Nazara Technologies Ltd (NAZARA) Q4 FY23 Earnings Concall Transcript

Nazara Technologies Ltd (NSE:NAZARA) Q4 FY23 Earnings Concall dated May. 10, 2023.

Corporate Participants:

Abhishek Kumar — Investor Relations

Nitish Mittersain — Founder and Joint Managing Director

Anupriya Sinha Das — Head of Corporate Development

Sudhir Kamath — Chief Operating Officer

Analysts:

Jinesh Joshi — Prabhudas Lilladher — Analyst

Abhishek Banerjee — ICICI Securities. — Analyst

Abhishek Bandari — Nomura. — Analyst

Deep Shah — B&K Securities. — Analyst

Mukul Garg — Motilal Oswal. — Analyst

Abhishek Kumar — JM Financial. — Analyst

Rahul Jain — Dolat Capital — Analyst

Unidentified Participant — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Q4 and FY ’23 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. [Operator Instructions] 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.

Abhishek Kumar — Investor Relations

Thank you, Yashashri. Good morning, everyone. Welcome to this call of Nazara Technologies to discuss fourth quarter and full year FY ’23 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.

Nitish Mittersain — Founder and Joint Managing Director

Good morning, and a very warm welcome to all of you to Nazara Technologies Limited Q4 and FY ’23 Earnings Call. We have uploaded our results presentation on the exchanges, and I hope you have had opportunity to go through it.

We are delighted to report another milestone here for Nazara. We have delivered a strong performance in FY ’23 with revenues surpassing the 1,000 crore INR mark for the first time at INR1,091 crores and our EBITDA coming in at INR109.7 crores. Revenue growth was at 75.5% year-on-year with an overall EBITDA of 10.1% and year-on-year, 21% PAT growth, a healthy year-on-year revenue growth across all business verticals, including gaming, eSports and Adtech demonstrates our commitment to drive sports aggressively alongside profitability, while prioritizing growth so that we can achieve scale and market leadership in the spaces, which we operate in.

In terms of our performance for the quarter gone by, revenue grew by 55% year-on-year to INR289.3 crores. EBITDA grew by 86% to INR27.7 crores and the PAT increased by 92% year-on-year to INR9.4 crores.

The company is currently operating in three key segments, which are gaming, eSports and Adtech. Our Gaming segment comprising of sub-segments namely gamified early learning, premium, RNG and telco distribution generated a total of INR406.6 crores, which was up 28% year-on-year and delivered an EBITDA margin of 17.5%. Our eSports business generated INR131.5 crores in revenue, up 74.9% to a 7.8% margin and our asset business generated INR153.2 crores revenue with 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 growth of our existing businesses. Our existing businesses are generating CAC, 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 deal.

This operating model enables us to create a flywheel that keeps gaining momentum across table, growing and diversified cash flow 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, by emerging regulatory clarity is a huge positive product 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 be resolved in the coming months. Since currently, skill-based R&D only 5% of our total revenues, it provides a significant scale-up opportunity for us going forward.

And with the regulatory gravity emerging, we are working on a pre-pronged approach towards the same. Through growth in our existing games, launching and publishing new R&D we had 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.

Anupriya Sinha Das — Head of Corporate Development

Thank you, Nitish. Good morning, everyone. As you are aware, Navara operates across three segments, Gaming, eSports and Adtech. Gaming includes Gamified Early Learning, Real Money Gaming, Freemium and Telco Distribution Sub-segment. This segment grew by 28%, contributed to 37% in revenues and 56% in EBITDA in FY 2023.

Our playbook here is to invest in user acquisition backed by unit economics, when focusing on product and content updates to drive retention metric. All our key IPs, continue to see growth.

If you look at Kiddopia which is a flagship IP, within Gamified Early Learning segment, we continue to see subscriber growth in Q4 FY 2019, despite negative impact of seasonality. As you know, Q3 is the success year in the U.S. and Q4 typically sees a pullback, but inside of that, we have seen a growth in the subscribers for Kiddopia.

The subscriber number increased to 311,758 in March 2019. Kiddopia continues to be the number two Grossing app for kids under five years in the U.S. EBITDA margin for the business improved to 18.4% in Q4 FY 2022 versus 11.6% in Q3 FY 2023, given 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 back-end to get actionable products and User Acquisition Insights.

On the product side, we have improved the cadence of content updates to drive growth. We are leveraging good capabilities for user acquisition via data. The emphasis on optimization on a non-core cost has led an improvement in EBITDA margins 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 revenue, 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 a next few days.

