Zynga CEO: company will be profitable this year

Don Mattrick points to restructuring, increased discipline and strategic hires, such as new COO

In a conference call following the company's strong third quarter earnings on Thursday, Zynga CEO Don Mattrick spoke about what the opportunity he sees for Zynga's future.

"We have an incredible opportunity to build new muscle, embrace new practices, and create old ideas that will contribute to the growth of our market," he said.

The company was able to beat expectations in the quarter, and Mattrick announced that he now expects the company to be profitable on an adjusted EBITDA basis.

The company now has five commitments, he said, to align the organizational structure and create a foundation for growth. They are: grow and sustain top franchise, create new hits, move to mobile, prove out the Zynga network and drive efficiency.

A big part of the reason that Zynga was able to come out ahead in the quarter were job cuts, studio closing and changes to its executive structure, the latter of which helped "drive increased accountability."

"We're making great progress on strengthening our teams and bringing in strategic new hires," Mattrick said. And that includes the company's new COO, Clive Downie, whose hire was announced on Thursday.

Downie was most recently Chief Executive Officer of DeNA West.  He also spent more than 15 years at Electronic Arts, serving as Vice President of Marketing, managing franchises including FIFA Soccer, Need for Speed, Medal of Honor and Command & Conquer.

He is replacing former COO David Ko, who was let go in August.

"Clive is a seasoned leader, with a deep understanding of consumer entertainment, a unique international perspective and strong management background in game publishing," said Mattrick. "All of which are inredibly valuable as Zynga navigates its move to mobile."

The changes that have been made to the structure of the company will help the company sharpen its executition, improve product quality and discipline, he said.

And in, addition, the company is spending more time developing its products, and testing how well they are received. 

Third quarter numbers

In the third quarter, Zynga reported revenue of $203 million for the third quarter of 2013, down 36% from the same period last year and down 12% from the second quarter of 2013. The company reported non-GAAP earning per share of -$0.02. Analysts had been expecting to see a loss of 4 cents per share on revenue of $189 million. 

Zynga also beat its own expectations. In its second quarter earnings report, the company projected revenue in the range of $175 million to $200 million for Q3 2013, while non-GAAP EPS was projected to be in the range of ($0.05) to ($0.02).  The company was expecting a net loss is in the range of $43 million to $14 million, 

"I am pleased with our Q3 performance which exceeded our guidance both in terms of bookings and adjusted EBITDA. We are encouraged to see sightlines to growth and expect to be profitable for the full year on an adjusted EBITDA basis," said Don Mattrick, CEO of Zynga, said in a statement.

"Our teams are working hard to compete more aggressively on the Web, move to mobile and develop new hits, and I am happy with the early progress we have made. We believe our top franchises, Zynga Poker, FarmVille and Words With Friends can be evergreen in terms of consumer interest and we are focused on growing these franchises in fiscal year 2014. I am confident that Zynga is rewiring itself in a meaningful way that will strengthen the core of our business and put us back on track to achieve significant long term growth and profits."

Bookings for the quarter were $152 million, a decrease of 40% compared to the third quarter of 2012 and a decrease of 19% compared to the second quarter of 2013.

Net loss was $68 million for the third quarter of 2013, up from $53 million in the third quarter of 2012, and $16 million in the second quarter of this year. 

Online game revenue was $174 million, a decrease of 39% compared to the third quarter of 2012 and a decrease of 14% compared to the second quarter of 2013. Advertising revenue was $28 million, a of 9% compared to the third quarter of 2012, but an increase of 3% compared to the second quarter of 2013.

Zynga saw daily active users decrease 49%, from 60 million to 30 million, year to year. Quarter to quarter, they were down 23%, from 39 million. Web DAUs and Mobile DAUs were 16 million and 14 million in the third quarter of 2013, respectively.

Monthly active users were also down. They decreased 57% year to year, going from 311 million to 133 million. They were down 29% from 187 million last quarter. Web MAUs and Mobile MAUs were 82 million and 51 million in the third quarter of 2013, respectively.

Zynga is projecting revenue for Q4 to be in the range of $175 million to $185 million, with a projected net loss of between $31 and $21 million.

The company is projecting EPS to be in the range of ($0.05) to ($0.04), based on a share count of approximately 812 million to 822 million shares.

(Image source: https://www.bbc.co)