Nazara Technologies Q1 profit rises 13% YoY to 24 cr; revenue dips to Rs 250 cr

Nazara Technologies founder Nitish Mittersain

Nazara Technologies on August 13 reported a net profit of Rs 23.6 crore for the quarter ended June 30, 2024, registering a 12.9 percent jump from Rs 20.9 crore profit in the year-ago quarter.

This growth was led by strong performance in the esports vertical during the quarter, offset by lower profits in the gaming vertical and losses in the adtech segment.

Revenue from operations, however, saw a minor dip to Rs 250 crore for the quarter, a 1.7 percent year-on-year (YoY) decline from Rs 254.4 crore in the corresponding quarter last year. The decline was due to a notable drop in the quarterly revenue from the gaming vertical.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) declined by 24.7 percent YoY to Rs 24.9 crore for the quarter as against Rs 33.1 crore in Q1-FY24.

"In FY24, our team focused on building a strong pipeline of opportunities and as we move into FY25, we are strategically deploying our cash reserves to acquire businesses that align with our vision and will further strengthen our platform for long-term growth" said founder Nitish Mittersain in a statement.

"We are focused on driving profitable growth in FY25 and beyond via organic growth of our existing businesses as well as M&A, especially in the core gaming sector" he said.

Nazara Technologies, the country's first publicly listed gaming firm, earmarked a $100-million war chest for mergers and acquisitions over the next 24 months in March.

The company currently operates in three key sectors - gaming (World Cricket Championship, Kiddopia, Animal Jam, Classic Rummy etc), esports (Nodwin Gaming, Sportskeeda) and advertising (Datawrkz).

In July, Nazara Technologies increased its stake in subsidiary Paper Boat Apps, which owns the gamified learning app Kiddopia, to 100 percent by acquiring the remaining 48.42 percent stake for Rs 300 crore in July.

Nazara Technologies also hiked its stake in mobile gaming subsidiary Nextwave Multimedia to 100 percent in May, by purchasing the remaining 28.12 percent stake from founder shareholders PR Rajendran, R Kalpana and PR Jayashree.

These deals are part of Nazara's new operating model, implemented earlier this year, aimed at increasing revenue and free cash flows accruing directly to the parent company by merging gaming IPs.

The company has been focused on boosting its gaming business, which Mittersain believes will become the biggest revenue generator for the diversified gaming and sports media firm in the coming years.

Last week, the firm also announced the acquisition of Fusebox Games, a United Kingdom-based gaming studio, for Rs 228 crore ($27.2 million) in an all-cash deal.

Meanwhile, Nazara's esports subsidiary Nodwin Gaming announced in June that it is purchasing 86.49 percent stake in Germany-based esports firm Freaks 4U Gaming through a share swap in a deal valued at Rs 271 crore (€30.3 million), taking its total ownership to 100 percent.

The acquisition is expected to bolster Nodwin Gaming's capabilities in PC gaming and games publishing support services along with access to developed markets.

Absolute Sports, the subsidiary which operates sports media brands Sportskeeda and Pro Football Network, recently bolstered its presence in the United States with the asset purchases of entertainment content destination SoapCentral and Deltia's Gaming, a gaming content platform.

Nazara's publishing unit also struck a partnership in June with gaming veteran Vishal Gondal's nCore to launch FAU-G: Domination, a made-in-India multiplayer shooter game. The firm owns exclusive global publishing rights for the title and will invest in the marketing, publishing and promotion of the game which is expected to debut in October 2024, it said.

Nazara Technologies, one of the country's oldest gaming companies, also received approval for its proposal to buy sports entertainment company Smaaash Entertainment through insolvency and bankruptcy proceedings earlier this month. Smaaash Entertainment, which operates physical entertainment centres across several cities, was admitted to bankruptcy in May 2022.

