Zynga Q3 2012 Earnings: $317M Revenue, 317M Users

Zynga just announced its earnings for Q3 2012, with revenue of $317 million, up 3% year-over-year, and a net loss of $53 million. It has had a rocky quarter, with its stock pricing dipping to an all time low. It is currently valued just slightly more than its cash reserves and securities, which indicates how much investors really believe in its future earnings potential.

Mark Pincus, CEO and Founder, Zynga, said:

“While the last several months have been challenging for us, Zynga remains well positioned to capitalize on the growth of social gaming. We’re implementing a number of steps to drive long-term growth and profitability. The successful launches of FarmVille 2 and ChefVille in the third quarter demonstrate that when we develop great games, our large player audience engages. It’s more clear than ever that along with search, shop, and share, play is a fundamental pillar of the Internet, and Zynga continues to be the leader.”

While Zynga is still light years ahead of its competition in terms of user numbers, it hasn’t been able to monetize them that well, and is seeing very high churn.

By struggling to launch new hits, but mainly by acquisitions, it has managed to increase its monthly active users to 311 million, and its daily active users to 60 million.

It has also seen good numbers for its latest games – ChefVille and FarmVille 2, while some others have crashed and burned.

Here’s a list of business highlights by Zynga:

  • Daily active users (DAUs) increased from 54 million in the third quarter of 2011 to 60 million in the third quarter of 2012, up 10% year-over-year.
  • Monthly active users (MAUs) increased from 227 million in the third quarter of 2011 to 311 million in the third quarter of 2012, up 37% year-over-year.
  • Monthly unique users (MUUs) increased from 152 million in the third quarter of 2011 to 177 million in the third quarter of 2012, up 17% year-over-year.
  • Average daily bookings per average DAU (ABPU) decreased from $0.058 in the third quarter of 2011 to $0.047 in the third quarter of 2012, down 19% year-over-year.
  • Monthly Unique Payers (MUPs) decreased from 4.1 million in the second quarter of 2012 to 3.0 million in the third quarter of 2012, down 28% sequentially, largely driven by Draw Something.

In related news, Zynga laid off more than 100 employees from its Boston office, shutting down its The Ville and Bingo teams in Austin. Both these games had seen user numbers plummet in the last couple of months.

However, there was also good news. Zynga finally announced a real-money gambling partnership in the UK. It will be tying up with bwin.party, and power real-money gambling on Zynga Casino, its platform for online games like Poker and other casino offerings.

It is also focusing on building an ad platform to monetize its massive user base, and also incentivize other developers to work with Zynga and promote their apps. It may also open it to other developers by integrating it with Zynga Platform.

via  Zynga – SEC

Zynga Has a Bad Q3; Writes Down OMGPOP Assets

Zynga is expected to reveal its earnings for Q3 2012 on October 24, but it gave investors a sneak peek by announcing preliminary financial results on Thursday.

It has projected revenue in the range of $300 to $305 million, with bookings down to $250 to $255 million for the quarter ended September 30, 2012. It also expects to book a net loss of around $90 to $105 million. Most of the loss can be attributed to a asset impairment charge related to its acquisition of OMGPOP, the maker of Draw Something, for about $200 million earlier this year.

Following the worse than expected quarter, Zynga has also lowered its full year projections, with projected 2012 bookings down to $1.085 to $1.100 billion, primarily due to reduced expectations for certain games, and delays in launching other new ones.

Mark Pincus, Zynga’s CEO, said:

“The third quarter of 2012 continued to be challenging and, while many of our games performed to plan, as a whole we did not execute to our satisfaction. We’re addressing these near-term challenges by implementing targeted cost reductions in the fourth quarter and rationalizing our product R&D pipeline to reflect our strategic priorities. At the same time, we are continuing to invest in our mobile business where we have one of the strongest positions in the industry. These actions support our strategy to transition from being a first party web game developer to a multiplatform game network. We remain optimistic about the opportunity for social gaming and the power of our player network of 311 million monthly active users. When we offer our players highly engaging content, they respond. FarmVille2 has been our most successful launch since CastleVille in terms of daily bookings, and we now offer 3 of the top 5 most popular mobile games in the U.S. in terms of time spent according to Nielsen.”

