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Gaming company cut full year outlook on weak quarterly numbers
It has been an unusually rough year for Zynga. A bad earnings report last quarter has lead to a series of bad news stories for the company, and now things are about to get even worse.
In a preview of its financial results for the third quarter of 2012, Zynga said that it expected to report revenue in the range of $300 million to $305 million and bookings in the range of $250 million to $255 million. The company also said that it will be reporting a net loss of between $90 million and $105 million, with non-GAAP net loss between $2 million and $5 million.
As a result, Zynga is now lowering expectations for the year, projecting full 2012 booking to be in the range of $1.085 billion to $1.100 billion, down from its previous expectations of between $1.150 billion to $1.225 billion. Adjusted EBITDA is projected to be in the range of $147 million to $162 million, down from $180 million to $250 million.
The full financial results for the third quarter will be released on October 24th.
Zynga blamed the bad numbers in the third quarter on “weakness of certain games in our web ‘invest and express’ category” as well as “reduced expectations for certain web games including The Ville, and delays in launching several new games.”
"The third quarter of 2012 continued to be challenging and, while many of our games performed to plan, as a whole we did not execute to our satisfaction," Mark Pincus, CEO and Founder, Zynga, said in a statement. "We're addressing these near-term challenges by implementing targeted cost reductions in the fourth quarter and rationalizing our product R&D pipeline to reflect our strategic priorities.”
This is the second time Zynga is cutting its full year outlook in only a few months. In July, Zynga lowered its booking estimates after a disappointing second quarter, from an estimation of $1.43 billion to $1.5 billion. In its quarterly earnings report, Zynga reported a loss of 3 cents a share, or a 1 cent profit on an adjusted basis, on revenue of that grew 19% to $332 million, far short of analysts' expectations of 5 cents a share on revenue of $345 million.
In response to its bad second quarter numbers, Zynga tried to hang on to its workers by offering them company stock, specifically 43,295,554 shares, at prices from $2.53 to $2.97 per share, perhaps not understanding that it was the low stock price that was causing the employees to want to leave in the first place.
So, unsurprisingly, the gambit did not work, and a slew of Zynga executives and employees have all decided to leave in the last few months.
First was Zynga’s Chief Operating Officer John Schappert who resigned in August. No explanation was given, with the company saying in an SEC filing that the resignation was “not tendered in connection with any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.”
Erik Bethke, general manager of Mafia Wars 2; Ya-Bing Chu, a VP in Zynga’s mobile division; and Jeremy Strauser, a general manager have all left as well.
Add to that the accusations that Zynga executives and investors engaged in insider trading when they sold their stock months before it crashed, and the lawsuit from Electronic Arts, who claimed that Zynga had plagiarized EA’s signature game, The Sims Social, with The Ville.
2012 has been nothing but trouble for Zynga.
(Image source: https://blogs.sj-r.com)
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Zynga is the largest social gaming company with 8.5 million daily users and 45 million monthly users. Zynga’s games are available on Facebook, MySpace, Bebo, Hi5, Friendster, Yahoo! and the iPhone, and include Texas Hold’Em Poker, Mafia Wars, YoVille, Vampires, Street Racing, Scramble and Word Twist. The company is funded by Kleiner Perkins Caufield & Byers, IVP, Union Square Ventures, Foundry Group, Avalon Ventures, Pilot Group, Reid Hoffman and Peter Thiel. Zynga is headquartered at the Chip Factory in San Francisco. For more information, please visit www.zynga.com.