Zynga Inc (NASDAQ:ZNGA), a leading social game developer, today announced financial results for the first quarter ended March 31, 2016.
“It’s been a productive two months leading Zynga as CEO. I’m seeing our momentum improve as our teams continue their commitment to growing our established live franchises and demonstrate more cost and operating discipline. As a result, Q1 bookings were above the high end of our guidance range at $182 million, and Adjusted EBITDA was above our range at $11 million. Our mobile momentum continued with mobile now representing 76% of our total bookings, up from 73% from last quarter, and total mobile audience up 7% from last quarter,” said Frank Gibeau, CEO of Zynga. “Zynga has all the ingredients it needs for a successful turnaround. My priority is to bring our founding social gaming vision to life in our games and lead our teams to deliver high quality experiences for players on time and profitably.”
“Since joining, the biggest surprise for me has been how much operating leverage we have across the company, which we can unlock with improved planning, more focused execution and cost control. That means putting in place more disciplined, consistent development practices and more cross team collaboration. Over the long term, there’s no reason why Zynga’s margins can’t be more in line with its peers. We’re committed to improving our operating leverage and cost management to attain those levels. Longer term, we’re building a world class studio and innovative creative culture. In my experience, the best games in the world are made by small, complete teams with great chemistry who build games in a predictable and profitable way,” said Gibeau.
- Bookings of $182 million; above the high end of the guidance range, up 8% year-over-year and flat sequentially.
- Adjusted EBITDA of $11 million; above the guidance range.
- Advertising and other bookings up 42% year-over-year.
- $857 million in cash, cash equivalents and marketable securities.
- Completed the remaining $102 million of $200 million share repurchase announced at Q3 earnings.
- Mobile bookings of $139 million or 76% of overall bookings, up 31% year-over-year and up 4% sequentially.
- Average Mobile Daily Active Users (mobile DAUs): 16 million; up 7% sequentially.
- Apple is now our largest platform partner, surpassing Facebook in terms of online game bookings.
- Slots – Mobile bookings up 77% year-over-year and 13% sequentially. Launched Willy Wonka and the Chocolate Factory Slots which is now in the top 30 grossing Casino charts in the Apple App Store; entered into soft launch with True Vegas Slots and this week we launched Spin It Rich! Slots worldwide.
- Zynga Poker – Mobile bookings up 13% year-over-year and 8% sequentially.
- Words With Friends – Delivered strong mobile bookings up 60% year-over-year.
- Match-3 – Launched Zindagi’s Crazy Cake Swap, which received Best New Game featuring from both Apple and Google at launch; entered into soft launch with two new games, Wizard of Oz Magic Match and Ice Age Arctic Blast.
FarmVille – Entered into soft launch with new FarmVille mobile experience, FarmVille: Tropic Escape; worldwide launch expected in the second half of 2016.
CSR2 – Currently testing across 11 test markets with an expected worldwide launch in early Q3.
- Dawn of Titans – Scaled to 14 test markets with an expected worldwide launch in late Q4.
Financial Highlights (in thousands, except per share data)
|Three Months Ended|
|March 31, 2016||December 31, 2015||March 31, 2015|
|Net income (loss)||$||(26,558||)||$||(51,198||)||$||(46,496||)|
|Diluted net income (loss) per share||$||(0.03||)||$||(0.06||)||$||(0.05||)|
|Non-GAAP net income (loss)||$||1,553||$||375||$||(6,713||)|
|Non-GAAP earnings (loss) per share||$||0.00||$||0.00||$||(0.01||)|
Player Metrics (users and payers in millions)
|Three Months Ended|
|March 31,||December 31,||March 31,||Q1’16||Q1’16|
|Average daily active users (DAUs)||19||18||25||7||%||(21||)%|
|Average mobile DAUs||16||15||19||7||%||(16||)%|
|Average web DAUs||3||3||6||10||%||(37||)%|
|Average monthly active user (MAUs)||68||68||100||1||%||(32||)%|
|Average mobile MAUs||55||55||76||0||%||(27||)%|
|Average web MAUs||13||13||24||4||%||(46||)%|
|Average daily bookings per average DAU (ABPU)||$||0.103||$||0.110||$||0.076||(6||)%||36||%|
|Average monthly unique users (MUUs) (1)||56||48||71||(2||)||16||%||(21||)%|
|Average monthly unique payers (MUPs) (1)||1.0||0.8||1.1||18||%||(12||)%|
|Payer conversion (1)||1.7||%||1.7||%||1.5||%||2||%||11||%|
(1) MUUs, MUPs and payer conversion exclude certain games as our systems are unable to distinguish whether a player of these games is also a player of other Zynga games. We exclude players of these games to avoid potential duplication.
- For the first quarter of 2015, NaturalMotion legacy games (CSR Racing, CSR Classics and Clumsy Ninja) are excluded from MUUs, MUPs and payer conversion.
- For the fourth quarter of 2015, NaturalMotion legacy games (CSR Racing, CSR Classics and Clumsy Ninja) and Rising Tide games (Black Diamond Casino) are excluded from MUUs, MUPs and payer conversion.
- For the first quarter of 2016, Rising Tide games (Black Diamond Casino and Vegas Diamond Slots) and Zindagi legacy games (Yummy Gummy and Crazy Kitchen) are excluded from MUUs, MUPs and payer conversion.
