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Nazara Technologies Ltd
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Ladies and gentlemen, good day, and welcome to Q4 and FY '23 Earnings Conference Call of Nazara Technologies Limited, hosted by JM Financial. [Operator Instructions] I now hand the conference over to Mr. Abhishek Kumar from JM Financial. Thank you, and over to you, sir.
Thank you, Sashi. Good morning, everyone. Welcome to this call of Nazara Technologies to discuss fourth quarter and full year FY '23 results. We have with us the management team of Nazara, represented by Mr. Nittish Mittershain, CEO and Managing Director; Mr. Sudhir Kamath, Chief Operating Officer; Mr. Rakesh Shah, Group Chief Financial Officer; and Ms. Anupria Sinha Das, Head of Corporate Development. With that, let me now hand over the call over to Mr. Nittish Mittershain for his opening remarks. Thank you, and over to you, Nittish.
Good morning, and a very warm welcome to all of you to Nazara Technologies Limited Q4 and FY '23 earnings call. We have uploaded our results presentation on the exchanges, and I hope you have had the opportunity to vote through the sale. We are delighted to report another milestone year for Nazaro. We have delivered a strong performance in FY '23 with revenues surpassing the INR 1,000 crore INR mark for the first time at INR 1,091 crores and our EBITDA coming in at INR 109.7 crores. Revenue growth was at 75.5% year-on-year with an overall EBITDA of 10.1% and up year-on-year, 21% PAT growth. The healthy year-on-year revenue growth across all business verticals, including gaming, eSports and adtech demonstrates our commitment to drive out aggressively alongside profitability while prioritizing growth so that we can achieve scale and market leadership in the spaces we operate in. In terms of our performance for the quarter gone by, our revenue grew by 65% year-on-year to INR 289.3 crores. EBITDA grew by 86% to INR 27.7 crores, and the PAT increased by 92% year-on-year to INR 9.4 crores. The company is currently operating in 3 key segments, which are gaming, eSports and ad tech. Our gaming segment comprising of subsegments, namely gamified all learning, premium, RNG and telco distribution generated a total of INR 46.3 crores, which was up 28% year-on-year and delivered an EBITDA margin of 17.5%. Our esports business generated in our INR 31.5 crores in revenue, up 74.9% to a 7.8% margin and our asset business generated INR 153.2 crores in revenue with an 8.8% market. Through our acquired and scale model, we'll continue to address preidentified white spaces in our existing business segments via strategic acquisitions while being focused on profitable and sustainable organic growth of our existing businesses. Our existing businesses are generating cash, which is being redeployed first to drive organic growth and thereafter for acquisitions, as can be seen in the recent sports '[ Gida ] and [ coportball ] network deal. This operating model enables us to create a flywheel that keeps gaining momentum across stable, growing and diversified cash flow generating businesses in the spaces we operate. On the M&A side, we will continue to expand our presence in gaming, eSports and at tech, the current market environment provides us with several attractive opportunities, and we are continuing to work actively towards the same. Lastly, on the skill-based real money gaming space, the emerging regulatory clarity is a huge positive for our industry. The Ministry of IT has recently issued a framework for operating skill-based RMG and clarity on online gaming TTS that was provided in the budget and thereafter has also been helpful. While [Indiscernible] GST is yet to emerge, we are hopeful that this will get resolved in the coming months. Since currently skill-based R&D is only 5% of our total revenues, it provides a significant scale-up opportunity for us going forward. And with the regulatory clarity emerging, we are working on a 3-pronged approach towards the same through growth in our existing games, launching and publishing new RNG games and acquiring existing RNG companies to drive scale for ourselves in this sector. I would now like to hand over the call to Anupriya to give some highlights on our specific business segments. Over to you Anupriya.