Zynga’s stock price dropped nearly 12% following the press release, bringing its market cap down to $1.9 billion, nearly 15% of its all time high.

via Zynga

Zynga Acquires A Bit Lucky for $20 Million

Zynga has been an expert at growing its user base by acquiring smaller gaming studios and startups in the last couple of years. Just before its IPO, it acquired Draw Something, its biggest acquisition to date. While its stock price has crashed significantly in the last couple of months, it still has a significant amount of cash in its coffers.

Today, it acquired a California based game maker, A Bit Lucky Inc., for around $20 million. This is one of its relatively larger acquisitions. A Bit Lucky has been focused on mid-core games, which fall between Zynga’s casual games and hardcore online games. This acquisition adds additional genres to Zynga’s portfolio of games, and allows it to expand its online audience beyond just casual gamers.

Zynga currently has nearly 330 million monthly active users and 50 million daily active users. With acquisitions like these, it keeps adding talent to continue churning out new games, while also adding to its user base instantaneously.

Zynga’s stock price stands at around $3.10, giving it a market cap of around $2.4 billion. It has cash reserves of nearly $1.6 billion.

via Bloomberg

Zynga Being Investigated by Law Firms for Possible Insider Trading Violations

Zynga had a really bad quarter in terms of earnings, which led to its stock crash nearly 40% right after it reported its Q2 2012 financials. It also took Facebook’s stock down with it, but that’s another story.

Anyway, just three months before this most recent bloodbath, a number of Zynga insiders including the founders and investors sold off a ton of Zynga stock in a secondary stock offering at around $12 a share. Zynga’s stock price is hovering around $3 right now.

Here’s a list of who cashed out in the secondary stock offering and how much money they made (via Business Insider)

  • Marc Pincus, Zynga’s CEO, sold 16.5 million shares for $200 million
  • Institutional Venture Partners, a Zynga investor, sold 5.8 million shares for $70 million
  • Union Square Ventures, a Zynga investor, sold 5.2 million shares for $62 million
  • Google, a Zynga investor, sold 4 million shares for $48 million
  • Silver Lake Partners, a Zynga investor, sold 4 million shares for $48 million
  • Reid Hoffman, a Zynga investor, sold 688,000 shares for $8.2 million
  • David Wehner, Zynga’s CFO, sold 386,000 shares for $4.6 million
  • John Schappert, Zynga’s COO, sold 322,000 shares for $3.9 million
  • Reginald Davis, Zynga’s general counsel, sold 315,000 shares for $3.8 million

There is speculation that they sold out stock right before the impending crash, as they were privy to the company’s financials which would have indicated that Q2 was going to be worse than they expected, which would mean that they flouted insider trading guidelines by the SEC.

Multiple law firms have announced that they will be investigating the secondary sale for possible insider stock trading violations. The list of firms includes Schubert Jonckheer & Kolbe, Newman Ferrara, Johnson & Weaver, Wohl & Fruchter, and Levi & Korsinsky.

All these firms are well versed in class action lawsuits and have won billion dollar lawsuits against big corporations. Zynga’s troubles may just be beginning, if any of these firms find any evidence of wrongdoing and lead a class action lawsuit against the social gaming behemoth on behalf of its shareholders.

via Kotaku

Zynga Posts Dreary Earnings in Q2 2012; Stock Down 40%

Zynga posted its earnings for Q2 2012 today, and it has caused a major bloodbath for its share price, which is down nearly 40% since the earnings release.

Zynga reported revenue of $332 million, up 19% year-over-year, but bookings of $302 million, which have actually decreased sequentially from Q1 2012. It also lowered its earnings outlook for the next quarter, which spooked analysts even more. It posted a net loss of $22.8 million. Of its total revenue, it generated around $292 million from virtual transactions in games, and $41 million from advertising.

Mark Pincus, CEO of Zynga, said:

“The company achieved some significant milestones in the quarter including the launch of Bubble Safari, which is now the number one arcade game on Facebook, and the launch of The Ville, now the number two game behind Zynga Poker. Our advertising business continued to show strong growth with revenue up 170% year-over-year. Our games reached record audiences, achieving over 300 million monthly active users. We grew our mobile footprint five-fold in the year to 33 million daily active users making Zynga the largest mobile gaming network,” said Mark Pincus CEO and Founder, Zynga. “We also faced new short-term challenges which led to a sequential decline in bookings. Despite this, we’re optimistic about the long-term growth prospects on mobile where we have a window of opportunity to drive the same kind of social gaming revolution that we enabled on the web.”

