Zynga Delivers Non-GAAP Net Profits in Fourth Quarter

Andrew Klips |

GRPN, LNKD, P, YNDX, IPO, Zynga, Zynga IPO, offering price, share price, valuation, analyst opinion, sell, underperform, Arvind Bhatia, Sterne Agee, tech IPO, farmville, cityville, castlevilleShares of Zynga Inc. (ZNGA) were pushing ahead during regular trading hours and gathered steam in extended trading after the social game maker shriveled its net loss during the fourth quarter and topped Wall Street expectations for revenue.

San Francisco, California-based Zynga said that fourth quarter revenue was $311.17 million, narrowly behind the $311.24 from the year prior quarter.  The big shift came in net loss, which contracted to $48.56 million in the fourth quarter of 2012, versus $435.01 million in Q4 2011.  Excluding items, Zynga earned 1 cent per share in the recent quarter, compared to 5 cents per share the year earlier.

Analysts were expecting an adjusted loss of 3 cents per share and revenue of $212.1 million.

Bookings for the fourth quarter were $261.3 million, a decrease of 15 percent compared to the fourth quarter of 2011 and an increase of 2 percent compared to the third quarter of 2012.

"The biggest highlight of the quarter was seeing our team deliver a successful sequel in FarmVille2, a next generation social game that offers cutting edge 3-D experiences loved by millions of FarmVille fans," said Mark Pincus, CEO and Founder of Zynga.  Pincus said that the company is brining the new class of games to mobile phones and tablets in 2013 as well as developing a superior network for gamers to interact.

The shift to a larger mobile platform has been a bane in the pocketbook for Zynga.  In October, the company slashed its outlook for the full year, citing in part delays in rolling out new games and transitions to mobile devices.

In the recent quarter, daily active users, or DAUs, increased by two million to 56 million compare to the fourth quarter of 2011, although DAUs were down 6 percent from the third quarter of 2012.  Monthly active users, of MAUs, climbed 24 percent in the recent quarter to 240 million compared to Q4 2011, but were down 4 percent on a consecutive quarter basis.

For the complete year 2012, Zynga recorded revenue of $1.28 billion, topping 2011’s total of $1.14 billion.  Net losses for 2012 were 28 cents per share, down from $1.40 per share for the year earlier.  Non-GAAP earnings per share fell from 24 cents in 2011 to 7 cents per share in 2012.

Online gaming revenue, far and away the biggest money maker for Zynga, increased by 7 percent year-over-year to $1.14 billion.

According to AppData, based on DAUs at the end of 2012, Zynga had five of the top 10 games on Facebook, including its blockbusters Words With Friends and Zynga Poker, and some of its newer games, Bubble Safari, ChefVille and FarmVille 2.

Looking ahead, Zynga projects revenue during the first quarter in the range of $255 million to $265 million.  Net loss is expected to be between $12 million and $32 million, while adjusted net losses are anticipated of 4 to 5 cents.

Helping lift shares during normal trading hours was an upgrade by Bank of America (BAC) to a “buy” rating from “underperform” and boosted its price target from $2.70 to $3.40.  Shares closed the day at $2.74 for a 7 percent gain and continued to rise in after-hours trading following the earnings release.  Wednesday will be interesting as investors digest the report and ponder the company still projecting losses for the first quarter.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
Sun Life Fin 12R Sun Life Financial Inc.
ZNGA Zynga Inc.
SLF.PR.I:CA Sun Life Financial Inc. Class A Non-Cumulative Rat
SLF.PR.I:AP Sun Life Financial Inc. Class A Non-Cumulative Rat
SLF.PR.I:PU Sun Life Financial Inc. Class A Non-Cumulative Rat
SLF.PR.I:CH Sun Life Financial Inc. Class A Non-Cumulative Rat
SLF.PR.I:CX Sun Life Financial Inc. Class A Non-Cumulative Rat

Comments

Emerging Growth

Taranis Resources Inc.

Taranis Resources Inc is an exploration stage company. The Company along with its subsidiaries is engaged in the acquisition and exploration of mineral properties. Its projects include Thor Property in…

Private Markets

Ozobot by Evollve Inc

Ozobot is a world leader in compact super intelligent robots that entertain and educate through fun interactive gaming.

Lyft

Lyft matches drivers using their own personal vehicles with passengers who request rides through the smartphone app, and the passengers pay automatically through the app. When using Lyft, passengers have…