Thank you, Nittish. Good morning, everyone. As you are aware, Nazara operates across 3 segments, gaming eSports and Ad Tech. Gaming includes gamified early learning Germany gaming premium and telco distribution subsegment. This segment grew by 28%, contributed to 37% in revenues and 56% in EBITDA in FY '23. Our playbook here is to invest in user acquisition backed by unit economics when focusing on product and content updates to drive retention metrics. All our key IPs continue to see growth. If you look at Kiddopia, which is a flagship IP with an denied Early Learning segment, we continue to see subscriber growth in Q4 FY '19 despite negative impact of seasonality. As you know, Q3 is the fees in the U.S. and Q4 typically sees a pullback. But inside of that, we have seen a growth in the subscribers for Kiddopia. The subscriber number increased to 11,758 in March 2018. Kiddopia continues to be the #2 grossing app for kids under 5 years in the U.S. EBITDA margin for the business improved to 18.4% in Q4 FY '23 versus 11.6% in Q3 FY '23, driven by cost per trial reduction to $35.9 in Q4 from $37.3 in Q3. Moving on to Animal Jam, which is another IP in our gamified Early Learning segment. We are setting the platform for growth and retention. The team has worked on improving the analytics back end to get actionable products and user acquisition insights. On the product side, we have improved the cadence of content updates to drive growth. We are leveraging group capabilities for user acquisition via data work. The emphasis on optimization on a noncore cost has led to an improvement in EBITDA margins from 3% in Q3 to 11.6% in Q4 FY '22, and we continue to -- we expect this upward trajectory to continue. Moving to WCC, world like champions. We have significantly improved monetization of users, leading to 38% growth in ad revenue, 26% growth in overall revenue and improvement in EBITDA margin from 19.1% in FY '22 to 26.2% in FY '18. We have also announced that we are acquiring an additional 19.5% stake in [ Nexteer ] Media, the holding company for WPP. And this transaction is expected to be completed in the next few days. Open play, which is Nazara's initial step into RNG space. You've seen a revenue growth of 33% year-on-year in FY '23 and EBITDA grows of 79% year-on-year due to better cost optimization. We raised our players that were not generating revenues but consuming bonus. We are further improving the acquisition funnel, branding and player journeys. Tamil Nadu band online gains the chance of money, including Rami and Poker in April 28. Tamil Nadu contributed to 20% of our revenue hence the band will have a short-term negative impact on the business. However, we are trying to actively mitigate this downside risk. As I just mentioned with new regulatory clarity emerging for the R&D segment, we are working on a larger blueprint for Navara in the RNG R&D space, while producing organic and inorganically or -- moving to our eSports segment, which contributes to 49% of our total revenue. This segment grew by 75% in FY '18. So specifically of ordering, the revenue grew by 84% in FY '22, driven by growth in multiple IT. The IT has seen a strong growth of playground [ Patin ] South Asia and digital as well as a strong growth in wings are gaining access to this business. Operating leverage will take in this case. Since we will see a non-linear growth in EBITDA to come from old IP and media accessories business to become margin equated as brands get more strongly established. [ Nordmin ] has acquired 51% in Branded BT Limited for a cash consideration of $1.2 million. Singapore has built marquee IPs, including all that matters is [Indiscernible]. This acquisition will also drive sponsorship revenue for all of Nordea India and internationally. First KA revenues grew by 55% in FY '23 as U.S. revenues grew by 89%, 104% growth in revenue from esports in FY '22 for [ Poste ]. [ Tenet-Bands ] sales now contribute to INR 26.7 crores in FY '25, which will more than double of the corresponding number in FY'23 [ Posera ] acquired 70% stake in profitable network, a premier source of coverage and analysis of MSM in the U.S. in March 23 was $1.82 million with more than 5 million MAUs, PSMA third among the top NFL focused media website in the U.S. as per similar branching in January 23. As said, our U.S. growth engine also performed well and grew by 53% year-on-year in FY '20. This segment contributed to 14% of revenues and 11% of EBITDA in FY '22. DataWorks added 42 new clients in FY is contributing to 34% of total revenue in the same period. The company lost one significant client. However, there will be a minimal EBITDA impact due to growth in new clients. Data was continues to build all 3 of its businesses, ITV, which is the services for advertisers, Mediaworks is services for publishers and visible, a self-serve demand-type platform. The company is ramping up says capabilities globally and is also actively evaluating ML. All our business segments continue to be cash generating. We closed the year with INR 68.3 crores of cash in our balance sheet. Our strong cash position not only provides financial strength for organic growth, but also allows us to deploy capital for trade. I'll close my remarks here, and we'd like to open the call for Q&A. I would request Mitesh Saber and Natasha to join me for the tee. Thank you very much. We will now begin the question-and-answer session.
[Operator Instructions] We have our first question from the line of Jinesh Joshi from Prabhudas Lilladher
I have a question on the FX business, which seems to have reported a loss in this quarter. So, can you highlight the reason behind it? I mean, has it got to do with the loss of clients, which we just highlighted? And if yes, what is the reason behind it? And how much did that client contribute to our business? And by when do you expect to stabilize from here on? That is question one. And just a follow-up on that is this time around. We have not disclosed the EBITDA of each and Telco businesses. So, you can just share that as well.
I didn't hear us. can you repeat that, please? So the ethnic business seems to have reported a loss in this quarter. So,the question is, has it got to do with the loss of clients, which we just highlighted. If yes, what was the reason behind that loss? And when do we expect the business to stabilize as such? Second question also. The EBITDA, EBITDA figure for tech and telco business, which we have not given in the PPT this time around, so if you can share those numbers?
