Nazara Technologies Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from Nazara Technologies Ltd (NAZARA) Q3 FY23 Earnings Concall

Management Update:

• [00:02:54] NAZARA said Kiddopia came back on a growth path with subscribers growing by 3.7% in 3Q23, while revenue grew by 21% aided by the price hike taken in the earlier quarter.

Q&A Highlights:

• [00:12:27] Abhishek Kumar from JM Financial asked that in Kiddopia the reason for price hikes being taken while blended ARPU is stable. Nitish Mittersain Joint MD said that price hikes impact only new users. So an increase in ARPU will be seen over a period of time.

• [00:12:34] Abhishek Kumar of JM Financial enquired if NAZARA is comfortable with the current CAC, allowing it to increase the marketing spend for user acquisition. Nitish Mittersain Joint MD said that NAZAR is very comfortable with the current range. NAZARA is also hopeful of picking up pace in coming quarters.

• [00:14:46] Abhishek Kumar with JM Financial enquired about the marketing spend going forward. Nitish Mittersain Joint MD replied that NAZARA would like to increase it provided, it’s in the guardrails of CACs. Therefore, if the opportunities arise to spend money to acquire users, spend will be increased.

• [00:15:18] Abhishek Kumar of JM Financial asked why margins haven’t increased despite Q3 being seasonally strong for both eSport and the accessory business. Nitish Mittersain Joint MD said Nodwin’s margins have been suppressed due to increased revenues from gaming accessories and new IPs, the return of real-world events with new games, and additional costs associated with hiring senior teams. There is no immediate visibility on when Nodwin’s margins will improve.

• [00:18:21] Jinesh Joshi at Prabhudas Lilladher asked about the implication of eSports being recognized by govt. as a part of a multisport event. Nitish Mittersain Joint MD answered that the government’s recognition of eSports as part of a multi-sport event is positive for the industry and it will help create an ecosystem that supports professional athletes, better training, and increased viewership.

• [00:19:57] Jinesh Joshi at Prabhudas Lilladher enquired about any reason for the decline in MAU of OpenPlay, despite Google’s allowance of Rummy App to be listed on its Play Store. Nitish Mittersain Joint MD replied that OpenPlay is focused on deep-diving into valuable customers and enhancing their ARPUs. On Google Play, the App has been launched, but there are still some enhancements being done to the KYC process. Early signs are positive. NAZARA expects that by 4Q23, Google Play will be able to scale up and show better results.

• [00:23:54] Rahul Jain from Dolat Capital asked about Kiddopia, what kind of growth one should see in the subscriber base. Nitish Mittersain Joint MD replied it’s too early to give any guidance. NAZARA is not in a large hurry to spike spends. As long as NAZARA is acquiring quality customers at right price, it’s willing to spend.

• [00:29:32] Rahul Jain from Dolat Capital enquired about the reason ad-tech business is growing but margins coming off. Nitish Mittersain Joint MD replied there is not much of pricing pressure. It’s been adding lot of new customers. As new customers scale, NAZARA will see overall better margins.

• [00:30:10] Rahul Jain from Dolat Capital asked about the margin range to be kept for the ad-tech business going forward.  Nitish Mittersain Joint MD said at this point of time it should be kept in the range of 8-10%.

• [00:35:14] Mukul Garg from Motilal Oswal asked about the flow through of price hikes in Kiddopia. Nitish Mittersain Joint MD answered that ARPUs have been increasing QonQ, and it’s likely to increase further over the next couple of quarters as price hikes take effect and more subscribers join at higher prices. NAZARA is scaling up its marketing spend, which will contribute to a faster increase in ARPUs.

• [00:44:07] Nitin Jain of FairView Investments asked about the Gamified Learning business, with Kiddopia subscriber base bottoming out, does revenue guidance include growth in subscriber base. Nitish Mittersain Joint MD said NAZARA expects subscriber base to grow going forward.

• [00:44:36] Nitin Jain of FairView Investments enquired about the unit economics of WildWorks business and if there is any chance of a price hike. Nitish Mittersain Joint MD replied there is lot of work in progress and it’s premature to get into the specifics of WildWorks. NAZARA also feels there is potential to increase pricing in WildWorks.

• [00:49:58] Ankit from JM Financial asked about ad-tech being seasonal, and if in 4Q23, the growth would remain as last quarter. Nitish Mittersain Joint MD answered that there is seasonality that builds up in 3Q and then normalizes in 4Q. And the same thing will happen this year also. On an overall basis, a good growth will be seen YonY.

• [00:51:09] Pranav from Dolat Capital asked about any update on Sportskeeda. Nitish Mittersain Joint MD said NAZARA is seeing good growth overall in it and is satisfied with that. Also some of the margins will be slightly lower due to new investments in teams and content.