Zynga Struggles With Declining User Base in Q2 Earnings

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Zynga (NASDAQ:ZNGA) announced its second quarter results on Thursday, Aug 4. The company’s revenues decreased 9% year-over-year (y-o-y) to $181.7 million, but beat the average consensus estimates of $169.4 million. Zynga also posted break-even adjusted earnings per share. The gaming company generated $174.7 million in bookings during this quarter, which was above the company’s high-end guidance but flat compared to a year ago. Adjusted EBITDA increased over ten times y-o-y to $11.6 million, against the company’s own guidance of break-even to 5 million. This increase was driven by better-than expected bookings of Zynga’s key franchises, Words With Friends, Slots and Zynga Poker. zynga_01zynga_02

Focus On New Games

The company launched four new games, including the successful release of NaturalMotion’s highly anticipated CSR Racing 2. However, Zynga’s online game revenue declined 6% y-o-y to $136 million, with Poker constituting 19% of the total online games revenue this quarter and Slots accounting for 38%.

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User Base Continues To Decline

Zynga continues to lose monthly and daily active players. Its user base declined on both the web and mobile platforms, with mobile daily active users (DAUs) declining 11% y-o-y to 15 million. The company will be focusing on games such as CSR Racing 2 to interest its users, and success with these new games could lead to upside in the company’s stock.

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Q3 Guidance

For the third quarter, the company projects revenue in the range of $170 to $180 million, the same as it quoted the last quarter. The company expects adjusted EBITDA to be between $12 million and $16 million and bookings to be in the range of $180 million to $190 million. Zynga also plans to launch Farmville: Tropic Escape in late Q3.

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