Openplay, which is Nazara’s initial step into R&D space, you see a revenue growth of 33% year-on-year in FY2023, and EBITDA growth of 79% year-on-year due to better cost optimization. We raised our players that were not generating revenue, but then giving bonus. We are further improving the acquisition funnel, branding and player journey. Tamil Nadu bans online games a chance of money, including rummy and poker in April 2023. Tamil Nadu contributed 20% of our revenue [Technical Issues] hence the brand will have a short-term negative impact on revenue. However, we are trying to actively mitigate this downcycle.

As Nitish mentioned with new regulatory clarity emerging for the R&D segment, we are working on a larger blueprint for Nazara in the R&D space, while using organic and inorganic.

Moving to our eSports segment, which contributes to 49% of our total revenue. This segment grew by 75% in FY ’23, specifically of Nodwin, the revenue grew by 84% in FY ’23, driven by growth in multiple items. The IT sector seen a strong growth of playground, PUBG in South Asia and digital, as well as a strong growth in wins are gaining access in this business.

Operating leverage will kick in this k, since we will see a non-lever growth in EBITDA to come from own IT and media rights, accessories business to become margin accretive once brands get more strongly established.

Nodwin has acquired 51% in branded Pte Ltd for a cash consideration of $1.2 million. Singapore based branded Pte has built marquee IPs, including all that matters is a [Indecipherable] creative voice. This acquisition will also drive sponsorship revenue for all of Nodwin rightly in India and internationally.

Sportskeeda revenues grew by 55% in FY ’23 and US revenues grew by 89%, 104% growth in revenue from eSports in FY ’23 for Sportskeeda. The next brand sales now contribute to INR26.7 crores in FY ’23, which is more than double of the corresponding number in FY ’22.

Sportskeeda acquired 73% stake in pro-football network, a premium source of coverage and analysis of NFL in the US in March ’23 while $1.82 million with more than 5 million MAUs, CFM brands heard amongst the top NFL-focus media website in the US as per [indecipherable] ’22.

Adtech our US growth engine also performed well and grew by 53% year-on-year in FY ’22. This segment contributed to 14% of revenues and 11% of EBITDA in FY ’22. Datawrkz added 42 new clients in FY ’23 coming to 34% of total revenues in the same period.

The company lost one significant client, however, there will be a minimum EBITDA impact due to growth in new client. Datawrkz continues to build all three of its businesses, ITV which is the services for advertisers, Media works which is a services for publishers and digital, a self-serve demand-type platform. The company is ramping up payer capabilities globally and is also actively evaluating.

All our business segments continue to be cash generative. We closed the year with INR628.3 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 [indecipherable].

I’ll close by remarks here and we’d like to open the call for Q&A. I would request Nitesh, Sudhir and Rakesh Shah to join me for the Q&A.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have our first question from the line of Jinesh Joshi from Prabhudas Lilladher. Please go ahead.

Jinesh Joshi — Prabhudas Lilladher — Analyst

Thanks for the opportunity. I have a question on the Adtech business, which seems to have reported a loss in this quarter. Sir, can you highlight the details 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 there on? That is question one. And just a follow-up on that is this time around, you have not disclosed the EBITDA expense in telco businesses, if you can just share that as well.

Nitish Mittersain — Founder and Joint Managing Director

Jinesh, hi. This is Nitish. I didn’

Jinesh Joshi — Prabhudas Lilladher — Analyst

So at the Adtech business, you have reported a loss in this quarter. So the question is, has it got to do with the loss of client, which you just highlighted. If yes, what was the reason behind that loss? And when do we expect the business to stabilize?t hear. Can you repeat that please?

Nitish Mittersain — Founder and Joint Managing Director

And the second question also.

Jinesh Joshi — Prabhudas Lilladher — Analyst

The EBITDA, EBITDA figure for Adtech and telco business, which we have not given in the PPT this time around, if you can share those numbers?

Nitish Mittersain — Founder and Joint Managing Director

Sure, sure Okay. So just to clarify the Datawrkz, the Adtech business is not posted the loss. It is revenue of INR39 crores in Q4, with INR2.7 crores of EBITDA. So it’s profitable 6.9% EBITDA in Q4. And total EBITDA of INR13.5 crores for the year on revenues of INR53.3 crores in the total EBITDA being 82%. The business continues to be profitable. We mentioned the client that was contributing revenues they are not for the low-margin client. So we don’t expect any large impact on our EBITDA, and we expect that we will continue to do well in the coming FY ’24. We’ve been actually adding a lot of new clients. We’ve also appointed some sales team in the U.S. So we are actually on a pretty aggressive growth part over and feeling very confident about our business. On the telco business, we had around INR52.8 crores of revenue with INR13.9 crores of EBITDA, which was a 26.3% margin.

