over Q1 FY 2022.
The drop in revenue is only mainly due to decline in revenue from their business, while revenue from non-Indian geographies have remained flat. As of Q1 FY2023, we are live with 75 operators in over 41 countries. In terms of our M&A strategy, we will continue to drive growth in gamified learning, gamified learning and stream them via M&A. We have augmented our team with an experienced person coming from gaming to build funnel of potential companies outside India, as quality of prospects as well as the value multiples are far more promising in international markets. Real money consolidation is work in progress and will pick up pace with clarity on GST, as well as having a pan-India regulatory framework on game of skills. I'll close my remarks here and will like to open for Q&A, and request Manish and Nitish to join me for the same.
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 touch-tone 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 Nitin Jain from Fairview Investment Services. Please go ahead.
Yeah, thank you for the opportunity, and congratulations on the great set of numbers. So my question is regarding the volatility in margins that we're seeing with every quarter. Now, I know that, you know, the management has repeatedly guided that it would prioritize growth over margins. But at the same time, the composition of revenue has changed so significantly in the last two years or so. So, for example, AdTech that was, you know, nowhere in the picture about three to six months ago, is a decent contributor to revenue now. And also esports, which is slightly lower margin business compared to gamified learning, is now the largest revenue segment. So in this context, how should we be thinking of margins for FY 2023 and beyond? Thank you.
Hi, good morning. Thanks for asking that question. As we have—as you rightly pointed out, our stance always has been, and I will just summarize that: A, we will look for an aggressive revenue growth. B, we will not have the revenue growth coming at the cost of EBITDA. We are not going to be a loss-making company ever. C, we are not maximizing EBITDA. We believe a 12%-13% range is a good EBITDA range in a market like us, in a high growth company like us. That's what we really strive for. And that, that's the similar stance we'll continue to maintain over a period of time.
Okay, that's all for me. Thank you.
Thank you. The next question is from the line of Mukul Garg from Motilal Oswal Financial Services. Please go ahead.
Yeah. Hi, Manish. Good morning.
Good morning, Mukul.
Manish, a couple of questions from my side. First, on this BGMI ban, which came last week, how should we see the impact on the esports, the NODWIN business, particularly from this ban? How should we read this more in terms of the impact on NODWIN going forward, given that you know there will be obviously follow-through impact on other you know gaming houses as well?
So shall I, y ou want to put all questions or we, I keep answering and then you keep asking?
Sure. No, I can. So the other question was on the Paper Boat business. Interesting to know about the price hike, but, you know, how should we read this in terms of growth going forward? You know, does this mean that, you know, you now have your cost per trial will, you know, increase, will enable you to resume a very strong growth rate in that business? You know, how will this impact your investments, which can, you know, really attract more suitable, you know, parents to the platform, without reducing the conversion rate? So if you can just give us a sense of, you know, how we should think about the impact-
Understood.
of price increase going forward.
Understood. And anything else? Then I will start answering.
Yeah, just, these two.
Good. So BGMI, takedown of the BGMI game from Google, there are two parts of it, and I'll address the NODWIN part first, since you asked about it. If you look at from a NODWIN revenue, BGMI last year has very little contribution. BGMI this year, we wanted to strengthen that partnership and Master Series and the current thing which is going, we were looking at building more IPs for... with the, with the strategic relationship which we have with BGMI. In terms of our revenue, which we are planning for this year and what we were looking and what is in the bag, BGMI does not contribute anything. So that's a zero impact on revenue, which we are looking at internally in terms of achieving our annual guidance of 50%+ growth rate, or even slightly higher in case of NODWIN first rates.
So BGMI revenue impact is zero, nil. Second, the esports industry is a very, very important industry, and BGMI really was the number one game today. But if you were to kind of relook at history, PUBG ban happened, Free Fire came in. Free Fire happened, BGMI came in.... Now, BGMI done, I think it's a great opportunity for Battlegrounds, for Call of Duty: Mobile, and other games to fill that void. Gaming is now, is basically a social immersive platform, and where the, this genre of players of mobile will find something or the other to play. The transition may take its own time because there is an affinity and there is a hope that the game may come back, and hence people will hang on to what they have because they have built their ratings or reputations inside the game.
If the game is not coming back for a longer period of time, then the movement and transition to new games will happen, and hence it's a temporary setback on the growth of eSports business or viewership in this country. But the habit of multiplayer eSports tournaments, as well as viewership, is far more deeper, and the shift will happen from A game to a B game, as we have seen in past. As far as NODWIN is concerned, if you look at it, our impact of PUBG, when people thought it's going to be very adverse on NODWIN, we kind of really continued to work and grow with other publishers because we are a diversified publisher, diversified geography, diversified business model company as part of NODWIN.