Zynga managed to grow its user metrics significantly in Q2, though most of it was due to acquisitions, and not organic growth.

Zynga’s monthly active users increased 34% to 306 million, while its daily active users increased 23% to 72 million. It also managed to increase the number of paying users to 4.1 million in Q2, which is a good sign for its monetization potential. Average bookings per user declined 10% though, to $0.046, which means that Zynga is generating less revenue per user than it used to.

Q2 was a very eventful quarter for Zynga. It launched 6 new games, launched the Zynga with Friends network, and made progress with its online gambling initiatives. It will likely roll out its first online gambling game internationally in the first half of 2013.

It ended the quarter with roughly $1.6 billion in cash, cash equivalents, and short term and long term marketable securities.

via Zynga – SEC

Angry Birds Maker Rovio Acquires FutureMark’s Gaming Division

After Zynga, it seems that Rovio may be the next big game developer to go on an acquisition spree. Zynga has been acquiring gaming studios and startups left, right and center, trying to maintain its scorching pace of growth. While Q4 2011 was good for Zynga in terms of new hits, it cannot continue to grow at the rate it has traditionally been growing at organically. It recently acquired OMGPOP, the maker of the surprise hit – Draw Something – for $210 million.

Rovio seems to have hit the same roadblock in terms of growth. It doesn’t have any major titles to its name except the Angry Birds series. It recently launched Angry Birds Space, which has been a huge hit, rising to the top app charts across the board.

However, to continue launching hit games, it will also need to choose the acquisition route. It has acquired the gaming division of Futuremark. It seems to be a talent acquisition, and will enable Rovio to focus on advanced mobile games with better graphics – possibly targeting the iPhone, the new iPad, and the new generation of Android phones.

Rovio had earlier acquired Kombo Animation Studio in 2011. The specifics of this deal weren’t revealed.

Zynga had tried to acquire Rovio earlier in 2011 for more than $2.25 billion, but was turned down. It seems like Rovio may become its greatest competitor on mobile.

Zynga Looking to Acquire OMGPOP, Maker of Draw Something

Zynga, the largest social gaming company in the world with over 245 million active users, may be planning to buy OMGPOP, the maker of the massive new hit – Draw Something.

OMGPOP has been in the news a lot lately; first, because of the insane amount of traction it has been getting with Draw Something, and then because it displaced Zynga by becoming the number one app in terms of daily active users.

“If you can’t beat them, buy them” – Mark Pincus. Probably.

Zynga has a successful track record of acquiring companies to expand its gaming empire, and OMGPOP will be no exception. Zynga is trying to expand rapidly in the mobile gaming space, by launching new games like the “With Friends” series and also be acquiring developers of popular games.

It reportedly even tried to buy Rovio, the creator of Angry Birds, but apparently that didn’t happen.

Techcrunch reports a rumored valuation of $150 to $250 million for OMGPOP, which if true, would be the biggest acquisition by Zynga to date.

Apps like Draw Something could propel Zynga to the top of the mobile gaming charts and make it the undoubted leader in the mobile and social gaming markets.

Zynga has made a lot of right moves in the past. If it is able to make a successful entry in the online gambling market, coupled with its already booming social and mobile gaming businesses, it could be worth more than all other traditional gaming companies combined in the next few years.

Zynga Has a Great Q4; New Games Take Off

Zynga, the largest social gaming company in the world, just reported its earnings for Q4 2011. It generated revenue of $311.23 million in Q4 to come up with a total revenue of $1.14 billion in 2011. It saw positive cash flow in 2011, but in terms of GAAP earnings, it recorded a net loss of $404.32 million. The loss was primarily due to the issue of new stock following its IPO in November, which led to a huge jump in stock based compensation expenses.

Founder and CEO Mark Pincus said, “2011 was another milestone year for Zynga’s mission of connecting the world through games. We are seeing social games and more broadly play become one of the most popular pastimes on web and mobile. Zynga set new records in the year in terms of audience size, revenues and bookings. We saw great momentum in mobile and advertising and ended the year with a strong pipeline of new games. We are excited about the opportunities in front of us to continue delighting our current players and to bring play to millions of new people.”

