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King has released its Q1 earnings for 2014, and they are not pretty

By on May 7, 2014
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The stock market will respond to how King’s performance compares to the "indications" they gave during their IPO roadshow. That means that there are some ways we can look at the these numbers and understand what is going on, but unless we were in on those roadshows to understand investor expectations, it’s hard to analyse the results.

BUT a share price fall of 13% suggests that in the eyes of investors, King has failed to deliver. Some highlights (or lowlights):

  • revenue flat-ish at $606.07m, but profit down from $159.2m in Q4 13 to $127.2m in Q1 14, blamed in part on "planned marketing spend for Farm Heroes"
  • a trend of profit decline over two quarters which is bad and will make many investors think that a) King was overvalued at IPO and b) that they were sold a pup.
  • DAUs are up by 19 million, which is good, but may be driven by increased marketing spend. MAUs up 73 million to 481 million is good, but by a quirk of how King accounts for MAUs, these may be duplicate Candy Crush players also playing Farm Heroes Saga. Oh, and they have spent a bucket load on customer acquisition in Q1.
  • Payers declined by from 12.2 million to 11.9 million. In a quarter where number of MAUs grew 18%, a fall in payers means a meaningful fall in conversion rate.
  • Monthly Gross Average Bookings Per Paying User (a sort of proxy for revenue per user) rose 4% to $18.02. That’s good, but it suggests that the marketing spend is bringing in new users, not new spenders.

The numbers are challenging in that the vanity metrics (revenue, users) are up, while the success metrics (profits, conversion rate) are down. The bright spot is monthly spend (MGABPPU), but that is only up 4%.

A secular decline. The company spending to reverse that decline but not seeing profits or conversions. An increased audience but a smaller paying audience. If I were an investor, and these were the results mere weeks after an IPO roadshow, I’d be pissed.


(If you think I’ve missed anything, let me know. Also, I am not an investment analyst. I don’t have access to the company, and do I pore over spreadsheets breaking down every facet of their business. These are my first impressions. But based on the 13% fall in King’s share price, I am not alone.)

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve:
  • I’m not sure that I understand your point.

  • oi

    These are all margins.

  • I think it might be the combination of top line growth with bottom line fall, for two consecutive quarters, matched with shrinking payers (and hence even faster shrinking conversion rates). It suggest top line growth is now really hard, and they are having to sacrifice margin just to stay still.

  • Tero Kuittinen

    Total revenue and non-Candy Crush revenue were both higher than expected… maybe it was the decline in paying customers that shocked the Street. They are jacking up monthly sales from loyal payers, but that pool has started shrinking.

  • Mashable says that the headline numbers were actually *above* Wall Street’s estimates. Which means investors were particularly upset about some of the details.

    Or that King got caught up in general Nasdaq woes.

    Or both.