And hence, besides the temporary or transient impact on the eSports ecosystem, there is going to be nil, zero impact on NODWIN. To answer your second question on Kiddopia, I think after the long one year, we are very comfortable and confident that there is a path to growth because of three reasons. One, your new user headroom of $8.4 ARPU versus $6.7 blended ARPU of today, gives you enough and more cushion on LTV CAC, because as you appreciate, we as a company always like to have 10, 11 months of ROAS in terms of break even, and then 24-month LTV CAC of 2 and upwards of 2. With the current price increase itself, for a new user cohort, we are achieving that KPIs.
As more and more new users keep coming in, the past users are churning out, our ARPUs will keep increasing, and that creates more cushion. Second, we have only taken a 10%-13% price hike versus our competitors, which gives us a headroom to experiment in three to four months with further price increase. And we didn't want to do it in one shot because we wanted to do it gradual so that our KPIs don't regress, and that, again, gives us more confidence about growth. The third thing is, your base has reduced and your ability to kind of grow because your churn is constant of 5.5%-5.7%.
Now, if you are able to, if you are able to find a stabilization of $38-$39 and able to spend $900,000-$1 million, your ability to acquire new users is, is going to be slightly higher than your people who are churning out, and hence, your subscriber growth will also start happening in the coming quarters. So I think it is if I were to kind of summarize, stabilization at $38-$39, and ability to spend $900,000-$1 million per month is now very well established, and we are confident about it. Second, there is a headroom for further price increase to improve our LTV CACs, which gives us slightly more advantage to kind of really grow. And third thing is, the old users, as they keep churning out, your unit economics will keep in control.
That's how we are seeing the business of Kiddopia.
Manish, just to follow up on the Kiddopia part, you know, you are now below 300,000 subscribers there. How should we think about the volume growth? You know, is it something which will resume the pre-IDFA growth, which you are witnessing, given that you are now able to, you know, spend $1 million to kind of get them back? And second, on profitability, this quarter was flattish versus last quarter. The expectation was that, you know, you will be kind of trialing out some other areas of expansion of visibility. And that margins, that cost did not flow through, or how should we, you know, kind of see profitability going forward?
So, Amakal, very good question, and thanks for pointing that piece out. This quarter, as I mentioned, last quarter and this quarter, are the quarters where we wanted to experiment with brand marketing. We wanted to experiment with YouTube marketing because we were seeing that what are other ways for us to really grow and grow fast? Because that's what we like about it. However, we have seen that the brand marketing has not had the desired impact as well as YouTube marketing. We are getting CPMs in the range of $48-$52, and we didn't want to spend. Both those experiments are already in the base. The coming quarters, we are back to what I'm talking about, $900,000-$1 billion is a performance which we know pretty well.
That's an area which we know how to optimize and efficiently do it, and hence you will see an improved margins in Q2 from Kiddopia.
Sure. And on the subscribers part, the growth of that?
On the, on the subscriber part, I think it's very simple maths. As you rightly said, our subscriber base, which was, let's say, 350, is now 300. Now, in 300, if you're talking about 5.5%, you're talking about 15,000-16,000 people churning out, and your ability at 1 million with 38.7, you will start seeing first they're coming together, just marginal growth, and then you are kind of really seeing a future more growth happening. Because if you are continue to spend at 38-39, your unit economics is in control, your ability to spend in INR 900 million is in control, your churn is constant, and since your base is lower, you will continue to grow on.
Thank you so much for answering my questions.
Thank you.
Ladies and gentlemen, in order to ensure that the management will be able to answer questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Jinesh Joshi from Prabhudas Lilladher Private Limited. Please go ahead.
Yeah, thanks for the opportunity. I have a question on esports. I think the EBITDA margin in this quarter was 1.2, and that is predominantly because we invested in some growth initiatives. So can you let us know what these initiatives were and for how long this will continue? And secondly, if I also looked at our contribution to media rights in this quarter, I guess it was at about 35% odd, which is lower than 49%, which we reported in 1Q of FY 2022, despite the fact that the content views were higher and so were distribution hours. So if you can just explain the reason behind this as well.
Jinesh, just a clarification before I answer. You are referring to Nodwin, not esports, sir, because the EBITDA margins of esports are much higher than 1.2%.
My bad.
