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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good morning, and welcome to Nazara Technologies Limited Q1 FY '23 Earnings Conference Call hosted by IIFL Institutional Equities. [Operator Instructions] 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 Fiscal '23 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 '23 Earnings Call. I have with me Mr. Manish Agarwal, our CEO; Rakesh Shah, our CFO; and Anupriya Das, who has recently joined us as Head of Corporate Development [ and IR ]. 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'm 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 1.
Our strategy to leverage opportunities that are coming our way and synergize with our existing offerings to 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 from pricing of esports, gamified learning, freemium, ad tech and skill-based real money gaming. We will continue to deliver 50% plus growth from our existing portfolio, and we will also continue to cover reidentified white spaces in the above segments via inorganic acquisitions.
This strategy, which you call the Friends of Nazara strategy has worked well for us in the last 4 to 5 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 will request Manish to walk through the quarterly highlights. Manish, over to you.
Thanks, Nitish. Thanks, Rishi and thanks, Michelle, for organizing this and hosting us. And good morning to everyone for tuning into 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 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 segments. 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. 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 a Q1, which is typically a low quarter is kind of bigger than the 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 IP, which has been created as well as the inorganic acquisitions which are made. And Anupriya will cover company performance in detail subsequently. The segment has not only kind of grown for us 92% year-on-year, but have also delivered 24% year-on 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 gave. If the adjusted EBITDA concept was to be done, the margins will be much, much higher because we do not CapEx in this business at all and everything is then treated as an OpEx.
The second segment, which is a new entry to our segment team is ad tech. With the consolidation of Datawrkz from April 13, 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 advisers are shifting their spend to digital from traditional media. U.S. leads per day in terms of spend and Datawrkz entire revenue or the bulk of the revenue really comes from U.S. markets. And as of this quarter, this segment contributes 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% to 12% EBITDA margins.
We are also working together with different companies within the group as this ad tech is a capability acquisition for us. And how do we really work with Sportskeeda, how do we work with Datawrkz, how do we work with Next Wave, 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 boundlessly 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 had 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 top 2 in the Apple Store Kids category 2 to 7 ranks. Related 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 changes policy. And we have on this call and many other calls have discussed that at [ noise ]. And the entire industry has faced the brunt of increased consumer 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. And 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 end network or you are a gamified early learning operator.
After 1 year of all experimentation, iterations, tribulations, I think everybody in the market is now very clear that the Apple policies and increase in cost is a new normal. That's not really going to change. And hence, how do we really go back to the growth? How do we really create positive unit economics which were existing before Apple policies? And one of the things which gamified early learning as a category has shown are a high amount of resiliency where consumers are willing to pay higher price. And our competitors have taken a price increase of 35% -- 25% to 35%.
Kiddopia, we also took a price increase of 10% to 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 to $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 the price increase from past users. But at $8.4 of ARPU and $38, $39 of cost per trial, our product strength ensures that our LTV/CACs are again in the order of 2 and greater than 2, which was the case when we were looking at pre Apple days.
So there is a very, very strong positive news coming from the gamified learning segment. We are far more comfortable and confident of really assuring that into a growth path, leveraging the headroom which we have on the price increase as compared to our competition.
The last -- the other segment, which is very, very important, and we are very closely watching is skilled money -- skill-based real money gaming. There 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 -- in clarity which will assure a massive amount of investment into this segment.
As we have mentioned in the past, this is a consolidation play for us in real money gaming to this 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 business is taking a hit. But we have been -- because of our very strong cohort-based 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 a marketing leader on cricket simulation games. The segment has 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 EBITDA 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 at a 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 right through the company's performance before we come into Q&A. Over to you, Anupriya.
Thank you, Manish. Good morning, everyone. Moving to esports segment. Nodwin Gaming grew by 68% year-on-year in Q1 FY '23. This increase is driven by distribution-led organic...
