Zynga, Inc. (NASDAQ:ZNGA) will hold a conference call to discuss financial results for its third quarter on Oct. 24, 2013, at 2:00 p.m.Pacific Time (5:00 p.m. Eastern Time), following the release of its financial results after the close of market.
San Francisco, California-based Zynga is a leading provider of social game services. Zynga's popular games include Zynga Poker, Words With Friends, Scramble With Friends, Gems With Friends, Draw Something, FarmVille 2, ChefVille, CityVille, Bubble Safari and Ruby Blast.
Wall Street expects Zynga to report a loss of 4 cents a share, according to analysts polled by Thomson Reuters. In the same period last year, Zygna reported breakeven results. Zynga sees third quarter loss of 2 to 5 cents a share.
In the last three quarters, Zynga's earnings have managed to top Street view, with upside surprise ranging between 75 and 133.3 percent. However, the Street's enthusiasm for Zynga's earnings have diminished as the consensus loss estimate has widened by 2 cents in the past 90 days. On the positive side, two analysts have raised their third quarter expectations for Zynga in the past 30 days.
Quarterly revenues are expected to decline 43.9 percent to $143.35 million from $255.61 million a year-ago. In the past four quarters, the company's revenue growth has been -31, -18, flat and 3 percent, respectively. The company forecasts revenue of $175 million to $200 million.
The comments of Mattrick during the second quarter call "we expect to see more volatility in our business than we would like over the next two to four quarters," doesn't bode well for the third quarter results.
Zynga is taking substantial steps to restructure its business away from web-based social PC games in an attempt to narrow its focus on mobile gaming, and the transition toward mobile gaming is likely to weigh on its earnings.
Recently, co-founder Justin Waldron left the company to pursue other goals and Zynga have lost its position as the top game-maker f! or Facebook to King.com, which develops "Candy Crush Saga." King.com has a monthly active user base of 159.4 million versus Zynga's 131.5 million, according to AppData. This shows fewer users are playing Zynga games on Facebook.
Daily active users (DAUs) of Zynga fell 45 percent to 39 million in the second quarter of 2013. Monthly active users (MAUs) decreased 39 percent to 187 million and monthly unique users (MUUs) also fell 36 percent to 123 million.
The magnitude of the reductions indicates a faster-than-anticipated deterioration for web-based social games and possibly a more challenging transition ahead for the company as it shifts toward more fragmented mobile gaming platforms. In this scenario, bookings would be a key metric. Bookings were $188 million for the second quarter of 2013, a decrease of 38 percent from last year.
Through the first two months of the third quarter, worldwide desktop comScore data for Zynga showed a 31.4 percent YoY decline in unique visitors globally, but a 2.8 percent increase in total minutes and a 22 percent increase in total page views.
U.S. mobile data (iPhone + Android) showed weaker trends, with unique visitors declining 27.2 percent YoY and mobile minutes slipping 14.1 percent.
During the quarter, the company hired Don Mattrick as CEO. Mattrick hails from Microsoft's Xbox business and succeeded founder Mark Pincus. Pincus remains the Chairman and Chief Product Officer of Zynga.
Following his appointment, Mattrick announced an organization restructure that led to the departure of three executives – David Ko (Chief Operating Officer), Cadir Lee (Chief Technology Officer), and Colleen McCreary (Chief People Officer) – and a realignment of other leaders. Recently, co-founder Justin Waldron just left the company to pursue other goals.
Investors expect Mattrick to provide further details on the company's new organizational structure and operating priorities on the upcoming conference call.
"We estimate online game rev! enue will! be $162mm, down 43% YoY," UBS analyst Eric Sheridan wrote in a note to clients.
Dojo Mojo and Castleville Legends were among the major releases during the quarter, though Zynga also launched Words with Friends in seven new languages (Spanish, Italian, Portuguese, Danish, Dutch, Russian and Swedish).
Late in the second quarter, Zynga launched Hidden Shadows and Eden to Green (the latter developed by iNiS), which is expected to have a greater contribution in the third quarter than in second.
During the second quarter earnings call, Zynga announced that the company would not pursue real money gaming licenses in U.S. jurisdictions. That said, the company's real money gaming offerings in the UK (ZyngaPlusPoker and ZyngaPlusCasino) remain active.
"We look forward to hearing more about management's plans regarding the international real money gaming opportunity, as well as thoughts on revisiting the U.S. opportunity in the future, Sheridan said.
For the second quarter, Zynga's loss narrowed to $15.8 million or 2 cents a share from $22.8 million or 3 cents a share last year. Excluding items, adjusted loss was 1 cent a share. Zynga's revenues for the second quarter dropped to $230.7 million from $332.5 million last year.
Zynga has reported third quarter results just once in its short history as a public company, trading up 12 percent following those results. The stock has outperformed the market by about 34 percent this year.
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