Better-than-expected 4Q for Zynga - Analyst Blog
February 06 2013 - 4:10AM
Zacks
Zynga Inc. (ZNGA)
reported better-than-expected fourth-quarter 2012 results.
Accounting for stock-based compensation expenses, Zynga lost 1 cent
per share, narrower than the Zacks Consensus Estimate of a loss of
4 cents.
On a non-GAAP basis, the company
reported EPS of 1 cent, which was down from 5 cents earned in the
year-ago quarter.
Quarter
Details
Though total revenue for the
quarter remained flat on year-over-year basis at $311.2 million, it
comfortably beat the Zacks Consensus Estimate of $214 million.
However, on a sequential basis, revenues were down 2%.
Advertising revenues jumped 35%
year over year to $37.0 million, due to the addition of several new
advertisers. Companies such as Progressive Insurance and LG
Electronics were added by Zynga, while McDonald’s
(MCD), Honda (HMC), and NBC Universal renewed
their advertising deals with the social game maker.
Online game revenues were down 3%
year over year to $274 million. Bookings decreased 15% year over
year to $261.3 million in the reported quarter, primarily due to
lower web user pay from its games. However, bookings improved 2% on
a sequential basis, aided by the launch of FarmVille
2.
Daily Active Users (“DAU”) were up
3% year over year to 56 million but down 6% sequentially. Monthly
Active Users (“MAU”) spiked 24% year over year to 298 million.
However, on a sequential basis, MAU were down 4%.
During the quarter, Zynga launched
6 new games (4 web-based and 2 mobile games). Moreover, the company
entered into a partnership with bwin.party that will enable Zynga
to offer real money gaming in UK.
The company undertook several
cost-cutting initiatives, which included spending cuts in marketing
acquisition, data hosting, and outside services. Zynga also shut
several of its remote studios (Boston and Japan) and trimmed its
workforce. These resulted in a 65.7% annual decrease in costs to
$273.6 million.
Adjusted EBITDA was $45.0 million
in the quarter, down from $67.8 million reported in the year-ago
quarter. However, on a sequential basis, adjusted EBITDA was up
from $16.2 million.
Zynga reported non-GAAP profit of
$6.9 million in the quarter compared with net income of $37.2
million a year ago. However, including stock based compensation of
$14.9 million, net loss came in at $7.9 million.
At the end of fourth quarter, Zynga
had cash and cash equivalents (including marketable securities) of
$1.28 billion compared with $1.32 billion in the previous quarter.
Zynga generated cash flow from operating activities of $19.8
million versus $30.1 million in the previous quarter. Free cash
flow was $29.5 million.
Outlook
For the first quarter of 2013,
Zynga expects non-GAAP loss per share in the range of 5 cents to 4
cents per share. Stock-based expense is expected to be between $35
million and $45 million
The company expects to generate
revenues in between $255 million and $265 million. Bookings for the
first quarter are projected in the range of $200 million-$210
million.
Moreover, Zynga expects adjusted
EBITDA to be in the range of ($10) million to break even in the
first quarter. For fiscal 2013, Zynga expects adjusted EBITDA
margin to be between 0% and 10%.
Recommendation
We believe that Zynga is well
positioned to grow in the near term based on its innovative product
pipeline and its dominant position in the social and mobile gaming
sector. The company’s expansion in the advertising space is another
positive for the company. Zynga’s initiatives to expand in the real
money casino and poker games across different platforms should act
in its favor. However, we believe that competition from
International Game Technology (IGT) could be a
possible headwind.
Moreover, shareholder friendly
initiatives such as the buyback and cost reduction program will
drive the stock in the near term.
However, we also note that barriers
to entry are low in the social gaming market and this will attract
new entrants, thereby further increasing competition for Zynga over
the long term.
Currently, Zynga has a Zacks Rank
#2 (Buy).
HONDA MOTOR (HMC): Free Stock Analysis Report
INTL GAME TECH (IGT): Free Stock Analysis Report
MCDONALDS CORP (MCD): Free Stock Analysis Report
ZYNGA INC (ZNGA): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Honda Motor (NYSE:HMC)
Historical Stock Chart
From Jun 2024 to Jul 2024
Honda Motor (NYSE:HMC)
Historical Stock Chart
From Jul 2023 to Jul 2024