Jinesh Joshi — Prabhudas Lilladher — Analyst

Sure, sir. Actually, I was looking at the EBIT number, which was negative and hence the confusion, 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 ’23, even the distribution adds are up when I compare it with the last financial year, yet if the contribution of media, right, the revenue has come down from about 39%-odd to about 31% in this financial year. So does it mean that pricing has taken hit towards here? If not, can you explain the reason behind it?

And also, if you can share, I mean, what kind of EBITDA margins can we make on mature IP truly from media rights like thing, because apparently, it appears to be a high-margin business for us. So, just wanted your thoughts on that.

Nitish Mittersain — Founder and Joint Managing Director

Sure. So, on the media rights revenue, right, I think for FY 2023, while at percentage but has dropped from an absolute terms, the revenues are have been broadly flat for us. And one of the large contributors for that reason is that because of a lot of the popular deals for bank, some of the media deals we had in place kind of dropped out, we should have generated significant growth in media revenue. So, I think despite the games being banned, us being able to also maintain the media rights where they were for the good performance and we expect in the coming year that to normalize. So, that’s one aspect. I think for our established IP with media rights, we should be able to get to — in the short near-term rate, about 20%, 25% kind of EBITDA margins once there is stability on the games — popular sports titles. I hope that answers your question.

Jinesh Joshi — Prabhudas Lilladher — Analyst

Yes, sir. One last question from my side. The PSN business that we acquired recently, apparently seems to be marginally loss-making at the operating level in CY 2022. So, I just wanted to know what can be the steady state EBITDA margin in this business? And by when do you expect to achieve that?

Nitish Mittersain — Founder and Joint Managing Director

Sorry Jinesh, which business?

Jinesh Joshi — Prabhudas Lilladher — Analyst

The pro football network business that Sportskeeda, the PSN–

Nitish Mittersain — Founder and Joint Managing Director

Yes. No, I think that’s a fantastic plug-in for Sportskeeda with roughly estimation in the US and it depends Sportskeeda is vertical in that space. And team there is fantastic. And few early days, we are already seeing some very strong growth in KPIs. So, we are very confident of delivering good profits and good EBITDA on that business in the current year. We think the synergies between Sportskeeda and PSN will be out very well, and we shall see — start seeing that from as early as next quarter.

Jinesh Joshi — Prabhudas Lilladher — Analyst

Would you like to share an indicative steady state EBITDA margin number over here?

Nitish Mittersain — Founder and Joint Managing Director

It’s very early Jinesh, so we are like not to do that.

Jinesh Joshi — Prabhudas Lilladher — Analyst

Sure, sir. Thank you so much and all the best.

Operator

Thank you. [Operator Instructions] We have a next question from the line of Abhishek Banerjee from ICICI Securities. Please go ahead.

Abhishek Banerjee — ICICI Securities. — Analyst

Hi. Just a couple of questions. Firstly, on your cost per trial in Kiddopia–

Operator

Sir, I’m sorry, can you use your handset mode, please?

Abhishek Banerjee — ICICI Securities. — Analyst

Hello. Is it clearer?

Operator

Yes.

Abhishek Banerjee — ICICI Securities. — Analyst

Yes. So, yes, first of all, a 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 clarity on how that happened? And what is your outlook going forward? So could we see another $1 kind of decline in that CPT, which would have a very big impact on your margins going forward? Or is it likely to stabilize at this time?

Nitish Mittersain — Founder and Joint Managing Director

Yes. I think it’s hard on getting the right optimal mix of cost per trial and the volumes that we are able to spend in acquired users. And I think Q4 — because Q3 usually is October to December Christmas season in the US and it’s a peak season. Q4 usually is a bit slower and I think we’re focused on optimizing our CPT in this period, you can see the results 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 increased — includes you know, trying to start scaling up the volumes, again.

We’ve kind of overcome that IDFA issue. We’ve gone back to spending a lot on Google, which we had our stock. So I think this quarter has been for us to stabilize the business, just check out on our key metrics, healthy and stable, which we are finding they are. And I think we look at it is the CPT range will still remain between the $35 to $37.

Now our focus going forward is to be how can we also parallely 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% versus successful quarter of 11.6%. So I think we’re on the right track with [Indecipherable] stabilizing the business and making it back growth trend.

Abhishek Banerjee — ICICI Securities. — Analyst

Got it. So but — and on one hand, you’re saying that you stabilized, of your business and CPDs 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?