Sure, sure. Okay.
So just to clarify the data works, the AdTech business has not posted a loss. It is revenue of INR 9 crore in Q4 with INR 2.7 crores of EBITDA. So, it's profitable or 6.9% EBITDA in Q4 and total EBITDA of INR 13.5 crores for the year on revenues of INR 53.3 crores. The total EBITDA being 8.8%. The business continues to be profitable. We mentioned the client that was contributing revenues for the low-margin clients. So, we don't expect any large impact on our EBITDA. And we expect that we will continue to do well in the coming FY '24. We've been actually adding a lot of new clients. We've also appointed some sales teams in the U.S. So, we are actually on a pretty aggressive growth part of rand feeling very confident about the business. On the telco business, we had about INR 52.8 crores of revenue with INR 13.9 crores of EBITDA, which was a 26.3% margin.
Sure, sir. Actually, I was looking at the EBIT number, which was negative in the contingent thanks for the clarification. Sir, my second question is on North win. So, if I look at the content view that we have shared in the Q3 that has gone up in FY '23. Even the distribution ads are up when I compare it with the last financial year, yet the contribution of media right, the revenue has come down from about 39% or to about 21% in this financial year. So, does it mean that pricing has deepen a hit over here? If not, can you explain the reason behind it? And also, if you can share, I mean, what kind of EBITDA margin can we make on mature IP [ Tully ] from media rights like because apparently, it appears to be a high-margin business for us. So just wanted your thoughts on that.
Yes. Sure. So, on the media rights revenue, right, I think for FY '23, while at percentage contribution has dropped from our absolute terms, the revenues are brought have been broadly flat for us. And one of the large contributors for that reason is that because of a lot of the popular genes called band, some of the major deals we had in place kind of dropped off, we should have generated significant growth in media revenue. So, I think despite the games being banned, as being able to also maintain the media rights where they were was a good performance, and we expect in the coming year that to normalize. So that's one aspect. I think for our established IP with media rights, we should be able to get to in the short near term rate, about 20%, 25% kind of EBITDA margins once there is stability on the games, the popular esports titans I hope that answers your question.
Yes, sir. One last question from my side. The PFM business that we acquired recently, apparently seems to be marginally not making at the operating level in FY '22. So, I just wanted to know what can be the steady speed EBITDA margin in this business? And by when do you expect to achieve that?
Jinesh which business?
The pro football network that food acquired the fee is in a...
Yes. No, I think that's a fantastic plug-in for spot. It's a top 3 destination in the U.S. and in defense sports betas vertical in that space. The team there is fantastic. And even it's early days, we are already seeing some very strong growth in KPIs. So we are very confident of delivering good profits and good EBITDA on that business in the current year. We think the synergies between sports [ Kira ] and CFM will play out very well, and we should see start seeing that from as early as this next quarter.
Would you like to share an indicative steady state EBITDA margin number over here?
It's a very early Jinesh. I'd like not to do that.
Sure... Thank you. A reminder to participants to press ran to ask a question. We have a next question from the line of Abhishek Banerjee from ICICI Securities.
Just one question. Firstly, on your cost per trial in Fido…
Sir, I'm sorry, can you use your handset mode, please?
Is it fair? Yes. Yes. So yes, first of all, great set of numbers. Just a couple of questions. First on Kiddopia, the CPT decline of close to $1.40. If you would give us some clarity on how that happened? And what is your outlook going forward? So, could we see another dollar kind of decline in that CBT, which would have a very big impact on your margins going forward? Or is it likely to stabilize at this level?
Yes. I think the team has been working hard on getting the right optimal mix of cost per trial and the blooms that we are able to spend in acquired users. And I think Q4, because Q3 usually is October to December Christmas season in the U.S., and it's our peak season. Q4 usually is a bit slower. And I think we're focused on optimizing our CPT in this period. You can see the results in front of you. I think there have been a lot of things we have done in the not business in the last few months, which includes the price increases. It includes trying to start scaling up the volumes, again, we've kind of overcome that IDFA issue gone back to spending a lot on Google, which we had earlier stopped. So, I think this quarter has been for us to stabilize the business, just check out our key metrics, healthy and stable, which we are finding they are. And I think the way to look at it is the CPT range will still remain between the $35 to $37. Now our focus going forward is to be how can we also [ parial ] start scaling up some of the spend volumes to start increasing the subscriber base. You can see in Q4, our EBITDA margins actually improved quite significantly 18.4% versus successive quarter of 11.6%. So I think we're on the right track with Kiddopia, stabilizing the business and getting it back growth, right?
