King beats Wall Street estimates for Q3 earnings, but revenues weaken

King, the Candy Crush Saga game publisher which has agreed to be acquired by Activision Blizzard for $5.9 billion on Monday night, reported earnings for the third quarter that beat Wall Street’s estimates.

The results show that King wasn’t necessarily desperate for a rescue because it was overly dependent on one game, as critics have said. Even though Candy Crush Saga is a few years old, the game and its various Saga brethren are still driving good results at King. That’s a testament to the power of mobile games, which reach a billion people and are expected to generate $30 billion in revenue in 2015.

[aditude-amp id="flyingcarpet" targeting='{"env":"staging","page_type":"article","post_id":1833887,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"bots,business,games,mobile,","session":"A"}']

Still, King’s results did weaken compared to a year ago.

King reported non-GAAP earnings per share of 45 cents on gross bookings of $502 million for the quarter ended September 30, compared with earnings per share of 56 cents a share on bookings of $544 million. Adjusted earnings before income tax, depreciation, and amortization were $180 million, compared with $216 million a year ago. Analysts had expected earnings per share of 29 cents. King’s own goal was $460 million to $485 million in bookings for the third quarter.

“Our Q3 results show that our business remains positive, profitable, and cash-flow positive,” said Riccardo Zacconi, the chief executive of King, in a conference call with analysts. “The primary reason for beating our guidance is the strength of our franchises.”

---

Why King’s CEO decided Candy Crush Saga, World of Warcraft, and Call of Duty were the perfect ‘match 3’

---

All of the games offered fresh content through live operations, such as tournaments, during the quarter. These events increased the monetization of playing payers, Zacconi said.

King’s transaction with Activision Blizzard is expected to close in the first quarter of 2016. King launched Blossom Blast Saga, a linker game for on iOS and Google Play. In the quarter, Paradise Bay also launched, expanding the overall network. Zacconi said cross-promotion of Paradise Bay with existing games was “very effective,” and it brought more new players than other Saga games that have launched. That means there is less cannibalization.

“These results reflect our continued execution of our franchise strategy and the longevity of our brands,” Zacconi said in a statement. “We are also pleased to have recently launched Blossom Blast Saga, our first game with a linker mechanic, and look forward to introducing this new game play to players around the globe.”

King said it had 474 million monthly active users in the third quarter, compared with 495 million a year earlier. It had 133 million daily active users, compared with 137 million a year ago. Monthly unique payers were 6.8 million, compared with 8.7 million a year earlier. Monthly gross average bookings per paying user rose to $24.45 per user compared to $20.92 a year ago.

[aditude-amp id="medium1" targeting='{"env":"staging","page_type":"article","post_id":1833887,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"bots,business,games,mobile,","session":"A"}']

“We are excited about the transaction with Activision Blizzard,” Zacconi said. “We believe the transaction will position us very well for the next phase of our company’s evolution and will bring clear benefits to our players and employees, while providing a return to our shareholders through the share price premium and the immediate liquidity it will provide to all shareholders upon completion.”

Zacconi said that the company expanded to Asia with a localized version of Bubble Witch 2 Saga in South Korea and China. It is also launching a studio in Shanghai to handle localization and to create new games in the region.

The Candy Crush Saga series was 40 percent of bookings in the quarter. There are still headwinds in the web business, said Hope Cochran, chief financial officer of King, in the conference call. About 82 percent of bookings, or $414 million, came from mobile.

King expects Q4 bookings of $475 million to $500 million. King has 1,600 employees.

[aditude-amp id="medium2" targeting='{"env":"staging","page_type":"article","post_id":1833887,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"bots,business,games,mobile,","session":"A"}']

“Our business is healthy,” Zacconi said. “We have strong financials with industry leading margins.”