Strong topline growth sequentially, acquisitions spree continues for Nazara Technologies | Q3 FY22 Conference Call Highlights3 min read
- Sales have grown at 43% on QoQ basis. Net profit has de-grown at 16% on QoQ basis.
- Nazara declared revenue of Rs. 446.6 Cr in 9MFY22 vs Rs. 330.8 Cr in 9MFY21, a growth of 35% on YoY basis, and 9MFY22 EBIDTA surged by 141% to Rs. 79.7 Cr as compared to Rs. 33.1 Cr in 9MFY21. EBITDA margin for 9MFY22 is 17.8% as compared to 9MFY21 (10%). PAT has increased to 42.8 Cr in 9MFY22 as compared to 9.4 Cr in 9MFY21. For Q3FY22, reported revenue of Rs. 185.8 Cr vs Rs. 130.4 Cr in Q3FY21, a growth of 42% on YoY basis, and Q3 EBITDA came in at Rs 30.2 Cr as compared to Rs. 27.3 Cr in the same quarter of the previous year.
- Management has indicated that quarter on quarter basis is not the right metric to look at for comparing results. It is better to look at YTD (year to date) basis because of mergers and acquisitions, seasonality impacts, certain big costs associated with marketing and advertising varying across the quarters.
- 75% YoY growth in the esports segment for 9MFY22 led by strong growth in revenue across all subsegments in Nodwin and SportsKeeda. The addition of original IPs such as NH7 Weekender and expansion of the esports business into the Middle East via the acquisition of Publishme has further accelerated the growth momentum.
- eSports: The segment has demonstrated 75% growth in revenue as well as 71% growth in EBITDA in the first 9MFY22 and has continued the YoY revenue growth momentum witnessed in FY21 (102% growth over FY20). eSports has witnessed a 70% revenue CAGR over the past 3 years. This segment now contributes the highest revenue in Nazara portfolio with 48% contribution in 9MFY22 revenue vs 37% in 9MFY21. There are over 14 esports broadcast platforms in 2020 which are expected to cross 20 platforms by 2025. While current viewership is 1.7 Cr, over 8.5 Cr unique viewers will watch esports tournaments in the country by 2025. This will comprise around 10% of global esports viewership. Viewership across multiple streaming platforms such as YouTube, Facebook, Twitch and other OTT platforms will collectively measure much higher. Such growth of platforms and viewership will lead to higher grow of media revenues both for Nodwin as well as SportsKeeda.
- Gamified Learning: Despite the impact of Apple IDFA in Q1FY22, company continue to focus on growth and have witnessed marginal growth in 9MFY22. The growth in this segment is expected to accelerate only once large ad networks like Google are fully able to find solutions to targeting Apple device users. Nazara is operating in high growth business segments and will continue to drive profitable growth while prioritizing growth over profit maximization at this stage without sacrificing on core principles of unit economics (LTV/ CAC ratio.
- Real Money Gaming: Strategy around RMG segment is to first integrate HalaPlay and OpenPlay into one common tech platform and then going forward continue to look at building the segment through consolidation
- Freemium: World Cricket Championship continues to be the largest mobile simulation cricket game, and are exploring levers of growth in web 2.0 as well as web 3.0 to scale revenues of this segment. Company is also looking at strategic M&A to add more IPs to this portfolio. Once positive LTV/CAC (LTV- Lifetime value; CAC-customer acquisition cost) equation is achieved, the company will invest aggressively in user acquisition to scale up its user base on WCC and drive profitable growth.
- Acquisitions: Nazara’s Acquisition of 100% stake in Hyderabad based skill gaming company OpenPlay Technologies Private Limited. A total consideration of Rs. 186.4 crores for 100% stake. The consideration of Rs. 43.43 crores for first tranche of strategic investment is payable in cash. Consideration of Rs. 143 crores by way of issuance of equity shares. Operating on EBITDA positive margins. Nazara’s Acquisition of majority stake in Publishme: lead the Company’s foray in the MENA (Middle east & North Africa) region in the gaming industry in the esports category. The acquisition will help the company in establishing as a key player in the region Cash Consideration of an amount of ~Rs. 20 Crores for 69.82% stake through a combination of primary investment and secondary purchase from the founders and existing shareholders
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