Nitish Mittersain — Founder and Joint Managing Director

No. I think Kiddopia business itself is – the Kiddopia app right is quite a lot — that continues to be working under team, continues to work very hard on the product side. As you might have seen, even in [Indecipherable] recently came to India and met Kiddopia team and also tweeted about how Kiddopia is impacting positively to kids over the world. That’s a big validation of the product. And I think that’s what’s helping us, I would say, outperform competition.

Abhishek Banerjee — ICICI Securities. — Analyst

Understood. Also, in terms of the acquisition pipeline going forward — so, you have been very active in this space, right? But at some time, management bandwidth becomes a constraint 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?

Nitish Mittersain — Founder and Joint Managing Director

Yes. I think the climbing we have, right, is the distributable climbing. So what I mean is that let’s take Sportskeeda, for example. You know Nazara went and acquired Sportskeeda 3.5 years back and grew it from, let’s say, a INR15 crore revenue to — this year as we done one second — Sportskeeda INR122 crores revenue, right. Is that INR38 crores — INR39 Crores EBITDA this year. 3.5 years back when we acquired the business, we had a — you know, zero 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 purchase team strategy officer in place who is very focused on M&A. And through our experience, we’ve kind of guided these teams. And the [Indecipherable] network is an acquisition done by Sportskeeda and 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 setting up a lot of our operational bandwidth at Nazara level. So while Nazara may be selective in doing acquisitions, you may see bolt-on acquisitions happen at a more rapid pace as the company is below because they are getting cash, accumulating cash, it’s a great deployment of their cash to further their businesses. That’s when we kind of bring in our experience and expertise in doing these transactions, but the actual operations of these M&As are done by the teams 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 the subsidiaries.

Abhishek Banerjee — ICICI Securities. — Analyst

Understood Understood. And if you’re talking about larger acquisitions, does that mean taking on some levels?

Nitish Mittersain — Founder and Joint Managing Director

Sorry, can you repeat that?

Abhishek Banerjee — ICICI Securities. — Analyst

So if you’re talking about larger acquisitions, does that mean taking on some debt?

Nitish Mittersain — Founder and Joint Managing Director

At this point of time, we’ve not 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 you were to take it, it would be purely against the cash flows of the target company and not the Nazara.

Abhishek Banerjee — ICICI Securities. — Analyst

Understood. That is very clear. Thank you so much sir for everything.

Operator

Thank you. We have a next question from the line of Abhishek Bandari from Nomura. Please go ahead.

Abhishek Bandari — Nomura. — Analyst

Thank you for the opportunity, Nitish. I had one question. If I go to your Slide number 32. I’m just trying to reconcile the slowdown of EBITDA into operating cash flow while we generated INR100-plus crores of EBITDA in FY ’23, the net cash flow from operations is just not, part of it is explain because of working capital. But if you could elaborate how are you thinking to bridge the gap between the two or is it a nature of the business that this kind of gap will always exist?

Nitish Mittersain — Founder and Joint Managing Director

No. I think this year we’ve seen a slight increase in working capital in many of our businesses. And I think also, there’s some — for example, in the case of Kiddopia because we had an 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 ’24, we expect to generate good cash. I think the other place our working capital got stuck or something is the gaming accessories business, which is working capital intensive business. So we are working closely with the team on how can we create better cash flow management so that working capital doesn’t get sucked in there continuously.

Abhishek Bandari — Nomura. — Analyst

Got it. So is it fair to say that the steady state EBITDA to operating cash flow conversion would settle at a higher rate — like would it be like 40%, 50% of your…

Nitish Mittersain — Founder and Joint Managing Director

Yes, absolutely.

Abhishek Bandari — Nomura. — Analyst

Got it. Thanks, Nitish and all the best.

Nitish Mittersain — Founder and Joint Managing Director

Yes.

Operator

Thank you. We have a next question from the line of Deep Shah from B&K Securities. Please go ahead.

Deep Shah — B&K Securities. — Analyst

Hey, good morning, sir. Thanks for the opportunity. Sir, the first question was around the — some qualitative commentary on the Valorant challenges the context is last year, we had a deal with transports thanks to BGMI. And I hear you alluded that some media deals have lapsed because of games in [Indecipherable]. So any rough metrics that you can call out as to what is the engagement level for Valorant that can give us some guidance on when those medial deal come back? Because if I understand correctly, more than monetization it is the reach which would have been large, which star sports as a partner?