Yeah. So on the NODWIN piece, if you were to look at it, we have expanded NODWIN's horizon to touch the 14-25 gamer life in multiple ways. We have expanded besides just kind of really having a large IP-based tournaments, we have expanded ourselves into gaming accessories business. We have expanded ourselves into creating on-demand content, scripted reality shows. We have expanded ourselves into a merchandising business. We are trying to really build NODWIN as a, as a flanking offering to a gamer. In the life of a gamer, how many more touch points can we create? In that context, if you see in this quarter, we have got gaming accessory business Wings, which got consolidated, and that business is... Last year, was doing at INR 22 crore run rate. In this quarter, it was, broadly, it is INR 3.5 crore per month.
So you can see a clear growth in quarter one. We were expecting that to be an EBITDA loss, but we really worked on the operational efficiencies to make it an EBITDA breakeven. So you are seeing a revenue mix changing on gaming accessory, and we believe the consumer business of connecting consumer transactions and engaging the gamer community will keep growing in contribution. And that is how, while you will also see a media contribution, which was the main revenue for the entire revenues, that contribution will get balanced with the gaming accessory business.
In the future, this market of gaming accessory is going to be very, very big, and we believe that this year itself, we will be able to achieve and exceed our AOP of INR 70 crore, and hence, the revenue mix of NODWIN will keep looking different than what it was looking last year different. The other parts of what you need to note is that our own IP businesses are more in the second half, not in first half, which is where your media contributions will be different. We are looking to create, and that's what I mentioned to Mukul's response, we are looking to create year-round IPs, which can have a media partnership like BGMI Master Series, which we didn't start in this quarter, overlapping quarter one, quarter two.
Those are the kind of initiatives we are doing so that we do not have our second half much stronger than the first half, and we can normalize our revenues across the quarters. On the overall EBITDA margins, as we have always mentioned, this is a very small nascent market, which has a massive potential of building viewership. With NODWIN being a market leader, it is our job to reinvest in IPs. It is our job to create more adjacencies which can have growth. We will continue to really drive that and invest on it. Our overall year guidance of 5%-6% EBITDA margins is absolutely remain same for NODWIN, but because of seasonality of H1 and H2, you are seeing a lesser EBITDA in Q1.
Thanks for the elaborative response. One last question from my side. I think in Kiddopia, we have done well, predominantly because of the price increase, and I believe there is further headroom, given the fact that the peers are at a slightly higher level, which appears to be positive. But what I wanted to know is that, how have we fared on the market share side, considering the fact that the Apple changes have been around for quite some time? Is our subscriber loss better off or worse than peers? And, whatever corrective action they have taken to deal with this situation, how have they fared on this particular parameter? So your comments would help on this.
Yeah, Jinesh. Jinesh, if you look at, Anupriya mentioned when she was covering Paper Boat Kiddopia, we have maintained number two rank in the App Store Kids category, which is a clear, clear, you know, milestone to understand how are we doing relatively to the rest of the market? If our loss of subscribers or our velocity of people or our velocity of churn is much lesser, we will not be able to hold on to number two rank. We have been consistently for last two, two and a half years on the same position, which means that we are neither worse off nor better off than the market, and everybody in the market is on the same boat.
And that's the great testimony for the product engagement retention, which we see, as well as our, our ability on the marketing front to continuously keep on iterating and optimizing, and seeing that how do we really have a balance between new user subscribers and unit economics?
Thank you so much, sir, and all the best.
Thank you, Dinesh.
Thank you. The next question is from the line of Depesh Kashyap from Equirus Capital. Please go ahead.
Yeah, hi, sir, good morning, and thanks for taking my questions. Sir, on esports first, if I try to exclude the revenues of OML, PublishME, and the other new acquisitions from Nodwin's this quarter revenue, right, then it seemed that the revenue growth of the existing portfolio is more of a flattish to a low growth scenario. So just wanted to check if that understanding is correct, and where are we in terms of the growth in terms of own IPs? And secondly, on BGMI, you said there is no revenue impact, so just wanted some more clarity on the Master Series. Was it Nodwin's owned IP event or a co-owned or a white label event that you created? And will the partnership with Star Sports continue even after this ban? Thanks.
So, Dipesh, two, three questions you asked, and I will answer. Partnership with Star Sports is a function of Star Sports wanting to really tap into this audience base at esports, as they see the esports as a format really becoming very, very important for them to engage with audience. And in that context, that secular trend of esports viewership growth is not going away. As I mentioned in my response to Mukul, that there will be a transient flip because a new game will like to build, build, will become big, and when the game becomes big, then the viewership becomes big. BGMI was a 100 million kind of a download game with a lot of viewership. Is there? Will there be a temporary vacuum? Yes, there will be a temporary vacuum. Will that vacuum get filled? Yes, that will get filled.