Got it. So -- but -- and on one hand, you're saying that you stabilized your business and CPD came down and even in a lean season, you managed to grow subscribers. So, is there some tailwind, which is happening in the sector? I mean, are people coming into the segment?
No. I think Kiddopia business itself is -- the Kiddopia is quite a long tap continues to be very popular, and the team continues to work very hard on the product side. As you might have seen, even Tim Cook, the CEO of Apple recently came to India and met the Kiddopia team and also created about how pilots impacting positively to its all over the world. So that's a big validation of the product. And I think that's what's helping us, I would say, outperform competition.
Understood. Also, in terms of the acquisition pipeline going forward, sir, you have been very active in this space, right? But at some time, management bandwidth becomes a constraint to support such a wide portfolio. So, would you give us some clarity on what kind of acquisitions you will try to do in the next year?
Yes. I think the flywheel we have, right, is a distributor flywheel. So, what I mean is that let's take sports kit, for example, Nazara went and acquired Sports filer 3.5 years and grew it from, let's say, a INR 15 crore revenue to this year's to be done on second half -- we have to have posted the INR 122 crores revenue, right, it the INR 39 crores EBITDA this year, 3.5 years back when we acquired the business, it had a 0 EBITDA. So, this company has accumulated cash over the last 2 years, generating profits, and we built a strong management team there. We have a CEO and a chase Strategy Officer in place, who is very focused on M&A. And through our experience, we've kind of guided these teams. And the [ f-football ] network is an acquisition done by sports [ Kitan ] it's being completely managed by the Sport kiddopia team under our guidance. So, what this structure allows us is to continue doing this M&A activity without it sucking up a lot of our operational bandwidth at Nazara level. So, when Nazara may be selective in doing acquisitions, you may see bolt-on acquisitions happen at a more rapid pace as the company is below because they are generating cash, accumulating cash, and it's a great deployment of their cash to further their businesses. that's when we kind of bring in our experience and expertise in doing these transactions but the actual operations, how these M&As are done by the teams of the subsidies. I think that's working very well for us. At the Navara level, I think our thought process going forward is that we will be taking fewer and larger bets on M&A, whereas bolt-on acquisitions will largely happen at a subsidiary. Understood.
Understood. And if you're talking about larger acquisitions, does that mean taking on some levels?
Sorry, can you repeat that?
So if you're talking about larger acquisitions, does that mean taking on some debt?
At this point of time, we've not looked at it. But I would say that some 0 debt to moving to a low debt could be an option, but largely any debt, if we were to take it, would be or against the cash flows of the target company and not that stock Nazara.
Understood. That is very clear.
Thank you... We have a next question from the line of Abhishek Bhandari from Nomura.
Nittish, I had one question. If I go to your Slide #32. I'm just trying to reconcile the slowdown of EBITDA into operating cash flow. While we generated INR 100-plus crores of EBITDA in FY '23, the net cash flow from operations is just in. Part of it is explained because of working capital. But if you could elaborate how are you thinking to bridge the gap between the 2? Or is it the nature of the business that this kind of capital always exist...
No. I think this year, we've seen a slight increase in working capital in many of our businesses. And I think also, there's some for example, in the case of Copart because we had a CD issue, we kind of advanced significant amounts of money to places like Google where we advertise to kind of secure those funds. So, I think it also got skewed because of that. I think we should continue generating good cash in FY '24, we expect to generate good cash. I think the other place our working capital got stuck or [Indiscernible] is the gaming accessories business in pink, which is our working capital intensive business. So, we are working closely with the team on how can we create better cash flow management so that working capital doesn't get [Indiscernible].
Got it. So, is it fair to say that the steady state EBITDA to operating cash flow conversion will settle at a higher rate?
Like would it be like 40%, 50% of your..
Got it. Nattish, all the best.
We have a next question from the line of Deep Shah from B&K Securities.
So the first question was around the -- some qualitative commentary on the Valorant challenges to the contest is last year, we had a deal with StarSports [ cans ] to GMI. -- you alluded that some media we have lapsed because of games being banned. So, any announcement can call out as to what is the engagement levels for Valorant time. That can give us some guidance on when those come back? Because if I understand correctly, more than the monetization, it is the reach, which would have been large, which StarSports as a [ patron ]. So that's my first question.