Nitish Mittersain — Founder and Joint Managing Director

So shall I just answer that first. So the BGMI or Star Sports was the first program, we ran with Star Sports and that was extremely successful. We had great response and Star Sports was very excited about Season 2 of seeing. However, because of the BGMI ban, we could not continue with that. And that was also one of the reasons our media revenue kind of dropped. Our marketing didn’t grow as we expected in the previous year, FY 2023.

Valorant is only days the league has just launched and we will be building up. Valorant versus BGMI, the difference is that Valorant is a PCVM, with a slightly smaller community compared to BGMI. It is more intense community, 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 with a large channel.

The other media content that has done well for us is the Playground series. Season 1, got about 17 million views, Season 2 got about 40 million viewers. We have Season 3 launching in June and that is actually a change in the format of bit and going to run a year-long season. So I think that should also be very positive for us.

Deep Shah — B&K Securities. — Analyst

Right, Nitish. Sir, second question. I hear many interesting remarks. I’m predicting them wrong, but I hear that ethical leverage has started to swing down in the eSports market this year. But I would rather think 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, rather than is it different game than BGMI. So how can we think about this profitability piece? Will it be protracted or will we see a lot of FLFs start flowing right from FY 2024? And as a parallel question, what is the plan for new IPs? Anything that you can help us with that?

Nitish Mittersain — Founder and Joint Managing Director

So, I think just to summarize if I understood your question, you are asking about the eSports margins in FY 2024?

Operator

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 thoughts on what the blue side there would be helpful?

Nitish Mittersain — Founder and Joint Managing Director

So I think in terms of margins, we are still projecting specifically for NORDWIND gaming, we are not in a FY 2024 protecting large, very large investments in EBITDA. We will try and optimize where possible, but our focus is on the continued price strategic growth in that business. I think in terms of your second question of IP, right, Valorant is one that NORDWIND has already launched. They launched a chess league which is also doing very well. There are two or three different leagues that NORDWIND is currently in the midst of launching or has launched which we think will build a strong IP.

There is a Kingfisher India Premiership 2023 which has been announced. This is having games like Tekken 7 and Cash of Clans. There’s a PUBG New State Pro series challenge Japan. I think there’s a lot of high key 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 buildup happen throughout FY 2024.

Deep Shah — B&K Securities. — Analyst

Sure, sir, this is very helpful, thank you so much.

Operator

Thank you. [Operator Instructions] We have a next question from the line of Mukul Garg from Motilal Oswal. Please go ahead.

Mukul Garg — Motilal Oswal. — Analyst

Thank you. I hope I’m audible.

Nitish Mittersain — Founder and Joint Managing Director

Yeah, hi, Mukul.

Mukul Garg — Motilal Oswal. — Analyst

Hey, Nitish, good morning. So it is just a follow-up on the on the modeling point. If you look at the content view or the distribution between Q4 FY 2022 and Q4 FY 2023, it obviously has some of 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 FIFA were kind of receiving from players. So how are you going to visualize the longer term opportunity capture which is out there in the space? Because 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.

Nitish Mittersain — Founder and Joint Managing Director

Yeah, no absolutely, so I think you are running on that in terms of you know the viewership is obviously got impacted due to the games that were banned. See we need very popular mobile gaming titles in a country like India to drive maximum viewership and one or two things will happen. Either the space that is currently there will get filled up by some new titles or you will have some of the existing titles come back which is also possible in the next few months.

So I think while that happens, obviously we are working on creating many other items. We do see Valorant et cetera also building out, we are working closely with them and building it out. But to see a large search, I think you need to get those large mobile eSports titles on the back of which a lot of it can be generated.

Mukul Garg — Motilal Oswal. — Analyst

Right, so just to follow-up on this, 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 we can argue in terms of these Free Fire or BGMI, which work quite popular in the country, to kind of get them back as an option?

Nitish Mittersain — Founder and Joint Managing Director

Yeah, so no, we actively have this 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’re very hopeful that some positive news will come in the coming months, right? That said, there are no 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 re-launched.

Mukul Garg — Motilal Oswal. — Analyst

And the second question was, again related question, when I look at WCC performance. It has been weaker than what it was same time last year. You have on the other hand increased your stake in the next wave. So, any thoughts on how you are visualizing your investment into the space there’s a lot of strategies happening on the mobile gaming side. Are you hoping to kind of aggressively expand and create an alternate opportunity here?

Nitish Mittersain — Founder and Joint Managing Director

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 NPV caption over that is starting to make sense. So, we will hope — I think for the franchise that work with the 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 for FY 2024. And how do we monetize this product better and how do we 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 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.