The active conversation between KRAFTON and government must be happening, or other games will come into picture. But as far as Star Sports or us or anyone is concerned, the secular trend of esports, tournaments, people excitement and viewership is not going away. And hence, we do not really see any challenges to a long-term or mid-term partnerships. In the immediate term, there may be certain amount of headwinds on which kind of game has that kind of reach and scale for it to be a legit game on the TV platform. Second piece on the NODWIN partnerships. If you were to look at it, I mentioned before, we do not, we, in NODWIN, we are acquiring some opportunities for capabilities building, and we are acquiring certain opportunities as a pure B2C play.
We do not see an OML, and we do not track it separately, that what is OML business, what is not OML business, because the teams of sales, influencers, content creators are all kind of intermixed with the NODWIN team, and that's why NODWIN is acquired capability. So keeping saying that we will look at NODWIN and remove businesses of OML or XYZ and then look at business, is not the way we look at it. And if when you acquire for capabilities, capabilities help you in growing the business overall. In terms of our own IP, as I mentioned, our own IP typically have the quarter one is not the thing which we really do. We were trying to build, and we built very successfully, the BGMI Master Series, which kind of really broke the viewership records on Star Sports too, and other platforms.
We are balancing the quarterly calendar. Our own IPs will have a Q2, Q3, Q4 kind of a playout, more predominantly in Q3, Q4, rather than Q1, Q2.
Sir, just a follow-up. So this Master Series was our own IP of NODWIN, right? And the entire, the media rights, the sale that happened, that will come to NODWIN. Is that correct?
Yes, yes.
Great, sir. Thank you, and all the best.
Thank you.
Thank you. The next question is from the line of Mansi Desai, from Dalal & Broacha Portfolio Managers Private Limited. Please go ahead.
Yeah. Hi, Manish, good morning.
Good morning. How are you?
I'm good, thanks. My question was about Kiddopia. Just wanted to understand when have the prices, when have the price hikes happened? Is it during the start of the quarter or towards the end of the quarter? I'm asking this because, you know, I want to get a sense of do we see improving margins going ahead from the levels that they are right now? Because now we are passing on the higher marketing costs.
Just two things that you should understand, that this price increase applies to new subscribers, not the old subscribers. Correct?
Okay.
If you are talking about 300,000 total monthly subscriber base, and you are acquiring 16,000-18,000 new subscribers, your impact of the new price increase on the overall base will take time to reflect. So in this quarter, for example, Q1, we were at 6.7. It may increase based on the percentage of churn, and that is a very simple mathematical equation. But for it to reach to 8.4, which is the blended average of just new user cohort, that's going to take time. For us, when we are looking at unit economics, because we are spending on new users, it is, it is not right to look at the blended, because blended is passed through to your EBITDA straight up, because the cost has been incurred in past.
It is the new user which you should look at, and that's the unit economics. ARPU is $8.4, with ROAS of roughly 11-12 months today, and the LTV cap 24 months or two. That's, that's the math which we are looking at. To answer your question, when did this happen? This happened in the early part of June, and we have seen the whole month of June. We wanted to see how, what's going... If at all, any impact on our conversion from trial to subscription or any impact on our retention. We have seen none, which gives us amazing amount of confidence that we are on the right track... plus there is a headroom of further price increase down the line, as and when we become more comfortable with, with more data around consumer behavior after three to four months.
Understood. Second is on, again, on Kiddopia. What are the new initiatives, like I've heard of new ad campaigns that have been done for Kiddopia, and how that is panning out? Like, how-- what's the kind of response that you are getting in terms of new subscriber additions, at least starting this quarter?
So we, we ran the brand campaign in Q1 and Q, Q4, of some part of Q4 and broadly in Q1, first two months. We have not seen great results of brand campaign. Whether the brand campaign can give you a result in three months, that's also in, in, in itself, a question mark. But given that we have been able to now stabilize our performance marketing spends at a, at 38, 39 for spending $800,000-$1 million per month, we are of the opinion that let's not spend on brand marketing and take that leap of faith, so we have stopped doing that. Second, any kind of new experimentation on new channels, we have done a lot in last four quarters, and now again, stabilization on which channel is working well, which is not, we are very clear.