Read: NSE should become Nasdaq in 5 years, more founders should list in India: Nazara's Nitish Mittersain

Segment-wise performance

Esports remained the biggest vertical for the company, with revenues of Rs 131.9 crore in Q1-FY25, up 12 percent YoY from Rs 117.8 crore in Q1-FY24. Profit more than doubled to Rs 13.2 crore in Q1-FY25 from Rs 6.31 crore in Q1-FY24.

Nodwin Gaming's revenues grew by 3 percent to Rs 71 crore for the quarter, although the company noted that like-for-like revenue growth was 35 percent since revenue from Wings (gaming accessories brand) was deconsolidated from February 3.

Nodwin currently owns 40.17 percent stake in Wings and has an exposure of around Rs 53 crore through a mix of equity and loans. Wings operator Brandscale Innovations is currently evaluating options of raising external capital to sustain its operations, the firm said.

A breakdown of Nazara's Q1-FY25 revenue

Sportskeeda witnessed a 33 percent jump in its revenues to Rs 60.9 crore for the quarter, from Rs 45.8 crore in the same quarter last year.

The gaming vertical reported revenues of Rs 92.8 crore for the quarter, down 15 percent YoY from Rs 109.5 crore in Q1-FY24. Profit also saw a significant decline to Rs 6.96 crore for the quarter, as compared to Rs 18.5 crore profit in the same quarter last year.

The Kiddopia business saw its revenue decline by 14.9 percent to Rs 49 crore for the quarter from Rs 57.6 crore in the same quarter last year. The company said that its subscriber base declined to 246,943 for the quarter, from 255,382 subscribers in Q4-FY24.

Average Revenue Per User (ARPU) increased to $6.92 in Q1-FY25 from $6.89, due to the attrition of users on older pricing plans. The company said it also plans to cross-promote Kiddopia's products with Animal Jam, starting Q2-FY25.

Revenue from Animal Jam business grew 7 percent to 23.6 crore in Q1-FY25, bolstered by continued success and monetisation of an in-game feature Wishing Coins. The feature helps players build wishes for specific attributes for their fantasy animals, requiring more coins for more detailed wishes.

The launch of a new pet ‘Dragons’ via the wishing well also contributed to the growth, resulting in the firm hitting a single-day revenue of $106,000, Nazara said.

The real-money gaming business saw its revenue fall sharply to Rs 5.3 crore for the quarter, from Rs 12 crore revenue in Q1-FY24, due to the impact of the government's 28 percent Goods and Services Tax (GST) regime that became effective from October 1, 2023. The higher GST cost along with providing bonuses to players resulted in lower net revenue, the company said.

Nazara said that its Gross Gaming Revenues (GGR) have only seen a slight decline, indicating that customers are still playing almost the same amount of games on the platform, but the portion paid out as GST has increased sharply from 11.7 percent to 48.7 percent of Gross Gaming Revenue.

The segment posted a negative EBITDA of Rs 1.1 crore for the quarter, as compared to a positive Rs 0.2 crore EBITDA in the year-ago period.

In July, Nazara said two of its subsidiaries — Openplay Technologies and Halaplay Technologies — received show cause notices for a proposed GST liability of Rs 1,119.9 crores for the period 2017-18 to 2022-23. The tax claims relate to the calculation of GST based on sums pooled by players rather than gross gaming revenues.

The company said it has been focusing on improving operating efficiencies to achieve profitability through new product features and gaming formats, reducing bonus offered to players, and increasing revenue per deposit.

This is a crucial step to reduce the firm's tax outflow since the government levies 28 percent GST on player deposits.

Explained: GST Council’s 28% tax on India’s real-money gaming sector

Nazara's adtech business saw a 7 percent decline in revenues to Rs 25.7 crore for the quarter, from Rs 27.1 crore in the same quarter last year. The revenue drop comes as the firm continues to move away from low-margin clients to higher-margin clients and product businesses.

The segment also posted increased losses of Rs 2.62 crore for the quarter, as compared to 1.61 crore in the same quarter last year.

In terms of geographies, North America accounted for 44 percent of the company's revenues in Q1-FY25, while India contributed 33 percent and the rest of the world contributed the remaining 23 percent.