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 '23. This increase was driven by distribution-led organic growth in own IPs, increased monetization across all IPs as well as increase in esports-focused D2C revenues. The company invested in multiple growth initiatives, including scaling of its own IP, leading to EBITDA margin of 1.2% in Q1 FY '23 versus 6.3% in Q1 FY '22. 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 IP and media rights revenues, which show non-linear EBITDA growth as IPs scale. All D2C business will become margin accretive once the brands are established.
Moving on to Sportskeeda. Sportskeeda has delivered growth of 103% in revenues in Q1 FY '23. U.S. revenues, which are 57% of total revenues in this quarter grew by 423%. Sportskeeda is growing its U.S. footprint and expanded its -- expanding its WWE playbook to new sports such as American football and basketball. In India, the company is focusing on growing the 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 '22.
Moving to gamified early learning. Kiddopia has very high product strength. The app is our #2 grossing app of 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 these 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 lower versus competitors, leaving significant headroom for any further price increase in the coming quarters. I'm very happy to announce that both this price increase, our LTV/CAC increased to 2x for the new customer and the relative economics model for this business has stabilized.
Now going forward, assuming 80% monthly subscribers in last -- in line with the past trend, average ARPU is $8.4. As the old subscriber churn out and the proportion of new subscriber increases, our ARPU will keep increasing in the coming quarter until it reaches $8.40.
Moving to Datawrkz. We have added a new growth engine to 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, the 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 retail revenue has grown by 18% year-on-year in Q1 FY '23.
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. Ad tech companies with deep data processing capabilities and first-party data ownership will emerge as well as in game-focused ad tech and will help Datawrkz to create value for itself as well as from Nazara shareholders.
Moving to the freemium segment. The business has demonstrated good growth on the back of IP agreements. The retention metrics are strong, day 1 retention of 48%, day 7 retention of 18% and day 30 retention of 6% for WCC. So moving to skill-based real money gaming, despite events like IPL and others, which lead to a drop of revenue of rummy segment, the company managed to achieve a revenue growth of 18% year-on-year in Q1 FY '23. EBITDA margin increased to 16.7% as Q1 FY '23 on back of previous tech optimization and marketing optimization initiatives. Like Manish mentioned before, we are looking at consolidation-led scaling once the clarity emerges for the segment. Moving to our telco business. The business has declined by 16% over Q1 FY '22. The drop in revenue is mainly due to decline in revenue from India business. But revenue from non-Indian geographies have remained flat. As of Q1 FY '23, 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 and freemium via M&A. We have augmented our team with an experienced person coming from gaming to build some 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 we'll pick up pace with clarity on GST as well as having a pan in the regulatory framework on game of skill. I'll close my remarks here and would like to open for Q&A and request Manish and Nitish to join me for the same.
[Operator Instructions] The first question is from the line of [ Nathan Jain ] from Fairview Investments Services.
Congratulations on a great set of numbers. So my question is regarding the volatility in margins that we're seeing with every quarter. Now I know that 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 2 years or so. So for example, ad tech that was nowhere in the picture about 3 to 6 months ago is a decent contributor to revenue now. And also esports, which is a 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 '23 and beyond?
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% to 13% range is a good EBITDA engine in a market like us and a high-growth company like us. That's what we really strive for. And then that's the similar stance we will continue to maintain over a period of time.
The next question is from the line of Mukul Garg from Motilal Oswal Financial Services.
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? And how should we read this more in terms of the impact on Nodwin going forward given that there will be obviously a follow-through impact on other gaming houses as well?
Shall I -- you want to put all questions or I keep answering and then you keep asking?
Sure. No, I can -- so the other question was on the Paper Boat business. Interested to know about the price hike. But how should we read this in terms of growth going forward? Does this mean that you now have -- the cost per trial will increase -- will enable you to resume a very strong growth rate in that business? How will this impact your investments, which can really attract more suitable parents to the platform without reducing the conversion rate? So if you can just give us a sense of how we should think about the impact of price increase going forward?
Understood. And anything else? Then I'm going to start answering.