Hence, our marketing budget is going to directly be attributable to performance marketing, where we understand what we are really optimizing for, and hence our Q2 both things will improve. Our unit economics will improve at an overall level, as well as the EBITDA margins.
Okay. And my last question was on the guidance that you're giving of a 50% growth. Can you just help us understand or elaborate a little bit on what are the factors that are going to attribute? Because esports is one category, both the, like, NODWIN and Sportskeeda have been doing absolutely well. So which is going to be the next growth area for you where considering Kiddopia is still going to take some time to give that kind of accelerated growth?
So our revenue growth of 50%+ is predominantly being driven by esports, by EdTech, and by your real money gaming portfolio. These are the three things which are, which are driving from a revenue growth point of view in a meaningful manner. And when I'm talking about 50%+, I'm not talking about any further M&A. This is without any M&A. We are very confident of delivering 50%+ growth.
Okay. Thank you so much.
Thank you.
Thank you. A reminder to the participants to press star and one to ask a question. The next question is from the line of Divyesh Mehta from Investec. Please proceed.
Hello. Thank you for taking my question. My first question is regarding the acquisitions. You have shared a slide on slide 14, where you have shown scaling of revenues, where I can see 2x, 3x versus acquisition current rate. Can you share why in acquisition were you using quarterly annualized and current estimates are the, again, quarterly annualized parts? So I want to understand, how this number has scaled up, what is the calculation behind it? And my another question is regarding the freemium game, WCC. We have not seen any improvement in terms of the IAP penetration rates. Can you give any update on that? What is going on? The last question is, globally, digital ads are declining. Is Datawrkz seeing any impact, and in which verticals are they largely present in? That's it.
I didn't understand the first question, but let me answer the first two, and then I'll come back, second two. On the freemium, our IAP purchase has been flat, which is roughly broadly 80% coming from ad revenue, 20% coming from in-app purchases for last 18-24 months. It is predominantly attributable to the overall India market, where in-app purchase are very concentrated to very few games. And the games which are local, whether it's cricket or whether it's Ludo or whether it's any other game, have not seen too much of in-app purchase because the Indian user behavior has been predominantly that wherever there is a multiplayer social community kind of a thing, the in-app purchases happen. For example, whether it's BGMI or it's Free Fire or whether it's Call of Duty Mobile or any other such games.
In cricket, predominantly, we remain to be a very single player game. For the reasons of, A, infrastructure, which does not allow a game like cricket to have a very real, multiplayer experience. Also, because of the propensity of large number of people who are coming are not mid-core, hardcore guys, and so there is no social community aspect in the game today. And hence, in-app purchases continue to be the level where they are. Our view is the market evolution will take its time, and hence, we are very focused on looking at the acquisitions of other game development studios, which are offering multiplayer experience and creating a social context. And the markets could be outside India, because those are markets which are far more evolved but competitive.
If we can find a great product, we can replicate a story like a Kiddopia story in the U.S. So that's on freemium. On the global digital EdTech, as Anupriya mentioned, it's a $700 million business, and we are talking about hardly $50 million of it, of Datawrkz, so we are very, very small, not even a drop in the ocean. And the headroom on the growth on the verticals, on the consumer demographics of young male audiences, which they cater to in U.S, is very high because that's the audiences which are people are multiple multiple use cases are attracting, whether it's consumer delivery businesses or it's education businesses or gaming businesses, and hence.
Building that competency in the young male demographic is very important for us, and gradually we'd like to build more and more first-party data so that we can become a very strong use case there. Second, Datawrkz operates on ethnic communities in U.S., talking to Chinese community, Indian community, Hispanic community, and that's where they really work with a lot of publishers from those countries and bring them to U.S. So they have a very strong, very, very clear niche identified, and those niches are big. Propensity to pay is big, and hence I don't see any issues on Datawrkz's future growth projections. I didn't understand slide 14, please, if you can either.
Can you just explain how the slide 14 data is calculated that at current, at acquisition and current estimates? And perhaps what is driving that growth, particularly in Planet Superheroes. Have the offline stores started?
Just a second. I'm opening your slide 14 to see what is slide 14, and so that I can answer it. I don't have it, memorized in terms of what is the slide number. Give me a second. Slide 14 is NODWIN growth, right?
Yeah. NODWIN Gaming organic, inorganic playbook.
