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

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