Yes, just these.
Good. So BGMI -- takedown of the BGMI game from Google, there are 2 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 pro series and the current thing, which is going, we were looking at building more IPs or build 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 0 impact on revenue, which we are looking at internally in terms of achieving our annual guidance of 50% plus growth rate or even slightly higher in case of margin growth rates. The BGMI revenue impact is below min. Second, the esports industry is very, very important industry and BGMI clearly was the #1 game today. But if you were to partner look at history, PUBG happened, Free Fire came in, Free Fire happened, BGMI came in. Now BGMI and I think it's a great opportunity for Garena, for Call of Duty: Mobile and other games to fill that void.
Gaming is now is basically a social immersive platform. And there, the genre of players of mobile will find something in order to play. The transition may take its own time because there is an activity and there is a hope that the game may come back. And hence, people will hang on to what they have because they build their ratings or reputation inside the game.
If the game is not coming back for a longer period of time, then the movement in 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 to amend as well as viewership is far more deeper and the shift will happen from [ A ] to a [ B ] as we have seen in the past.
As far as Nodwin is concerned, if you look at it, our impact of PUBG is people thought it's very aggressive environment. We kind of really continue 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 effect on the esports ecosystem, there is going to be 0 effect on Nodwin.
To answer your second question on Kiddopia. I think after the long 1 year, we are very comfortable and confident that there is a path to growth because of 3 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 breakeven and a 24-month LTV/CAC of 2 and numbers of 2. With the current price increase itself for the 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% to 13% price hike versus our competitors, which gives us a headroom to experiment in 3, 4 months with further price increase. And we do want to do it in one shot because we wanted to do it gradually so that our KPIs don't progress. 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% to 5.7%. Now if you're able to find a stabilization of $38, $39 and able to spend $901 million, your ability to acquire new users is going to be slightly higher than your people who were 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 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/CAC, which gives us slightly more advantage to kind of really grow. And third thing is the old users will keep churning out. Your related economics will keep improving. So that's how we are seeing that business of Kiddopia.
Manish, just to follow up on the Kiddopia part. You are now below 300,000 subscribers there. How should we think about the volume growth? Is it something which will resume the pre-IDFA growth which you are witnessing given that you are now able to 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 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 kind of see profitability going forward?
So Mukul, very good question, and thanks for pointing that piece out. This quarter -- as I mentioned last quarter and this quarter, after the quarter, 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, getting CPTs in the end of $48 to $52 and we don't want to spend.
Both those experiments are already in the base. In the coming quarters, we are back to -- I'm talking about $900 million is the 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 improved margins in Q2 from Kiddopia.
Sure. And on the subscriber part, the growth of...
On the subscriber part, I think it's very simple math. As you rightly said, a subscriber base, which was, let's say, 350,000 is now 300,000. Now in 300,000, if you were talking about 5.5%, you're talking about 15,000, 16,000 people churning out and your ability at $1 billion with [ 38 and .7. ] You will start seeing, first, they coming together, just marginal growth. And then you are kind of really seeing the future of more growth happening.
Because if you're continuing to spend at $38, $39, your unit economics is in control. Your ability to spend $900 million is in control. Your churn is constant. And since your base is lower, you will continue to grow.
[Operator Instructions] The next question is from the line of Jinesh Joshi from Prabhudas Lilladher Private Limited.
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 look 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 FY '22 despite the fact that the content views were higher and slower distribution. So if you can just explain the reason behind this as well.
Jinesh, just a clarification before I answer, you are asking Nodwin not esports. Because the EBITDA margins of esports are much higher than 1.2%.
My bad, yes.
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 having a large IP-based tournament, 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 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 accessories business, which was consolidated. And that business is -- last year, we're doing a INR 22 crores of run rate. In this quarter, it was broadly just INR 3.5 crores per month. And you can see a clear growth in quarter 1. We were expecting that to be an EBITDA loss, but we really work on the operational efficiencies to make it an EBITDA breakeven.