Mukul Garg — Motilal Oswal. — Analyst

So, should we expect kind of front-ended investments to kind of believe the required growth? Or are you already seeing a tipping point and we see that the growth will happen while the US is kind of getting a favorable returns on the investments?

Nitish Mittersain — Founder and Joint Managing Director

No, I think we don’t anticipate large investments in terms of SG&A costs, et cetera. But I think in the near future, we will potentially ramp up our user acquisition on that product to scale the user base.

Mukul Garg — Motilal Oswal. — Analyst

Got it. Thanks for answering my question and best of luck for the quarter ahead.

Nitish Mittersain — Founder and Joint Managing Director

Sure. Thank you.

Operator

Thank you. We have our next question from the line of Abhishek Kumar from JM Financial. Please go ahead.

Abhishek Kumar — JM Financial. — Analyst

Yes, thank you for taking my question. First, I just noticed that we have not given any guidance for FY 2024. 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, so any color on growth and guidance for next year?

Nitish Mittersain — Founder and Joint Managing Director

Yes. Abhishek, we’re not giving the guidance at this point of time. I do think since we invested, we’ve usually given guidance in September once we have better break of the whole year. But our intent this year is to obviously enhance margins in businesses where we can and through certain businesses, we should continue to take strategic growth for 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.

Abhishek Kumar — JM Financial. — Analyst

Okay. Now, second question is on real money gaming. A lot of regulatory clarity has emerged over the past couple of months with a self-regulatory body and even on TDS. And we have also talked about a larger blueprint now in RNG. So, I just wanted you to flesh out what would that mean? What would that entail both in terms of organic and inorganic strategy?

Nitish Mittersain — Founder and Joint Managing Director

Yes. So, like I mentioned in my opening remarks, there are three ways we are approaching this. One is how can our existing RNG businesses, especially openings games, classic rummy brand grow fast and more aggressively. While Anupriya mentioned, there was a short-term lift because of the [indecipherable] where this game is quite popular. I think that’s the short-term for us. But we are looking at the larger picture, how can we really scale that business. 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 RNG games in India, which are innovative and new and scale them up. And I think with this framework, we can do it a lot more confidently, we can invest more aggressively. And then, build our user base and team revenue. So I think that’s the second thing we’ve been actively working at.

And the third is we are in talks with various existing RMG peers to see whether there is a consolidation opportunity possible. So I think this is these three actions, we’re looking to definitely start scaling our RMG business going forward.

Abhishek Kumar — JM Financial. — Analyst

Okay. Just one clarification, you said, you’re working with global publishers. So are we also looking at expanding beyond [Indecipherable] in RMG.

Nitish Mittersain — Founder and Joint Managing Director

Yes, most definitely. So just to clarify our focus on RMG to Indian market, but we are definitely looking at launching new games outside of [Indecipherable] as well. In the Indian market which are fresh and new and will be appealing to the consumer this year.

Abhishek Kumar — JM Financial. — Analyst

All right. Okay. Okay. Thank you and all the best.

Nitish Mittersain — Founder and Joint Managing Director

Sure. Thank you.

Operator

Thank you. We have our next question from the line of Rahul Jain from Dolat Capital. Please go ahead.

Rahul Jain — Dolat Capital — Analyst

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 are 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 kind of speed up the pedal to drive your marketing spend here to drive growth?

And 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 quarters there?

Nitish Mittersain — Founder and Joint Managing Director

Sure. So on Kiddopia, what we tell you launched a lot of new content and features which are quite appealing to the consumers both parents and kids, for example, the 40 for kids which is in launch in Kiddopia has been very well appreciated.

And I think tenants are willing to spend money that you have these prices 7.9 to 9.9 without down facility and that reflects in our KPIs like which is if you see the last four quarters or five quarters that we have shown in this constant irrespective of the price.

I think that is the good team that — and the way that sort of help us with our cost per trial in control, and the price increase, our margins in FY 2024 are going to look much healthier than what they were in 2023 because LTV CAC ratio has improved significantly. So I think that’s one aspect.

Now what we are basically seeing is, while keeping our cost of trial is let’s say is between $35 to $37 how can we increase our spend from $1 million a month or two significantly more. What we don’t want to do is, again, break the cost per trial things that we have established because we don’t want to take it to $40 plus.

So you get a gap in there and the team is working actively on various channels to see how we can start increasing spend within this cost per ton, 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 letting us on data. And it is very interesting, and we show some healthy results already, in Q4, if you see, we’ve also worked a lot on optimizing value into the instance. If you see Q4 FY ’23, we’ve seen a growth in EBITDA margin to 11.6% and we think we should get this business very quickly to about a 20% EBITDA margin and we do it from there, a lot of product work is happening on features that can help monetization better.