Got it. So if you look at it, as I mentioned in my earlier comments, the way we are looking at NODWIN, catering to a gamer. And a gamer can be attracted on tournaments, gamer can be attracted of, around, viewership platforms. Gamer can be touched upon through merchandising, through accessory business, and through tests and, and, collegiate activities which are happening. So how do we be present in the life of a gamer in multiple touch points? That's what we are really looking for. And hence, some of these initiatives, like Planet Superheroes, is in very, very early, early stage, where we need to now really define what is the strategy going forward, how do we really work. We are not very. The purpose of really getting into this is to unlock your own community touch points and reach.
The offline stores may be just few, and they may. That's not going to be thrust for us in terms of growth. Our growth will remain a digital-led growth for considerable point of time, because that's where our community is coming to our platform for tournaments participation. And any kind of physical touch points, it's much easier for us to establish in the events where a lot of footfalls are already coming. If you were to kind of really look at Rusk, Rusk is where we are very excited about the whole entertainment meets gaming opportunity, where our Playground IP, which we created as a first season, has been tremendous hit. Which is like a Bigg Boss meeting gaming community, and you are creating a scripted reality show. And we are going to create many such events so that there is an entertainment masala.
There is one audience which is looking for live sports events, and then there is another audience which is looking at a gaming meets entertainment kind of a masala. So that's what we are going to really look at and figure that piece out. And that's the content piece which we are really looking for. Third, influencer ecosystem is very important because they are the new distribution vehicles, simplification vehicles, for whether you create live content or on-demand content or scripted reality content. And that becomes your not just a sword, but also a shield, so that you can continue to dominate the India market. And we are actively working on how do we keep building or consolidating the influencer ecosystem in India.
Okay, that's it. Thank you.
Thank you. A reminder to all the participants to restrict their questions to one or two per participant. Should you have a follow-up question, please rejoin the queue. The next question is from the line of Abhishek Kumar from JM Financial. Please go ahead.
Yeah, hi, thanks. Good morning, Manish. Congratulations on a very good quarter. A couple of questions. First, you know, when we had come out at the end of, towards the end of the last quarter and guided for 55%-60% growth, is there anything specifically that surprised us? You know, since our growth was significantly ahead of the upper end of that band. So that was the first question. The other one I have is on Sportskeeda, which is, you know, one of the primary growth driver this quarter. Looks like the volumes have not grown that fast. If I just look at the monthly active users, it is 16% YOY. However, the direct sales have, have grown.
So is that a function of, you know, the growth in cricket, which is in India, where you're seeing more of direct sales? And how much more scope is there to expand direct sales and hence blended pricing in Sportskeeda? I have one bookkeeping question that I'll ask after these two questions.
Right. So Sportskeeda, for us, the way if you look at it, our portfolio of sports is really kind of increasing, and our strategy is to keep adding newer sports which are more catering to U.S. audience. And for a very simple reason, that your inventory yields in U.S. are 6x of India inventory yields. And if you were to kind of really take a new sports and get to a 4 million-5 million MAUs number, you'd make it a profitable and at least a business which will be INR 10-12 crores on an ARR basis, in a very quick time period, with relatively very less investment. So that's the strategy which we have been following... and that, coupled with direct sales, as you rightly pointed out, in India during cricket season, has really helped us to have a far higher revenue growth than the MAU growth.
The second point is, we have worldwide the success of direct sales in the last 18 months in India. We are actively considering putting feet on ground in U.S. for direct sales, and then monetizing the current inventory even more, so that we can really have a much faster growth. And then we can really use that cushion to really create more video content and create more, more faster velocity of addition of new sports, which we can really do. So from a Sportskeeda perspective, the revenue, in my opinion, will continue to exceed the growth of MAUs, because of your shift of mix happening between India and U.S., and your share of direct sales increasing. On the 55-60% growth guidance versus 70% growth, which we have achieved, there is no surprise.
It's only, only something which we have been really working hard. And we would like to kind of really, with your permission, keep some buffers in our pocket so that we really can live and sleep, sleep peacefully.
No, that's always helpful. So, so one last question is: have we consolidated Rusk Media also? Because one of the slides says that, NODWIN revenue includes Rusk Media. Because I thought we just owned some.
I think the wording there is slightly misrepresenting. Rusk Media, Nodwin holds 6%, and we can't consolidate, right? There is a revenue, Rusk Media. So there are two parts of Rusk Media. One, this whole Playground IP, which is being created, is creating as a subsidiary of Rusk, where Nodwin owns the majority, because that's the reason for us to invest in Rusk, was to build gaming and gaming entertainment content business, where Nodwin owns 51% and the Rusk own 49%. And the monetization of entire gaming is done by Nodwin. What does Nodwin really has done? Nodwin has done a capability through email to really go to brands and sell of such kind of concepts, because that's the strength which Nodwin has always demonstrated.