Sure, Shale. I'll just answer that first. So, the BGM on StarSports was the first first program we ran with starts and that was extremely -- we had great response, and it starts popery excited about season 2 of same. However, because of the BGM band, we could not kind of continue with that. And that was also one of the reasons our media revenue kind of drops or not didn't grow as we expected in the previous year of FY '23. Valorant is early days, the league has launched, and we will be building up value versus GMI, the difference is that values a PC with a slightly smaller community compared to GMI. It was more intense community. But from a visibility point of view, viewership point of view, it's a bit smaller. So we are kind of building it out before we take it with the large channel. The other media content that has done well for us is the [ Pringround ] series. Season 1, we got about 17 million viewers season to brought about EUR 40 million. We have Season 3 launching in June, and that this is actually changing the format a bit and go to on a year-long season. So, I think that should also be very positive for us.
Right, Sales. Sir, second question, so are you in your using remarks. I'm seem wrong, but I hear that acting leverage has started slowing down in the esports volatile. But I would rather sit that it would be proactive in that we have a lot more new -- it's a lot more marketing required given that, as you rightly said, rather than a gain lender. So how do we think about this profitability, please? Will it be protected or we see a lot of start flowing rights on FY '24. As a saturation, what is the plan for new IP in a helper?
Sure. So I think just to summarize, I understand your question, you're asking about the eSports margins in FY '24.
Yes. So, should we see a pickup right in FY '24? Or will you say some time? And second, on the new IPs or where do you see scaling up of existing IP that we have. Any your thoughts on what the busier would be helpful?
Yes. So I think in terms of margins, we are still projecting specifically for [ Noden gaming.] We are not in FY '24 project large -- very large enhancements in EBITDA. We will try and optimize where possible. But our focus is going to continue drive strategic growth in that business. I think -- in terms of your second question of IP, right? Valorant is one that not has already launched, they launched a [Indiscernible], which is also doing very well. So, there are 2 different leagues that not only is currently in the midst of launching or has launched, which we think will build strong IP. There is Kingfisher India Premiership 23, which has been announced. This is having the infected cash on plans. There's a one-state sites Challenger finance matures done. So, I think there's a lot of ideas work in progress, working with major gaming publishers who want to do a larger India play. So, I think there's a lot of activity happening there. And you will see that buildup happen throughout FY '24.
Sure, sir. This is on
We have a next question from the line of Mukul Garg from Motilal Oswal.
I hope I'm audible. Yes. At just a follow-up on the Northern point. If you look at the other content view or the distribution between Q4 FY '22 and Q4 FY '23, it obviously has come off a bit. I just wanted to get your sense on how should we think about the opportunities playing out over the longer term. This quarter, we were trying to do that through Valorant and ESL. But clearly, the response has not been up to what BGI [ officer ] kind of receiving in from players. So how are you visualizing the longer-term opportunity capture, which is out there in the space because you have been able to grow your revenues quite smartly, but that is probably more because of broadening of offering rather than the viewership or distribution.
Yes. No, absolutely. So, I think you are right on that in terms of the viewership, which obviously got impacted due to the game at for banks. So, we need very popular mobile gaming titles in a country like India to drive maximum viewership. And One or 2 things will happen, either the white space that is currently that will get filled up by some new titles or it or you will have some of the existing titles come back, which is also , which is also possible in the next few months. So, I think while that happens, obviously, we are working on creating many other IPs. We do see Valorant, et cetera, also building out -- we are working closely with them and building it out. But to see large search, I think you need to get those large mobile lease ports titles on the back of which not more [ bearship ] can be generated.
Right. So just to follow up on this. Are there any potential names which you are seeing, which are in the pipeline? Or are you in discussions with the government in terms of what the scenario in terms of the fee fire or BMI, which were quite popular in the country to kind of get them back as an option?
Yes. So no, we're actively as an important stakeholder in this whole space, right? We are obviously interacting both with government as well as the publishers to see what solutions can be found here. And we are very hopeful that some positive news will come in the coming months, right? That said, there are other games like all of duty mobile, et cetera, that we are working with. So I think focus is on expanding the types that we work with as well as working closely with the publishers receive where some important taxes can be relaunched.
And the second question was, again, probably related question. When I look at W performance obviously has been weaker than what it was same time last year. You have, on the other hand, increased the stake in next way. So, any thoughts on how you are kind of visualizing your investment into the space. There's a lot of strategies happening on the mobile gaming side. Are you hoping to kind of aggressively expand and create an alterate of...
Yes. So, I think we are at a point where we think that WCC can be starting to scale. We've always been focused on KPIs. And I think our LTV cap equation over that is starting to make sense. So, we will hope -- I think for the franchise at what we can championship as in India, the kind of monetization we do today or even the kind of user base you have is relatively low. And there's a lot more that can be done in terms of scaling this up. So, I think that's hard for FY '24, that how do we monetize this product better? And how do we scale up the user base so that we have a multiplier effect on the overall business. You also brought in a Chief Operating Officer recently who has showed us from a large gaming studio and is working very closely with the team to kind of action some of the things we want to implement.
