|Zynga User Base Shrinks Further, Loss Narrows on Accounting Change |
Quarterly improvement driven by lower expenses
By Lisa Beilfuss
The Wall Street Journal
Updated Aug. 4, 2016 4:37 p.m. ET
Videogame developer Zynga Inc. ZNGA 0.34 % ’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 FB 1.51 % 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.