(2) In the third quarter of 2015, the company made a modification to its calculation of MUU to further reduce duplication. MUU for the first quarter of 2015 has been revised to reflect the company’s current calculation.
First Quarter 2016 Financial Summary
- Revenue: Revenue was $187 million for the first quarter of 2016, an increase of 1% compared to the fourth quarter of 2015 and an increase of 2% compared to the first quarter of 2015. Online game revenue was $137 million, an increase of 6% compared to the fourth quarter of 2015 and a decrease of 7% compared to the first quarter of 2015. Advertising and other revenue was $50 million, a decrease of 12% compared to the fourth quarter of 2015 and an increase of 41% compared to the first quarter of 2015. Zynga Poker, Hit It Rich! Slots, Wizard of Oz Slots and FarmVille 2 accounted for 19%, 15%, 15% and 14% of online game revenue, respectively, for the first quarter of 2016 while FarmVille 2, Zynga Poker, FarmVille 2: Country Escape and Hit It Rich! Slots accounted for 20%, 19%, 16% and 15%, respectively, for the first quarter of 2015.
- Bookings: Bookings were $182 million for the first quarter of 2016, flat compared to the fourth quarter of 2015 and an increase of 8% compared to the first quarter of 2015.
- Net income (loss): Net loss was ($27) million for the first quarter of 2016, compared to net loss of ($51) million for the fourth quarter of 2015 and net loss of ($46) million for the first quarter of 2015. The quarter-over-quarter decrease in net loss was primarily due to lower costs and expenses (primarily, in order of significance, restructuring expense, the elimination of duplicative data center costs and marketing costs).
- Adjusted EBITDA: Adjusted EBITDA was $11 million for the first quarter of 2016, compared to $2 million in the fourth quarter of 2015 and $2 million for the first quarter of 2015. The quarter-over-quarter change in adjusted EBITDA was primarily due to the elimination of duplicative data center costs and, to a lesser extent, lower marketing costs due to seasonality in the fourth quarter of 2015.
- Non-GAAP net income (loss): Non-GAAP net income was $2 million for the first quarter of 2016, compared to non-GAAP net income of$0.4 million in the fourth quarter of 2015 and non-GAAP net loss of ($7) million in the first quarter of 2015.
- Net income (loss) per share: Diluted net loss per share was ($0.03) for the first quarter of 2016, compared to diluted net loss per share of ($0.06) for the fourth quarter of 2015 and diluted net loss per share of ($0.05) for the first quarter of 2015.
- Non-GAAP earnings (loss) per share: Non-GAAP earnings per share was $0.00 for the first quarter of 2016, compared to non-GAAP earnings per share of $0.00 for the fourth quarter of 2015 and non-GAAP loss per share of ($0.01) for the first quarter of 2015.
- Cash and cash flow: As of March 31, 2016, cash, cash equivalents and marketable securities were approximately $857 million, compared to $987 million as of December 31, 2015. In the first quarter of 2016, we repurchased 42.2 million shares of our Class A common stock at a weighted average price of $2.40 per share for a total of $102 million. Cash flow from operations was ($3) million for the first quarter of 2016, compared to $3 million for the fourth quarter of 2015 and ($47) million for the first quarter of 2015. Free cash flow was ($6) million for the first quarter of 2016 compared to $3 million for the fourth quarter of 2015 and ($49) million for the first quarter of 2015.
Second Quarter Outlook
Zynga’s outlook for the second quarter of 2016 is as follows:
- Revenue is projected to be in the range of $170 million to $180 million
- Net loss is projected to be in the range of ($26) million to ($20) million
- Net loss per share is projected to be in the range of ($0.03) to ($0.02) based on a share count projected to be approximately 875 million shares
- Bookings are projected to be in the range of $160 million to $170 million
- Adjusted EBITDA is projected to be in the range of break-even to $5 million.
- Non-GAAP loss per share is projected to be in the range of ($0.01) to $0.00, based on a share count projected to be approximately 875 million shares (Original Source)
Shares of Zynga jumped nearly 15% to $2.64 in after-hours trading. ZNGA has a 1-year high of $3.13 and a 1-year low of $1.78. The stock’s 50-day moving average is $2.34 and its 200-day moving average is $2.38.
On the ratings front, Zynga has been the subject of a number of recent research reports. In a report issued on March 2, Cowen analyst Doug Creutz maintained a Hold rating on ZNGA. Separately, on the same day, Robert W. Baird’s Colin Sebastian maintained a Hold rating on the stock and has a price target of $3.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Doug Creutz and Colin Sebastian have a total average return of 12.7% and 16.3% respectively. Creutz has a success rate of 53.1% and is ranked #528 out of 3838 analysts, while Sebastian has a success rate of 71.8% and is ranked #15.
Overall, one research analyst has rated the stock with a Sell rating, 4 research analysts have assigned a Hold rating and 4 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $3.25 which is 40.7% above where the stock opened today.
Zynga, Inc. operates as an online social game services company. It engages in the developing, marketing and operating of online social games as live services played over the Internet and on social networking sites and mobile platforms. The company provides its online social games under the Zynga Poker, Words With Friends, Scramble With Friends, Gems with Friends, Draw Something, FarmVille, FarmVille2, ChefVille, CityVille, Bubble Safari and Ruby Blast. It has operations in Asia, Canada, Europe and the United States of America. The company was founded by Mark Jonathan Pincus on April 19, 2007 and is headquartered in San Francisco, CA