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.