And that's what we are using to really leverage the content creation capability and distribution capability of Rusk and the monetization capability of NODWIN. So that's part one. Part two, the Rusk itself, some of the IPs, NODWIN sales team is selling, and that business, I'm assuming, will keep growing. Because this is just initially understanding of our sales teams, how do we really go and pitch to the same brands, the same demographics, which Rusk is capturing, and how can we really create more revenues for them? And those revenues, again, we will consolidate. It is not that we are consolidating Rusk.
Got it. Got it. That's very helpful. Thank you, and all the best.
Thank you. The next question is from the line of Rahul Jain from Dolat Capital. Please go ahead.
Yeah. Hi. Congratulations to your team for strong performance. Most of my questions have been answered, just one or two. Do you think, you know, in the gamified business, when you said this, pricing hike is coming and more can come, you... It, it eventually means that in this category, with the refining part, is actually on the consumer eventually. So do you think this may itself impact on the progressive side mindset by the App Store?
Rahul, lot of disturbance.
Just give me one moment.
Hello?
Rahul Jain, there is a lot of disturbance.
Hello?
Let me get back to you again. Sorry.
The next question is from the line of Amit Chandra from HDFC Securities. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. So my, so my question is on the RNG segment. So I know it's a very small segment for us, only 6% of revenue, and we have now increased our presence through the, you know, OpenPlay acquisition. But, as a segment, RNG is a very, very big segment, and if I'm not wrong, you know, in the total Indian gaming industry, it, it know, as, as projected, it can be around, you know, around like $3.5 billion of total industry, the RNG segment. So what are the plans here, you know, to increase the scale here? Because still we are very, very small as, as, as compared to the competitors there. So if I take, know, know, MPL or Dream11 or Games24x7, so are we competing with them?
You know, in terms of our electronic portfolio, you know, like, where we stand in terms of online rummy, fantasy sports there? Yeah.
So, Amit, thanks for ringing, and I'll just again reiterate what I did in my opening remarks on segment. First of all, MPL Dream11 is not a competitor to us. Nazara believes in having a very diversified portfolio play across consumer cohorts, across different drivers, business models, and countries. So I don't really see Nazara competing, because we have a very unique offering in India market, which nobody really has. Second point on the real money gaming piece, yes, you are absolutely right. This is one of the largest segment in the Indian gaming market, and we are an insignificant player there.
That is out of choice, which we have maintained in our portfolio only at 6%, because we have been wanting to get a statutory clarity on this segment, both on a framework for defining game of skill, which is clear and pan-India common. Second, which is a GST clarity. The positive thing is that a lot of interest and interactions with government industry are happening as we speak, to really create clarity on both these items. And we believe that as the clarity really happens, our capital allocation decision will become much easier. We are very well, our approach of Friends of Nazara network and our interactions and rapport with the other real money gaming companies in this market is amazingly high.
Our ability to kind of really bring them into Friends of Nazara network to consolidate RNG is, is very, very well proven and possible. But we want to really kind of go into it once we have a semblance of clarity emerging on both these aspects.
Okay. In terms of the plans, are we planning now for an organic growth year or we have plans for inorganic because a lot of consolidation can happen in this segment?
So if you look at it, Rummy is growing, and Rummy is continues to grow. In spite of us not really accelerating the user acquisition on account of GST overhang, we have really improved our revenue growth from our current users, and which you can see reflecting in our EBITDA margins, which are 28% for this quarter and for Open Play. We will continue to grow that as soon as we see a clarity emerging on GST. We are very confident of growing not just the Rummy business, but also growing the overall segment through a combination of organic and inorganic.
Okay, sir. Thanks, and all the best for the future.
Thank you, Amit.
Thank you. The next question is from the line of Rahul Jain from Dolat Capital. Please go ahead.
Hello, am I audible now?
Yeah, yeah, Rahul, thank you.
Yeah. Yeah, sorry for the trouble earlier. So, what I was essentially trying to understand is that this pricing hike that we have taken, and we are saying there is some more room, and this is what the PS are also following. So essentially, the impact of this IDFA thing has is actually coming on to the consumer. So do you think this may itself impact the privacy side mindset by the App Store, or this is more about monetization at their end?
