Zynga Lowering Full-Year Results Again; Recording Huge Negative for OMGPOP
Zynga is reporting preliminary third-quarter results today, but it won’t do much to comfort investors who were already growing wary of the company’s prospects.
The social games company says that the third quarter is falling behind because its bread-and-butter Ville-style games continue to underperform. Additionally, the company said it is lowering projections for the full year, and that it will have to write down the acquisition costs of OMGPOP by as much as $95 million.
In after-hours trading, the company’s stock was in a downward spiral, falling as much as 16.5 percent to $2.35 a share. At the end of the second quarter, Zynga had $1.85 in cash per share, not including other hard assets, like its San Francisco headquarters, which represents another 25 cents a share.
In the release today, Zynga said it expects to report third-quarter revenue in the range of $300 million to $305 million and bookings in the range of $250 million to $255 million. Zynga also expects to report a net loss of between $90 million and $105 million, or roughly a 12 cent to 14 cent per share loss.
The weakness is being caused by the performance of certain games, including TheVille. The company is also writing down its full-year guidance again because it is expecting delays for several new games.
The company’s updated outlook for full-year 2012 includes bookings in the range of $1.09 billion to $1.1 billion (compared to previous expectations of between $1.15 billion to $1.23 billion), and adjusted EBITDA projected to be in the range of $147 million to $162 million (compared to previous expectations of between $180 million to $250 million).
In a blog post to employees, CEO Mark Pincus tried to sound upbeat about how Zynga still serves more than 311 million monthly active users, but admittedly, he said some things will have to change. Instead of Ville-style games, they will focus on the casino genre and mid-core titles in addition to investing in mobile.
“We’re addressing these near-term challenges by targeted cost reductions and focusing our new game pipeline to reflect our strategic priorities,” he wrote. “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 multi-platform game network.”
Here’s Zynga’s CEO Mark Pincus’ note to staff that was posted on the blog:
Today we announced preliminary Q3 financial results and revised our forecast for the rest of the year. I want to add more color to the announcement and our future opportunity.
The challenges we faced in our web business in Q2 continued in Q3 and while many of our games achieved plan, we still experienced overall weakness in the invest and express category. To address this we’re further investing in other genres like casino where we already lead with Zynga Poker and blue PVP, a category we pioneered with Mafia Wars, and now have the opportunity to reinvent with the industry’s best talent here at Zynga.
While we’re disappointed with these financial results, we’re proud of the progress that our teams made on many fronts. We continue to see the power of our player network, launching three games, each achieving top 10 status with more than 6 million daily players. Within its first six weeks, ChefVille has become a mainstay for 45 million monthly players and FarmVille 2 introduced stunning 3-D farming for the first time in a web browser becoming the most popular social game within three days of network launch.
So why are we lowering 2012 guidance? There are a few factors contributing to a weaker than expected outlook for Q4. The reduced performance of some of our live web games is continuing to impact results and we have several new games which are at risk of launching later than expected.
We’re addressing these near-term challenges by targeted cost reductions and focusing our new game 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 multi-platform game network.
Let’s not lose sight of the bigger picture. The world is playing games, and is increasingly choosing social games. Zynga has become synonymous with social gaming serving 311 million monthly active users, the largest player network on web and mobile. When we offer our players highly engaging content they respond. FarmVille 2 has been our most successful launch since CastleVille. Our With Friends franchise is defining social play on mobile where Zynga represents 3 of the top 5 most popular mobile games in terms of time spent in the U.S. according to Nielsen. While we’re encouraged by our strong starting position on mobile, developing this new growth market to the scale of our web business will take time.
Over the past few weeks, we’ve been meeting with you all to check-in and answer your questions. It’s exciting to hear how much passion you have to innovate on new ideas. We have an amazing opportunity to channel this into breakthrough new products that surprise and delight, excite and ignite our players.
Please join me and your fellow Zyngites today to discuss Q4 OKRs and our next steps.Thanks for all your hard work to pioneer social gaming. I look forward to working together to deliver on our mission of truly connecting the world through our games.