So we are seeing a revenue mix changing on gaming accessory and we believe the consumer business of getting consumer transaction unlocking the gamer community will keep growing in contribution. And that is how -- why you will also see a media contribution, which was the main bellwether for the entire revenues, that contribution will get balanced with the gaming accessories business. And in future, this market of gaming accessories 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 crores. And hence, the revenue mix of Nodwin will keep looking different than what it was looking last year in the front.
The other parts of what we 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 working to create a year-round IPs, which can have a media partnership like Pro Master Series, which we did starting this quarter overlapping quarter 1, quarter 2. Those are the kind of initiatives we are doing so that we do not have 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. At 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 has absolutely remained same for Nodwin. But because of seasonality of H1 and H2, we are seeing a lesser EBITDA in Q1.
Thanks for the elaborate 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 IDFA changes have been around for quite some time. Are subscriber launch better off or worse than peers and whatever corrective actions they have taken to deal with the situation? How have they fared on this particular parameter? So your comments would help on this.
Yes, Jinesh. Jinesh, if you look at it, Anupriya mentioned when she was covering Paper Boat Kiddopia. We have maintained #2 rank in the App Store Kids category, which is a clear, clear milestone to understand have we -- 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 #2 rank. We have been consistently for the last 2, 2.5 years on the same position, which means that we are neither worse off or better off than the market, and everybody in the market is in the same boat. And that's the great testimony for the product, engaging retention, which we see as well as our ability on the marketing trend to continuously keep on iterating and optimizing and seeing that how do we really have a balance between new user subscriber and unit economics.
The next question is from the line of Depesh Kashyap from Equirus Capital.
Sir, on esports first, if I try to exclude the revenues of OML, Publishme and the other new acquisitions from Nodwin this quarter revenue, right? Then it seems that the revenue growth of existing portfolio is more of flattish to a low-growth scenario. So just wanted to check if my 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. What is Nodwin's owned IP or a co-owned or a white label event that you created? And will the partnership with Star Sports continue even after this ban?
So Depesh, 2 to 3 questions you've 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 split because our new games will like to -- will become big. And when the game becomes big, then the viewership becomes big. BGMI was $100 million kind of a download game, a lot of viewership. Will there be a temporary vacuum? Yes, there will be a temporary vacuum. Will that vacuum backfill? Yes, that will backfill. The active conversation between [ capital ] 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 midterm 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 -- 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 with what is OML business, what is not OML business because the teams of sales incrementals, content rates and all kind of inter mix with the Nodwin team and that's when Nodwin has acquired capability.
So keeping saying that we will look at Nodwin and the more businesses of OML or XYZ and then look at business is not the way we look at it. And if any 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 big -- quarter 1 is not the thing which we really do. We were trying to build and we build very successfully Pro Master Series, which kind of really drove the viewership records on Star Sports through and other platforms. And we are balancing the quarterly calendar. Our own IPs will have a Q2, Q3, Q4 kind of a play out more predominantly in Q3, Q4 rather than Q1, Q2.
Just a follow-up. So this Masters Series, was the owned IP of Nodwin, right? And entire -- the media rights, the sale that happened, that will come to Nodwin. Is that correct?
Yes. Yes.
The next question is from the line of Mansi Desai from Dalal & Broacha Portfolio Managers Private Limited.
My question was about Kiddopia. Just wanted to understand, when have the prices -- when have the price hike happened, is it during the start of the quarter or towards the end of the quarter? I'm asking this because on a better sense of, do we see improving margins going ahead from the levels that they are right now because now we're passing on the higher marketing cost?
So just 2 things, which you should understand that this price increase applies to new subscribers, not the old subscribers, correct? And if you are talking about 300,000 total monthly subscriber base, and we are acquiring 16,000 to 18,000 new subscribers, your impact of the new price increase on an overall base will take time to reflect.
So in this quarter, for example, in 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 users, 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 in $8.4. The gross of roughly 11 to 12 months today and LTV/CAC 24 months of 2. That's the max which we are looking at.