I don't think that. See, fundamentally, what I am really seeing, consumer is okay to pay for privacy. And that's the headline news, which at least I can understand from the behavior in this category. Because we are talking about the safety of a child in an environment where a child can have fun and can also learn. And parents are okay to kind of they do that, but they are always worried about the privacy of such in-interactions, and hence it's a trade-off which they are comfortable.
Right. And, I think you mentioned a bit, but I could not follow it so much. So does that mean now since we will increase the price, and the portfolio price would come on its own and there is room for more? So the entire, mathematics that we were having about the LTV/CAC itself take a higher base, so subscription growth can be targeted, in couple of quarters, if not immediately?
You are absolutely right, Rahul. You're bang on.
So, although it may look little far off, but can we say that FY 2024, our thought process in the business could be similar to what we were having in the business, a year back, or let's say at the time of IPO?
Rahul, the mindset has not changed. There was constraint, which has changed. But, whether we will grow 5% month-on-month or we will grow 8x in a year, I do not know today, right? But what I am very confident and comfortable, that there will be a growth in few quarters down the line as our, the new user base keeps coming in, and hence the blended ARPU keeps increasing.
Yeah, yeah. So the whole point is that if there is enough demand in terms of number of people and there's enough demand even at a higher price, then one should try to spend more and get the market rather than trying to stabilize the margin. Though, if you were not sure about the subscriber, then of course, saving the margin was an optimum way to go about it. But if we increase price.
At this juncture, after a lot of experimentation, we have found a stability around 38-39 CPT. We like to kind of run it on it for some time before we really have a rethink on our strategy. But as we understand today, that is a stabilization which is really, coming after a lot of experiments, and we do not want to kind of upset that rhythm.
Right. Right. Appreciate it. That's why I think, FY 2024, become a more, way to look at it. Okay. Secondly, you... I think there was, one, comment in the opening remark by Anupriya related to some talent, addition, driving the, inorganic capability in the, global market. If you could, spread that bit more on that. And anything more on the RNG consolidation side, are we seeing any pipeline there to add?
So we have got somebody to lead M&A for premium and gamified. The person comes from having four to five years of experience in the gaming companies and has good relationship with the networks in Europe and U.S. He's working on building a pipeline of studios which we could really look at. And that's where now a dedicated resource who understands gaming domain and understands how to evaluate gaming companies and then bring a curated funnel to Nitish and myself is a really asset which we were missing, and we have added it. And we are having a very good now NDA discussions across the globe, where at least people know Nazara is interested in looking at such deals, whether it's a cohort of boutique gaming bankers or the companies and founders directly.
So I think that's something which is what Anupriya kind of mentioned about. We have also kind of added a Chief Strategy Officer in Sportskeeda, because we are sitting on a lot of cash there. The company is cash generating. What can be done to really drive in an organic growth in Sportskeeda also, while organically they are doubling every year? So key people and geographies in different companies is what we are continuously adding. Anupriya herself is a great support to me, so that I can spend more time on business operations, and she could really take that burden off my shoulder. So augmenting leadership teams at corporate as well as subsidiaries is the task which we'll keep doing here as we speak. You had another question.
Which was on RNG. So we've been talking about this consolidation here.
So, so Rahul, as I mentioned to, in answer to Amit, the players in RNG are very well known to us. Multiple times we have had discussions with them. The desire to come under one RNG and network effects of that are very clear and pronounced to us and to them. So the pipeline is not an issue there. It is about when to press the green button to kind of really go ahead and do this. And that's where we believe that we have waited for too long. We are optimistic that the clarity will emerge, both on the framework of game of skill as well as GST very soon.
Right. But I guess the valuation will change much faster once the clarity emerges.
My personal belief is for the risk of binary risk versus a clarity, a premium which you can pay in a market like India, which is very large and will continue to grow, I don't see an issue of premium being paid, because then there is no clutter in your mind and you can, with free mind, you can go and press the growth accelerator.
Right. Appreciate it. Thank you. That's from my side, and best of luck.
Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Rishi Jhunjhunwala for closing comments.
Rishi, do you want to hand over to Nitish?
Yeah, yeah. So just wanted to thank, you know, the management, Manish, Nitish, and team for letting us give the opportunity to host the call. With that, I'll just pass it over to Nitish to close the call with his remarks. Thank you.
Yeah. Thank you everyone for joining us early morning on Monday and for all the insightful questions. We remain committed to drive growth over the years in Nazara. We're a very stable company that remains profitable, generates strong cash flows, and creates value. We look forward to your continued inputs as we continue to evolve. Thank you very much, and have a good day.
Thank you. On behalf of IIFL Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.