What To Watch For In Zynga’s Q4 Earnings

by Trefis Team
-13.48%
Downside
3.94
Market
3.41
Trefis
ZNGA
Zynga
Rate   |   votes   |   Share

Zynga (NASDAQ:ZNGA) is scheduled to release its financial results for the fourth quarter Thursday, February 9th. For Q4 2016, Zynga projects revenue in the range of $180 to $190 million, much lower than earlier estimates of around $202.8 million. The company expects adjusted EBITDA (new methodology) to be between $12 million and $14 million and bookings to be in the range of $185 million to $195 million. In terms of bottom line, the company expects a net loss of $25 to $27 million in the quarter.

znga-11
Key Metrics To Watch

  1. Revenue Growth: Zynga reported a 12% decline in revenue from online games in the first nine months of the year, which was partially offset by a 22% increase in advertising revenue in the same period. Going forward, we expect sales to continue to decline on a year-over-year (y-o-y) basis owing to a declining user base, but total bookings could improve driven by growth in the company’s key franchises: Words With Friends, Slots, Zynga Poker and the recently launched CSR Racing 2 and FarmVille: Tropic Escape.
  2. Adjusted EBITDA & Free Cash Flow: Zynga’s adjusted EBITDA improved over 7x y-o-y to $22.5 million and free cash flow improved to $7.3 million in the first six months of the year, driven by lower R&D expenses and lower general and administrative costs. In the third quarter, adjusted EBITDA declined 44% y-o-y to $17.9 million but beat the company’s own guidance of $12-16 million. This decline in adjusted EBITDA was driven by higher costs, owing to mobile payment processing fees due to the launch of CSR Racing 2, headcount-related expenses and marketing costs for CSR Racing 2 and FarmVille: Tropic Escape, offset by better than expected bookings.Zynga expects to report adjusted EBITDA of $12-14 million in Q4 2016, compared to $1.7 million in Q4 2015.
  3. User Base: Zynga continues to lose monthly and daily active players. Its user base declined on both the web and mobile platforms, with monthly active users (DAUs) declining 13% y-o-y to 66 million at the end of September 2016. However, the company was able to increase its average monthly unique users (MUUs) as well as its average monthly unique payers (MUPs) both y-o-y and quarter-over-quarter to 57 million and 1.3 million, respectively, by the end of the third quarter.The company is currently focusing on new games such as CSR Racing 2 and FarmVille: Tropic Escape to interest its users, and success with these games could lead to higher user growth and user engagement going forward.

See our full analysis for Zynga here.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research  

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!