Zynga’s user growth numbers look quite encouraging. Its monthly active users increased from 227 million in Q3 2011 to 240 million in Q4 2011. It saw a similar increase in daily active user numbers, which went up to 48 million this quarter. It still had the top 5 most played games on Facebook in Q4 2011, with its new release – CastleVille – being one of them.

It even introduced a new metric in the earnings – monthly unique payers. The monthly unique payers increased from 2.6 million in Q3 2011 to 2.9 million in Q4 2011, which means that more and more players are paying for virtual goods in Zynga’s games.

It launched 20 new titles in 2011 – 12 of them on web based platforms like Facebook and Google+, and 8 on mobile platforms like iOS and Android.

In its earnings call, it also revealed that it was looking to enter the online gambling space, which could positively impact its revenues in the coming years. It also stated that it had been building up its own cloud infrastructure to power its games, which now powers more than 80% of its total capacity.

Zynga’s IPO Fails to Pop, Ends 5% Below Offer Price

Zynga finally made its stock market debut on Friday, and it was a pretty disappointing one. Zynga which was valued at $15 – $20 billion just a few months ago, and already decided to list at a valuation of just $7 billion, considering the gloomy macroeconomic outlook, before the IPO window was closed for good.

Jive which went public just a day before Zynga, had a pretty good pop, and is still trading much above its IPO price. Even Groupon, one of the most controversial companies in recent history, is trading around 15% above its offer price.

In its last round of funding, investors bought in at $14 a share, so they are bleeding pretty badly right now.

I’m not saying Zynga didn’t have an inflated valuation, but compared to Groupon or even Jive, it was a much better bet. Zynga is on track to clear more than $1.1 billion in revenue this year, and has been growing rapidly.

There has been a slump in its average user numbers in the past couple of quarters, but some of its new games like CastleVille and Words with Friends have really taken off. Besides, it has been diversifying its offerings on multiple platforms now, like Google+, iOS, Android and its own Zynga Direct, which should be up in 2012, to decrease its dependence on Facebook.

Zynga’s Q4 financials will be out in January 2012. Hopefully, they will be better than Q2 and Q3 numbers, and will boost its stock price.

All of this makes me wonder, why Zynga was so desperate to go public. It had around a billion dollars in cash on its balance sheet, and could have easily waited out the lull in the stock market, to list later when the investor sentiment was more positive. If it wanted to go public so desperately before reporting Q4 financials, you have to wonder – are the numbers that bad? Or is it just bad timing?

Zynga’s IPO is Finally Here; Roadshow Starts December 5

Zynga’s public offering has been one of the most awaited tech IPOs of all time. It filed its first S-1 IPO filing back in July 2011, and has filed more than 6 amendments to the original filing since, with updated numbers and user metrics for its games.

It was supposed to go public before Thanksgiving, but obviously, that didn’t happen. According to a report by Fortune, Zynga will kick off its IPO process with a roadshow on December 5. We may soon see its last S-1 amendment, which should lay out all the details, including the number of shares it plans to offer and the exact valuation at which it expects to go public.

Zynga is planning to raise nearly $1 billion, at a rumored valuation of around $15 – $20 billion. However, given the bloodbath that Groupon’s stock has seen in the last week, its underwriters may price it lower to attract investors.

Unlike Groupon, Zynga is a profitable business and hasn’t been mired in controversies (at least not as many as Groupon). It has made nearly $828 million in revenue in the first 9 months of 2011, with a run rate of more than $1.1 billion, but its profits have dropped significantly due to increased operating expenses.

It was recently in the news for forcing some senior employees to return some of their unvested stock and threatening to fire them if they refused to, but that isn’t really much of an issue. A major concern has been the drop in the number of monthly active users, the primary metric which determines its growth. Most of its new games except CastleVille and Words with Friends have peaked early, and are already seeing a drop in active users. Zynga will need to continue churning out successful new games to compensate for the drop in users playing its older games, which is becoming difficult in the increasingly competitive social gaming market.

My analysis suggests that Zynga’s fair valuation should be in the range of $10 billion to $15 billion, based on a range of user and revenue growth estimates. Let’s wait and watch how it plays out for Zynga.

In other news, even Facebook is expected to go public soon.