Sure. So, should we expect kind of front-ended investments to kind of generate the required growth? Or are we already seeing a tipping point and we feel that the growth can happen while U.S. is kind of getting a favorable meters on the investments?
Yes. No, I think we don't anticipate large investments in terms of SG&A costs, et cetera. But I think in the near future, we will potentially ramp up our user acquisition on that product to scale the user base.
Got it. answering my question first of luck for the quarter...
Thank you. we have a next question from the line of Abhishek Kumar from JM Financial.
First, I just noticed that we have not given any guidance for FY '24. So just any sense on how are we looking at the overall portfolio growth? And also how should we look at margins now, things appear to have stabilized. So any color on growth in guidance for next year, growth and margin.
So Abhishek, we are not -- we are not giving a guidance at this point of time. As you've seen since we listed, we mutually given guidance in September once we have a better report year -- but our intent this year is to obviously enhance margins in businesses where we can and to certain businesses, which will continue to drive strategic growth for market leadership. So, I think we'll continue following the same approach. Generally, overall sense of mine today is that there should be some margin improvement in the overall year.
Great. Now second question is on real money gaming. A lot of regulatory clarity has emerged over the past couple of months with a self-regulatory body and even on TDS. And we have also talked about a larger blueprint now in RMG. So, I just wanted you to flesh out what would that mean? What would that entail both in terms of organic and inorganic strategy?
Yes. So, like I mentioned in my opening remarks, there are 3 ways you are approaching this. One is how can our existing RMT businesses, especially open play, which as a class Ecoin brand grow fast and more aggressively. While Anoka mentioned, there was a short-term blip because of the TNBC this game is quite popular. I think that's a short-term life for us. But we are looking at the larger picture, how can we really scale that business -- that's point number one. Point number two is we are working with many new game developers, sorry, many developers and global companies to publish RNG GMs in India, which are innovative and new and scale them up. And I think with this framework is we can do it a lot more confidently, we can invest more aggressively and then build our user base and scale revenue. So, I think that's the second thing we've been actively working in. And the third is, we are in talks with various existing RMG peers to see whether there is a consolidation opportunity possible. So, I think in these 3 actions, we are looking to definitely start scaling our LNG business going forward.
Okay. Just one clarification. You said you're working with global publishers. So are we also looking at expanding beyond Rami in RMG.
Yes, most definitely. So just to clarify, our focus on R&D in the Indian market, but we are definitely looking at launching new games outside of game as well in the Indian market, which are fresh and new and will be appealing to the consumer this year. All right.
We have a next question from the line of Rahul Jain from Dolat Capital.
My question is pertaining to the gamified business, Crop animal jam. I know you shared some of your thoughts earlier. But to I think from a real growth addition point of view, I think this segment would play an important part in this year. So, if you could share beyond what you just shared in terms of the stability and eventual progress. So how you see the demand based on the revised pricing and the churn behavior? And when you think would be -- what is the data point that you would watch out for before you kind of speed up the pedal to drive your marketing spend here to drive growth? And how the revival on the cost side and in terms of content side shaping up in animal gem? And what kind of growth one should envisage over the next 4 to 6 quarters there?
Sure. So, for Propane thing we launched a lot of new content and features which are quite appealing to the consumers, both parents and kids, for example, the boating kits, which has been launched in Petone appreciated. And I think parents are willing to spend the extra money that we have to increase prices from 7.9 to 9.99% without hesitating. And that reflects in our KPIs like John, is if you see the last 4 quarters or 5 quarters that we have shown in this constant irrespective of the price increase. I think that is the good news that -- and the way that health is with our cost per trial is in control and the price increase, our margins in FY '24 are going to look much healthier than what they were in FY '23 because LTV CAC ratio has improved significantly. So , I think that's one aspect. Now what we are basically seeing is while keeping our cost of trial, let's say, between $25 to $27 how can we increase the spend from $1 million a month to significantly more. What we don't want to do is, again, break the cost per tran range that we have established. So, we don't want to take it to $40 plus. So, we kept the bail there, and the team is working actively on various channels to see how we can start increasing spend within this large of cost per tonne, so that our margins are also protected. Coming on to Animal Jam, I think we are very excited with what we've seen in the last few months after the acquisition, we spent a lot of time getting our upon data. I think the data is very interesting and is showing some healthy results already in Q4, if you see, we've also worked a lot on optimizing various costs that were built into the business. if you see Q4 FY '23, we've seen a growth in EBITDA margins to 11.6%. And we think we should get this business very quickly to about a 20% EBITDA margin and we do it from there. A lot of product work is happening on features that can help monetization better. Because one of the challenges with Animal Jam, we found was that the conversion to monetization was fairly low because the feature that we implemented did not make the people pay 95% of the game was being played for free. And I think that wreaking some of those things which will help us improve conversions, hence in the revenues. So very excited about animal jam as well. It's a very strong IP within that consumer base. And I think in gaming, as long as you are holding good IPs, there's a lot more you can do with it. So [Indiscernible] and Animal Jam strong IPs in the sector, and there's a lot more we can do with them going forward.
