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Nazara Technologies Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Nazara Technologies Ltd (NAZARA) Q2 FY24 Earnings Concall

  • Financial Performance
    • Revenue increased 13% year-on-year to INR297.2 crores.
    • EBITDA grew 30% year-on-year to INR 27.9 crores.
    • PAT increased 53% year-on-year to INR 24.2 crores.
    • Gaming segment revenue grew 43% and EBITDA 14% year-on-year in Q2.
    • eSports segment revenue grew 21% and EBITDA 16% year-on-year in H1 FY’24. Expect momentum in IPs around popular games going forward.
    • Adtech business overcoming challenges, margin forecast improving in Q2. Focus on higher margin clients and expanding client base.
  • M&A Plans
    • Consolidated cash reserves of over INR1,300 crores.
    • Recent fundraising of INR 510 crores from Nikhil Kamath and SBI Mutual Fund.
    • Well positioned to capitalize on M&A opportunities to accelerate growth.
    • Corporate M&A to target minimum INR100 crores revenue companies.
    • No new business segments, acquisitions to be synergistic.
    • Aim to deploy some capital in next couple of quarters.
    • Hope to see some deployment before end of current fiscal.
  • Focus Areas
    • Businesses consolidated and focused on strengthening KPIs.
    • Efforts to accelerate organic growth and enable strategic acquisitions.
    • Confident in ability to deploy cash reserves effectively.
  • Kiddopia Business
    • Revenue grew 8% year-on-year in H1 FY’24 to INR113.9 crores.
    • Focused on acquiring customers at optimal CAC to ensure healthy margins.
    • Resulted in EBITDA margin expansion from 17.5% in H1 FY’23 to 25.5% in H1 FY’24.
    • Working on initiatives like licensing IPs to drive growth.
    • Facing challenges scaling Google ad spend and working with Google to resolve spend scaling issues.
    • Considering other ad networks to open up scale.
  • Animal Jam Acquisition and Outlook
    • Optimized costs leading to 24% EBITDA margin in Q2 FY’24.
    • Improved monetization loops resulting in 46% increase in ARPDAU.
    • Focus on licensing deals to introduce popular IPs and drive organic growth.
    • Fixed margins first, now at 22-24% vs single digits earlier.
    • Revenue growth to happen in coming quarters.
    • Will invest more in user acquisition and marketing
  • GST Impact on Gaming
    • 28% GST levied on entry fees effective October 1.
    • Nazara absorbing tax impact currently, eroding margins.
    • Implementing cost optimization and increasing commission rates.
    • Confident business will stabilize and set base for future growth.
  • Nazara’s Publishing Strategy
    • Will take equity in developers requiring capital for teams/development.
    • With developed games, may not take equity upfront.
    • Aim to build large consumer base across many published games.
    • Nazara SDK to enable cross-promotion and first-party data.
  • Indian User’s Monetization Outlook
    • Seeing better in-app purchase conversions as users evolve.
    • Tailwind from growth of digital payments in India.
    • Monetization still far behind global markets, but incremental improvement happening.
  • Nodwin eSports Outlook
    • Currently in investment phase, not focused on margins.
    • Stated policy is margins can increase to 10-15% over time.
    • No specific margin guidance at this point.
    • Content views declined due to ban and subsequent review of popular games in Q1.
    • Big IPs scheduled in Q3 and Q4 as key season.
  • Datawrkz Adtech Business Outlook
    • Adtech facing global headwinds like lower ECPMs, but Datawrkz provides user acquisition service to clients.
    • Focusing on higher margin clients and product side.
    • Still huge room for growth and margin expansion.
    • Leveraging it for other Nazara games.
  • Pro Football Network (PFN) Scaling
    • Acquired when still negative margin business.
    • Aimed for breakeven in first year and achieved breakeven month in September.
    • Applying Sportskeeda playbook for growth.
    • Expects to scale revenues much higher with profitability.
  • Full Year Outlook
    • Expect higher revenue and EBITDA growth in H2 vs H1.
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