But one of the challenges with animal we have found was that the conversion to monetization was fairly low, because the feature that were implemented did not make the people to play enough, 95% of the game was being played for free. And I think that we see some of those things, which will help us improve conversion, hence, in the revenue.

So we’re very excited about Animal Jam, it’s a very strong ranking within that consumer base. And I think in gaming as long as you’re holding good IPs, there’s a lot more you can do with it. So Kiddopia and Animal Jam strong ideas in this sector, and there’s a lot more we can do with them going forward.

Operator

Does that answer your question, Mr. Jain? [Operator Instructions] We have our next question from the line of Mohana Kumar [Phonetic], an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

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 in the — over the next year. I understand that 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 maybe like a 10% to 15% range of what we’ve seen in the last couple of years?

Nitish Mittersain — Founder and Joint Managing Director

Yeah. I think, again, without giving any specific guidance, I think we will continue to drive for growth in all our businesses wherever we can. And as these businesses continue to generate cash, we will keep glorifying this cash of accumulating into organic as well as in organic growth. So I think we will see good organic growth. I don’t want to give a specific number, but it should be not for what you just spoke about.

Unidentified Participant — — Analyst

And which is a 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 free sub-segments, but where are you expecting a larger — the biggest chunk to actually come from?

Nitish Mittersain — Founder and Joint Managing Director

I think we should see good margin expansion in our gaming business overall — with Kiddopia and WCC as well as Animal Jam. So I think these products should continue to drive very good margin expansion in FY ’24. We also expect Sportskeeda to do well in terms of margins. So yeah, we think you can say that in eSports business where we are not predicting large margin expansion, I think other businesses all will be upwards — seeing upwards of margins.

Unidentified Participant — — Analyst

Sounds good. Thanks a lot, and all the best for the coming year.

Nitish Mittersain — Founder and Joint Managing Director

Thank you.

Operator

Thank you. We have a next question from the line of Rahil Shah [Phonetic], an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Hi. Good morning. Am I audible?

Nitish Mittersain — Founder and Joint Managing Director

Sure.

Unidentified Participant — — Analyst

Sir, I understand you’re not giving any guidance on the EBITDA margin question it’s little more far ahead in the future. So I wanted to ask what — have you envisioned a number potential of steady state EBITDA margins when your investments in new business verticals reduced and these business has stabilized. So have you targeted any number or if not targeted, can you just share with us any number which is you are confident is possible?

Nitish Mittersain — Founder and Joint Managing Director

Yeah, sure. Sudhir, do you want to take this one?

Sudhir Kamath — Chief Operating Officer

Yeah sure. Rahil, just so I can understand what you were saying. You’re asking for each of the businesses or overall?

Unidentified Participant — — Analyst

No, no, no, overall, so you are in a process of scaling up, now you’re investing a lot in new business vertical, correct. So I’m just asking, when you’re done with this and when this business is stabilized, what kind of potential of steady state EBITDA margins you are confident that you will be able to achieve?

Sudhir Kamath — Chief Operating Officer

Sure. So I think one is each of our segments, if you look at it, right? Right now, we are very much in a very fast growth, so there is a lot of investment which is happening in the current year in the previous year, as you see. And we do expect that pace to continue for a little bit. So I think when we see what are the steady-state EBITDA numbers, we need to look a little further in the future than the next six months or a year or two year. If you look at segment by segment, if we start with eSports, I think definitely on that, you will see a similar kind of margin structure 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 to be, especially as the media properties kick in and 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 have a look at EBITDA — sorry, steady state EBITDA margins there. On the gaming side, we definitely see already about a 20% kind of model structure in the businesses. And that number will expand in the near future. And longer-term, steady state, I mean, if I have a guess, I probably go around a 30% kind of a number. But again, it might take a bit more time in investment before we kept it.

Ad tech is a different kind of business, that’s more of a services business. I mean that current numbers are closer to 9% or 10% as you 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 business, if those come through and that increases the margin significantly over time. But at this point, we don’t have. So I hope that answer your question.

Unidentified Participant — — Analyst

Okay. Okay. Yeah. That’s helpful. And another would be, why have our profit margins dropped significantly in Q4 compared to Q3. So I’m just trying to understand is it because of like the seasonality factor? What happened in Q4? And when do you expect it to revise?

Sudhir Kamath — Chief Operating Officer

I think I was just actually looking more at a broader picture for the year rather than because there are — there are seasonal variations as well business-specific as well, which has been called out at the different segments rather than giving a answer on this.