We have our next question from the line of Mohan Kumar, an individual investor.
Congrats on a great set of numbers, and it's been a pretty solid last couple of years. So I just wanted to get some qualitative understanding of what the growth could look like in the -- over the next year. I understand that it's still very early, and you probably are comfortable providing numbers towards the second half of the year. But do you feel that the growth trend that we have seen can actually continue to grow organically if not at the same rate as last couple of years, but a at maybe like end to 15% range of what we've seen in the last couple of years.
Yes. Yes. I think, again, without giving any specific guidance, I think we will continue to drive for growth in all our businesses wherever we can. And as these businesses continue to generate cash, we will keep redeploying this cash that's accumulating into organic as well as in all comic growth. So I think we will see good organic growth. I don't want to give a specific number, but it should be north of what you just spoke a book.
And which is a business where you feel that the margin expansion is going to drive the expansion for the broader growth group right now. You mentioned that you're expecting in a few or you have the subsegments, but where are you expecting a larger -- the biggest chunk to actually come from?
I think we should see a good margin expansion in our growing business overall with Kinobi and WCC as well as animal Jan. So I think these products should continue to drive fairly good margin expansion in FY '24. We also expect Sports Kita to do well in terms of margins. So yes, I think even a side or not an esports business where we are not projecting large margin expansion, I think other businesses all will be upward senators.
Sounds good. Thanks a lot, and all the best for the coming year. Thank you. Thank you. We have a next question from the line of Rahil Shah an individual investor.
Yes, sir. So, I understand you're not giving any guidance on the EBITDA margins. But my question is more far ahead in the future. So, I wanted to ask what have you envisioned a number potential of steady state EBITDA margins when your investments in new business verticals reduced and the business has stabilized. So have you targeted any number or it's not targeted. Can you just share with us any number which is your confident is possible.
Yes. Sure, Sade, do you want to take this one?
[Indiscernible], ride, just so I can understand what you were saying. You're asking for each of the businesses or overall?
No, no, no, overall. So you are in a process of scaling up, you're investing a lot in desertic debt. So I'm just asking, when you're done with this and when this business is stabilized, what kind of potential of steady-state EBITDA margins you are confident that you will be able to achieve?
Sure. So I think one is each of our segments, if you look at it, right? Right now, we are very much in a very fast growth phase there's a lot of investment which is happening in the current year in the previous year, as you've seen. And we do expect that pace to continue for a little bit -- so I think when we say what is the steady state EBITDA numbers, we need to look a little further in the future than just 6 months or a year or 2 years. So if you look at segment by segment, if you start with eSports, I think definitely on that, you will see with some similar kind of margin structure as to what we have today for the near future because that opportunity is probably the largest in terms of absolute growth numbers currently. Down the road, we do expect it to be -- especially as the media properties team and the IP get much higher value. That should be a very highly profitable segment as well in line with what you would see in the media world. So, I'd prefer you sort of look at steady state EBITDA -- sorry, steady-state EBITDA margins there. On the gaming side, we definitely see already about a 20% kind of margin structure in the businesses. And that number will expand in the near future. And longer term, steady state, if I have to guess, I'd probably go around a 30% kind of a number. But again, it might take a bit more time than spent before we kept it. I take it a different kind of business, that's more of a services business. And in that current numbers are closer to 9% or 10%, as you have seen, which will expand a bit, but not hugely as long as it stays focused on services. There are some product possibilities on that as well, which if those come through and that increases the margin significantly over time. But at this point, we don't too. That's why I hope that answers.
Okay. Okay. Yes. That's helpful. And another would be, why have our profit margins dropped significantly in Q4 compared to Q3. So I'm just trying to understand is it because of like the seasonality factor? Or what happened in Q4? And when do you expect it to revise?
I think I was just actually looking more at a broader picture for the year rather than because there are these -- there are seasonal variations as business-specific contest, which I called out at the different business segments rather than giving a...