To answer your question, when did this happen. This happened in the early part of the June, and we have seen the whole month of June. We wanted to see how, if, at all any impact on our conversion from trial to subscription or any impact on our retention. We have seen one, 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 more data around consumer behavior after 3, 4 months.
Understood. Second is on Kiddopia. What are the new initiatives like the new ads and things that has been done for Kiddopia and how that is panning out and how -- what's the kind of response that we are getting in terms of new subscriber additions at least starting this quarter?
So we ran a brand campaign in Q1 and Q4 -- some part of Q4 and in Q1, first 2 months, we are not seeing great results of brand campaign. Whether the brand campaign can give you a result in 3 months, that's also in itself a question mark. But given that, we have been able to now stabilize our performance marketing spend at $38, $39 for spending $800,000 to $1 million per month. We had also opinion that let's not spend on brand marketing and take that leap of faith. So we'll stop doing that.
Second, any kind of new experimentation on new channels, we have done a lot in the last 4 quarters. And now again, stabilization on which channel is working well, which is -- were very clear. And hence, our marketing budget is going to directly be attributed to performance marketing, where we understand what are we really optimizing for. And hence, 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 we're giving approximately 50% growth. Can you just help us understand or elaborate a little bit on what are the factors that needed to attribute? Within esports is one category, both the [indiscernible] esports has been doing [ attribute ], which is going to be the next growth lever to the [indiscernible] considering [ it ] will take some time to build that kind of accelerated growth.
So our revenue growth of 50% plus is predominantly mainly driven by esports, by ad tech and by the real money gaming portfolio. These are the 3 things which are driving from a revenue growth point of view in a meaningful manner. And when I am talking about 50% plus, I'm not talking about any further M&A. And this is without any M&A, we are very confident of the 50% plus growth.
[Operator Instructions] The next question is from the line of Divyesh Mehta from Investec.
My first question is regarding the acquisitions. You have shared a slide on Slide 14, where you've shown scaling of revenues where I can see 2x, 3x versus acquisition at current rate. Can you share what acquisitions were you using quarterly analyzed and current estimates are the, again, quarterly analyzed part? 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 rate. Can you give any update on that what is going on?
The last question is, globally, digital acts are declining. Is Datawrkz seeing any impact? And which verticals are they largely present in? That's it.
So I didn't understand your first question, but let me answer the first and then I'll come back secondly. 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 the 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 Euro or whether it's any other games have not seen too much of in-app purchase because the Indian user video games has been predominantly that wherever there is a multiplayer social community kind of setting, that 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 game infrastructure, this doesn't 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 with nonhard core, hard core life and so there is no social community aspect in the game today. And hence, in-app purchases continue to be the level that they are.
Our view is the market evolution will take its time. And hence, we are very focused on looking at acquisitions of other game studios, which are offering multiplayer experience and [ underpinned ] social context, and the market could be outside India because those are markets which are far more involved. But [indiscernible] and if you 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 effect, as Anupriya mentioned, it's a $700 million business and we are talking about highly $50 million of Datawrkz. So we are very, very small. We're 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 we cater to invest is very high because that's the audiences which are -- people are multiple use cases are attracting, whether it's consumer delivery businesses or its education businesses or gaming businesses. And hence, building that competency in the young demographic is very important for us. And gradually, we'd like to build more and more first-party data so that we can become 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 the U.S. So they are very strong -- very, very clear niche identified, and those niches are big -- propensity to pay big, and hence, I don't see any issues on Datawrkz' future growth projections.
I didn't understand Slide 14, please. If you can either...
Okay. Explain how the Slide 14 data is calculated at current -- at acquisition and current estimates? And what are sources driving that growth particularly in Planet Superheroes, have the offline stores started?
Just a second, I'm opening Slide 14 to see what is Slide 14 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?
Yes, Nodwin Gaming or inorganic playbook.