Nitish Mittersain — Founder and Joint Managing Director

But just to add to that, our margin — our EBITDA margin for Q3 was 9.7%, we’ve seen that 9.6% in Q4, even Q3 is a high margin business for many of our products across Sportskeeda, for example, in the U.S. realizes very high during this period and similarly to some of the other businesses to Q3 is high treatment business — quarter. And we do fairly well with the margin actually in Q4 9.6%. If you compare it to the previous year, also we’ve improved it a 8.5% in Q4 FY ’22, whereas it’s 9.6% in Q4 of FY ’23.

Unidentified Participant — — Analyst

Okay. Okay, sir. All the best. Thank you.

Operator

Thank you. We have our next question from the line of Rahul Jain from Dolat Capital. Please go ahead.

Nitish Mittersain — Founder and Joint Managing Director

Hi, Rahul.

Rahul Jain — Dolat Capital — Analyst

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 the SMB U.S. market. So, how you are seeing that market shaping up? We also saw a client impact, so how you see in light of relatively weakening macro trend in that market. And of course, we have a very strong client addition metrics. So how it should balance out during this year in your view?

Nitish Mittersain — Founder and Joint Managing Director

Rahul, we see that those services that Datawrkz offers and also backed some of the new products they launched. They launched a platform for Mediawrkz and they’ve also launched a platform product on Vizibl. We think there’s a lot of value proposition for clients and — because Datawrkz operates much of its team and operations from India, there’s a lot of arbitrage streaming that we can offer to the clients to gets better results.

So I think the weakening market in U.S. should not hurt Datawrkz much, because client will look to optimize costs. And actually, Datawrkz may benefit from that. No client signing up has been going at a very good rate. There is a lot of efforts that their team is doing there. So we’re very optimistic about this business into FY ’24. We also see some very interesting bolt-on opportunity. There’s been actually enhanced margins by acquiring competing entities in the U.S. and Europe, which we are currently looking at. So I think overall, we can 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.

Rahul Jain — Dolat Capital — Analyst

Right, right. And you did this transaction of 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 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.

Nitish Mittersain — Founder and Joint Managing Director

Yes, sure. So I think of course NFL season probably happen in Q2, Q3. So Q1, for example, is the lowest season for football network. But the team at Sportskeeda has a lot of ideas. There’s a lot of synergies actually with football network, we’ve actually seen significant uptick in some of the KPIs of football network since we’ve kind of acquired that. So it’s probably a small transaction within our network, but we are very excited about this opportunity at this part of time.

Sudhir Kamath — Chief Operating Officer

Nitish, if I may just add couple of points there.

Nitish Mittersain — Founder and Joint Managing Director

Yes.

Sudhir Kamath — Chief Operating Officer

So Rahul, I think I want to emphasize that football is about — American football, obviously which is of what Premium [indecipherable] called at the American football, and that’s actually the largest sport in the world, not just in the US and Argentinean market larger than soccer football and larger than cricket.

And PFL is the unique property in the — I mean, that is something very interesting and they’re growing very rapidly, obviously. Seasonality-wise, the local football season a broadly corresponding to Q2 and Q3 of our year. So for us in this quarter, Q1 as an opportunity to sort of bring a lot of — bring further on the product side there. and look at the core between Sportskeeda tandem which there are. I’ll go what we actually show the results we hope in that. But we do expect this to be a significant driver of value for Sportskeeda over in the coming years.

Rahul Jain — Dolat Capital — Analyst

Right. Thanks for that additional comment. 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, their very all business are great.

And there are a lot of — 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 NTT covering the entire support is what will trend in the future?

Nitish Mittersain — Founder and Joint Managing Director

So I think that’s definitely an interesting and important point there, right, which is the way customers in the US consume content on this. Many of them will be very loyal to specific biddings or regions and — or even say college football teams and they follow that with a great deal of passion. So one way to growth this segment which the Sportskeeda and the indecipherable [indecipherable] focused on is looking at how do you target those individual communities segments? And there are different kinds of answers on that and team is kind of very focused on using that guidance also. I would be just a bit careful on what we say here because it’s not just one website. It is definitely much more than they do. And that insight that you share on, that’s definitely one thing that they message.

Rahul Jain — Dolat Capital — Analyst

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.

Nitish Mittersain — Founder and Joint Managing Director

Thank you very much, everyone, for spending the time today on the call. We look forward to continue to strive on to deliver good results in FY ’24 and beyond and look forward to your ongoing support and [indecipherable]. Thank you very much.

Operator

[Operator Closing Remarks]