Zynga User Base Shrinks Further
August 04 2016 - 5:10PM
Dow Jones News
Videogame developer Zynga Inc.'s second-quarter loss narrowed
despite a shrinking user base and revenue decline, thanks mostly to
an accounting change.
Zynga said its loss would widen in the current quarter, with
revenue coming in below expectations. Shares dropped 8.1% in after
hours trading.
The San Francisco company, known for its social games Farmville
and Words with Friends, has been trying to steady its business.
Zynga had a meteoric rise, thanks largely to a marketing
relationship with Facebook in its early days, but since the company
went public in late 2011 the stock has tumbled. Shares made their
debut at $11 and most recently closed at less than $3.
The company has been trying to shore up cash, announcing layoffs
last year that brought its staff to about half its peak and this
year saying it would sell its seven-story San Francisco
headquarters. It has also worked to cut marketing costs.
"We have more work to do in our turnaround," said Chief
Executive Frank Gibeau, though he expressed optimism over steps the
company has taken to "do more with less."
The second-quarter improvement was driven by lower expenses,
primarily because of a benefit stemming from a change in the
estimated fair value of recent acquisition's liability. Zynga
bought the social casino Rising Tide Games last year. Mr. Gibeau
said lower marketing costs also helped. Such expenses declined
1.2%.
During the quarter, Zynga's user base continued to shrink. The
company reported 61 million average monthly users—down 26% from a
year earlier and 11% from the first quarter. Most of those users
play Zynga's games on mobile devices. Average monthly mobile users
dropped 23% year-over-year and 11% from the first quarter. Users
who play daily fell 15% from last year's quarter to 18 million.
As the company's user base declined, so did revenue. Total sales
slid 9.1% to 181.7 million, with online game revenue down 16%.
Advertising jumped 22% from a year earlier, though from the first
quarter it fell 8%.
Zynga's loss narrowed to $4.45 million, or a penny a share,
compared with a year-earlier loss of $26.9 million, or 3 cents a
share. Excluding stock-based expense and acquisition-related costs,
among other items, the company broke even on a per-share basis
after posting a loss of 2 cents a share last year.
Analysts projected a loss of 2 cents a share and revenue of
$169.8 million, according to Thomson Reuters.
For the current quarter, Zynga said it expects to report a loss
of 3 cents to 4 cents a share. On an adjusted basis, the company
sees a profit of a penny per share, matching analysts' expectation.
Zynga predicted third-quarter sales of $170 million to $180
million, short of the $187.2 million average analyst estimate.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
August 04, 2016 16:55 ET (20:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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