Correct. 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 2 moments. Gamer can be attracted around viewership platforms, gamer can be touched upon through merchandising, through accessory business and through test and collegiate activities, which are happening.
So how do we represent in the life of the gamer in multiple touch points? That's what we are looking for. And hence, some of these initiatives like Planet Superheroes is at very, very early release stage where you need to now really define what is the strategy going forward, how it really works. We are not very -- the purpose of really getting into this is to unlock your own community touch points and reach. The offline stores, maybe just few. And they may -- that's not going to be threats for us in terms of growth. Our growth will remain a tangible-led growth for a considering point of time because that's where our community is coming to our platform for tournament 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 look at Rusk, Rusk is where we are very excited about the whole entertainment needs gaming opportunity, where our PLAYGROUND IP, which we created as the first season has been in tremendous state, which is like a big boss YouTube gaming community, and we are creating a scripted reality show. And we are going to create many such means 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 gaming news entertainment kind of Masala. So that's what we want to really look at and figure that we have.
And that's the content pieces we are looking for. Third, influencer ecosystem is very important because they are the new distribution vehicle, simplification vehicles for whether you create a live content or on-demand content or scripted reality content. And that becomes 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.
[Operator Instructions] The next question is from the line of Abhishek Kumar from JM Financial.
Congratulations on a very good quarter. Couple of questions. First, when we had come out at the end of -- towards the end of the last quarter and guided for 55% to 60% growth, is there anything specifically that surprised us 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 one of the primary growth drivers this quarter. It looks like the volumes have not grown that fast. If I just look at the monthly active users, it is 16% Y-o-Y. However, the direct sales have grown. So is that a function of 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 2 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. And if you were to kind of take a new sports and get to a 4 million, 5 million miles number, we would make it as profitable and at least a business, which would be INR 10 crores, INR 12 crores on an ARR basis. And then there is quick time period but 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 skate season, has really helped us to have a far higher revenue growth than the MAU growth.
The second point is we have boiled why the success of direct sales in the last 18 months in India. We are actively continuing 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 push to really create more user content and create more faster velocity of addition of new sports, which we continue to.
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 on your contribution of direct sales increasing. On the 55%, 60% growth guidance versus 70% growth which we have achieved, there is nothing surprising, it's only something which we have been really working hard. And we still like to kind of really, with your permission, keep some buffers in our pocket so that we really can lift and sleep peacefully
That's always helpful. So one last question is, have we consolidated Rusk Media also because one of the slides says that Nodwin revenue includes Rusk Media? I thought we just got something...
I think the wording there is slightly misrepresenting. Rusk Media, Nodwin both 6% and we can't consolidate it, right? There is a revenue Rusk Media. So there are 2 parts of Rusk Media. One, this whole PLAYGROUND IP which is being created -- is creating as a subsidiary of Rusk. Whereas 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 has Nodwin really has done? Nodwin has done a capability through AML to really go to brands and sell of such kind of concept because that's the strength, which Nodwin has always demonstrated. And that's what we're 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, 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 reach to the same brand, the same demographics, which Rusk is capturing and how can we will create more revenues for them. And those revenues, again, we will consolidate. It is not that we are consolidating with us.
The next question is from the line of Rahul Jain from Dolat Capital.
Congratulations to the team for strong performance. Most of my questions have been answered. Just 1 or 2, do you think in the gaming side of business, when you said this pricing hike is coming and more can come, to eventually means that in this category with the different factors actually on the consumer eventually. So do you think this in itself impact on the privacy by the App Store? [Technical Difficulty]
[Operator Instructions] The next question is from the line of Amit Chandra from HDFC Securities.
So my question is on the RMG segment. So I know it's a very small segment for us, only 6% of revenue, and we have increased our presence to the OpenPlay acquisition. But as a segment, RMG is a very, very big segment. And if I'm not wrong, the total Indian gaming industry, as projected, it can be around like $3.5 billion of total industry, the RMG segments. So what are your plans here to increase the scale here because still we are very small as compared to the competitors there?
