Zynga Wins Big On Triple Announcement: Earnings, An Acquisition, A Headcount Cut

Jan 30 2014, 6:18pm CST | by

Zynga came out with 2013 full year and fourth quarter results a full week ahead of schedule, but the move seems to be paying off. Shares were up close to 20% to $4.25 in after-hours trading following the surprise announcement which included 2013 earnings, as well as news of an acquisition and plans to cut jobs.

On a non-GAAP basis the digital gaming company reported $716.2 million in annual bookings — a predictor of sales — down from $1.1 billion in the year prior, but ahead of Wall Street’s $712 million consensus estimate. Adjusted EBITDA came in at $46.5 million and non GAAP net loss was $34.1 million, or minus 4-cents per share.

On a GAAP basis full year revenue came in at $873.3 million, down 32% from the year prior. But the company managed to slash it’s net loss to $37 million from $209.4 million in 2012. Loss per share was 5 cents, versus 28 cents in 2012.

“Over the last 7 months, our teams have been working with a sense of urgency,” said CEO Don Mattrick in a statement. “We finished 2013 in a strong position and expect 2014 to be a growth year.” He declared high hopes for a foundation setting first quarter and noted that investments in popular game Words With Friends and in Zynga’s Casino have begun to pay off.

He added, “Our market is growing as measured by device, audience and dollars and we have the privilege to compete in one of the fastest growing parts of the entertainment industry. We have an ambitious agenda and we are moving quickly to add capabilities that are complementary and strategic to our core growth plans.”

The company also announced that it has acquired NaturalMotion, a privately held mobile gaming company responsible for hits like CSR Racing and Clumsy Ninja. Zynga paid around $527 million for NaturalMotion, including $391 million in cash and 39.8 million Zynga shares at its $3.42 close price on January 29.

In addition to creative and technological gains in mobile, Zynga expects the deal to add between $70 million and $80 million to non-GAAP earnings this year. “NaturalMotion set out to make games that wow millions of people, by being obsessed with quality, disrupting and creating genres, and using almost magical technology,” said Natural Motion CEO Torsten Reil. “We’ve reached our first milestones — creating #1 top-grossing and top-free titles — on our own. We can’t wait to see what we can achieve together with Zynga.”

Finally, Zynga announced what it is calling a “cost reduction plan.” The plan includes cutting 314 employees, approximately 15% of its workforce. The company expects the cuts to result in $33 million to $35 million in pre-tax savings, excluding a first quarter restructuring charge between $15 million and $17 million.

Looking ahead Zynga forecasts first quarter revenue between $155 million and $165 million including the impact of NaturalMotion. Net loss is projected to fall between $56 million and $49 million, including restructuring charges. The company expects bookings in the range of $138 million to $148 million.

For the full year, the outlook on bookings it between $760 million and $810 million, for non-GAAP earnings per share to return to positive territory between 1-cent and 3-cents.

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Source: Forbes Business


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