Zynga Users Dying Off Faster Than Smokers

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Zynga Inc. (NASDAQ: ZNGA) saw its shares trade higher on Thursday ahead of earnings. The euphoria was tied to the Facebook Inc. (NASDAQ: FB) stock surge after earnings. The good news for Zynga is that a new CEO is in town. The bad news is that Zynga’s user base is dropping off about as rapidly as a chart measuring the decline of smokers in the 1990s.

24/7 Wall St. is not very concerned about the earnings with a loss of -$0.01 EPS on a non-GAAP basis. What stands out here is the broad declining metrics. Its second quarter revenues were down 31% year over year to $231 million. Thomson Reuters had estimates of -$0.04 EPS and $185.42 million in sales. The fact that sales were not as bad as expected will not help when you look at how bad the erosion of its key metrics are. Zynga’s bookings were down 38% year over year to $188 million.

The company’s cost reductions brought a $25 million restructuring charge, but this is expected to generate pre-tax cash savings ranging from $70 million to $80 million per year. Don Mattrick has his work cut out for him. We want you to see just how bad these declines are looking in its user base:

  • Daily active users have fallen from 72 million in the second quarter of 2012 to 39 million in the second quarter of 2013 (down 45%).
  • On a consecutive quarter basis, daily active users were down 24% from 52 million in the first quarter of 2013.
  • Monthly active users have dropped from 306 million in the second quarter of 2012 to 187 million (down 39%).
  • On a consecutive quarter basis, the monthly active users are down 26% from 253 million in the first quarter of 2013.
  • Monthly unique users have fallen from 192 million in the second quarter of 2012 to 123 million in the second quarter of 2013 (down 36%).
  • On a consecutive quarter basis, monthly unique users have fallen 18% from 150 million in the first quarter of 2013.
  • Monthly Unique Payers have fallen from 4.1 million in the second quarter of 2012 to 1.9 million in the second quarter (down 53%); and on a consecutive quarter basis these monthly unique payers were down 22%.

The only good news we see here on the metrics are as follows: Average daily bookings per average DAU rose 14% from $0.046 in the second quarter of 2012 to $0.053 in the second quarter of 2013. On a consecutive quarter basis, this was up 6% from $0.049 in the first quarter of 2013.

Zynga did offer some lower guidance at the mid-points as well for its third quarter of 2013. Revenue is projected to be in the range of $175 million to $200 million, with its net loss expected to be -$43 million to -$14 million, and with its earnings per share put in a range of -$0.05 to -$0.02. Thomson Reuters has estimates of -$0.02 EPS and $192.76 million.

Zynga shares were down 13% at $3.07 in the after-hours session on Thursday against a 52-week trading range of $2.09 to $4.03.

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