So if I take MPL or Dream11. So are we competing with them? And in terms of our [ electoral ] portfolio, like where we stand in terms of [indiscernible] space?
So Amit, thanks for ringing and I'll just, again, reiterate what I did in my opening remarks on the 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 functions. So I don't really see Nazara competing because we are a very unique in India market, which nobody really has.
Second point on the real money gaming piece. Yes, you are actually right. This is one of the largest segments in the Indian gaming market. And we are very -- we are an insignificant player there. And that is our choice, which we have maintained in our portfolio only at 6% because we have been working to get a statutory clarity in this segment, both on our framework for defining game of skill, which is cleared and pan-India common. Second, which is the GST clarity.
The positive thing is that a lot of interest and interactions with government and 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 trends of Nazara network, and our interactions and rapport with the other real money gaming companies in this market is amazingly high. And our ability to kind of really bring them into Friends of Nazara network to consolidate RMG, it's very, very well proven and possible. But we want to really kind of go into it once we have clarity emerging on both these aspects.
Okay. And in terms of the plans, are we planning for an organic growth leader or we have plans for inorganic to do a lot of consolidation can happen in this segment?
So if you look at it, rummy is growing and rummy 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 we're reflecting in our EBITDA margins, which are 28% for this quarter and for OpenPlay.
We will continue to grow that as soon as we see a clarity emerging on GST. We are very confident of growing non-[indiscernible] business, but also growing the overall segment through a combination of organic and inorganic.
The next question is from the line of Rahul Jain from Dolat Capital.
Yes. 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 [ pricing ] is 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'm 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 the child in an environment where a child can have fun and can also learn. And parents are okay to come away with that, but they are always worried about the privacy of such interactions. And hence, it's a trade-off which we 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 takes a higher base? So subscription growth can be targeted in a couple of quarters, if not immediately?
Yes, you're absolutely right, Rahul.
So although it may look a little far off, but can we say that FY '24, 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 constrained, 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'm very confident and comfortable that there will be a growth in a few quarters down the line as our -- the new user base keeps coming in and hence the blended ARPU keeps increasing.
Yes. 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? Or if we are not sure about the subscriber then, of course, saving the margin was an optimum way to go about it. But if we could increase price...
Rahul, 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, I mean, after a lot of experiments, and we do not want to kind of offset that rhythm.
Right, right. I appreciate it. That's why I think FY '24 will become more way to look at it, okay. Secondly, I think there was one comment in the opening remark, where Anupriya related to some talent addition driving the inorganic capability in the global market, if you could spread that a bit more than that? And anything more on the RMG consolidation side? Are we seeing any pipeline there to add?
So we have got somebody to lead M&A for freemium and gamified. The person comes from having a 4, 5 years' experience in the gaming companies and has good relationship with the networks in Europe and U.S. He is working on building a pipeline of studios, which we could really look at and that's where our dedicated resource who understands gaming drama and understands how do we 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 MD 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 mentors 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 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 an organic growth in Sportskeeda also while organically they are doubling every year.
So key people in geographies in different companies is what we are continuously adding. Anupriya itself is a great support to me so that I can spend more time on business operations and she could really take that burden of mine shorter. So augmenting leadership teams at corporate as well as the subsidiary is a task which we'll keep doing here as we speak. You had another question?
Which was on RMG. So we've been talking about this consolidation, yes.
So as I mentioned, to an answer to Amit, the players in RMG are very well known to us. Multiple times, we have had discussions with them. The desire to come under 1 RMG 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 a framework of game of skill as well as GST very soon, right?
But I guess the valuation would change much faster once the clarity emerges.
My personal belief is for the risk -- of value 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.
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 have -- want me to hand over to Nitish?
Yes, yes. So I just wanted to thank the management, Manish, Nitish and team for letting us -- giving 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.
Yes. 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, and a very stable company that remains profitable, generate strong cash flows who 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. Thank you.