Some interesting points:
Zynga Wins Big On Triple Announcement: Earnings, An Acquisition, A Headcount Cut
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 Streets $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.
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. Weve reached our first milestones creating #1 top-grossing and top-free titles on our own. We cant 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.
First, if 314 employees were just 15% of workforce, they have had too many staff.
Second, they got much better staff and IP with NM
Third, 391 million in cash is half of their revenue. If they predict their revenue increase significantly after the deal, that might be OK. CSR racing, a game of NM, was reported to have 12 million revenue per month, which makes it 144 million annually.
NaturalMotion Ltd is a leading games and technology company based in Oxford, London, San Francisco, and Brighton. Its high-end mobile games label, NaturalMotion Games, is one of the most successful and fastest growing mobile gaming companies in the UK.
The company creates ultra-high quality free-to-play games that combine polished gameplay with high-end 3D graphics.
NaturalMotion Games CSR Racing for iOS released in July 2012. It reached number 1 in the Top Free and Top Grossing charts in over 70 countries worldwide and was the only title featured on stage during Apples WWDC 2012 conference. The company announced that the game generated more than $12 million revenue a month
The companys next title, Clumsy Ninja, was revealed during Apples iPhone 5 keynote.
NaturalMotion Technology produces leading animation software products such as the award-winning euphoria engine - a break-through in real-time character animation, and used in games such as GTA IV, Red Dead Redemption and Max Payne 3. NaturalMotions other run-time animation product, Morpheme, is the industrys first graphically authorable animation engine. Morpheme is the most widely used animation engine in the console and PC games industry.
This means that Zynga, which wasn't strong on 3D, now may have much better animation and graphics. Also, NM is strong in freemium, same to Zynga. Maybe good combination after all and very good for Natural Motion founders.
Whatever else Natural Motion does is irrelevant when they'll simply be folded into the Zynga umbrella like all of their other acquisitions.