Yes. But just to add to that, our margin -- our EBITDA margin for Q3 was 9.7%, which came at 9.6% in Q4, given Q3 is a high margin business for many of our products across sports data, for example, in the U.S. realizes very high CPMs in this period. and similarly to some of the other businesses, Q3, the high seasonal business quarter. And we've done very well with the margin actually in Q4, 9.6%. If you compare it to the previous year, also we've improved it was 8.5% in Q4 of FY '22, whereas it's 9.6% in Q4 of FY '23.
Okay. Okay. Okay, sir. All of this -- thank you.
Thank you. We have our next question from the line of Rahul Jain from Dolat Capital.
I hope I'm audible. Just one more incremental input on the ad tech business, specifically that we are more targeting this in the U.S. market. So how you are seeing that market shaping up? We also saw a client impact. So how do you see in light of relatively weakening macro end in that market. And of course, we have a very strong client addition metrics. So how it should balance out during this year in your view?
On we see that the services that data was offers and also back by some of the new products we've launched, the [Indiscernible] they've also launched a black product on visible. We think there's a lot of value proposition for clients and the ball DataWorks operates much of its team and operations from India, there's a lot of arbitrage saving that they can offer to the clients to decide better results. So, I think the weakening market in U.S. should not hurt data works much because clients will look to optimize costs and actually datawares may benefit from that. New clients signing up has been going on at a very good rate. There's a lot of efforts that the team is doing there. So, we're very optimistic about this business into FY '24. We also see some very interesting bolt-on opportunities which can actually enhance margins by acquiring renting entities in the U.S. and Europe, which we are currently looking at. So, I think overall, we can see good growth, good margins in this business and the new products that we have launched to not so video to that over a period of time.
Right, right. And you did this transaction of Pro football. I think it's a fantastic transaction given the large opportunity, and I was looking at some of the peers which are much, much larger than what this company has achieved, of course, this is a very young company. So if you could give more input in terms of what are the scalability opportunity here? Is there any synergy to existing SK business? And also, is there any meaningful seasonality in terms of the way they recognize their revenue.
Sure. So I think couple NFL season probably happens in Q2, Q3. So Q1, for example, is the lowest season for for football network. But the team at Sports Kidahas a lot of ideas. There are a lot of synergies actually with cocooned. -- even in the leasing season, we've actually seen a significant uptick in some of the KPIs of football network since we've kind of acquired them. So it's probably a small transaction within our network, but we are very excited about this opportunity. And upon If I may just add a couple of points, sir. Yes.
So Ron, I think I want to emphasize that football is about American football, which is what we in India for time called gB, but American Saban, that's actually the largest port in the world. not just in the U.S. or ds market larger than soccer football or a large electric at. And PSM is the used property in the -- or I mean, they've built something very interesting. They're growing very rapidly, obviously. Seasonality-wise, the American football season a broadly corresponding to Q2 and Q3 of Avaya. So for us, we've seen this quarter, Q1 has an opportunity to sort of build a lot of -- a bit further on the product side there and look at the synergy between sports keratan then tier. And Q2, Q3 is what we ask to show the results we hope in that. But we do expect this to be a significant driver of value for Sports overall in the coming years.
Right. Just a little bit more curious about the opportunity size because when I see this space, I see that there is 1 or 2 players which are significantly larger than what we are -- and of course, they are very old business that way. And there are a lot of sites which are dedicated to particular league or team, and that is also a huge market. So is there something that we could do to consolidate this space? Because otherwise, I think there is a lot of loyalty led volume or content consumption that happens in this market for us to scale to a meaningful level? Or you think independent entity covering the entire support is what would trend in the future?
Which I take that. So I think that's definitely an interesting and important point there, right, which is the way customers in the U.S. consume content on this. Many of them will be very loyal to specific teams or regions and -- or you can say, college football teams and then follow that with a great deal of fashion. So, one way to grow this segment, which is Poker and the PS team are very focused on is looking at how do you target those individual communities or segments? And there are different kinds of answers on that as the team is kind of very focused on using that insight and also in that. I'd be just a bit careful on what we say here because it's not just one website. It is definitely much more than they do. And that inside to share on, that's definitely one thing that the leverage...
Sure. Thank you.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to management for closing comments. Over to you.
Thank you very much, everyone, for spending the time today on the call. We look forward to continuing to strive hard to deliver good results in FY '24 and beyond and look forward to your ongoing support and take that. Thank you very much. On behalf of JM Financial, that concludes this conference.
Thank you for joining us, and you may now disconnect your lines.