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King shows signs of slowdown in Q1


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Tim Ferguson

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King, the company behind hit mobile game ‘Candy Crush Saga’, reported first quarter results that showed slowing revenue growth and a quarter-on-quarter decline in profit.

Following its lacklustre IPO in March, the company reported revenue of $606.7 million for the first quarter of 2014, up 195 per cent on the same period in 2013 but just 1 per cent better than the prior quarter.

Profit for the period was $127.2 million, up 142 per cent from a year earlier, but 20 per cent down on that reported for Q4 2013.

The quarter-on-quarter decline in profit was attributed to increased marketing spend related to the launch of ‘Farm Heroes Saga’; increased share-based and equity-related compensation expense ($78 million compared with $60 million in Q4 2013); headcount additions; and foreign exchange losses.

Daily active users in Q1 2014 were 143 million, up 297 per cent from Q1 2013, and 15 per cent higher than the prior quarter. Monthly active users hit 481 million, up 249 per cent compared with a year ago, but a less impressive 18 per cent improvement on Q4 2013.

In terms of monetising users, monthly unique payers (MUPs) stood at 11.86 million, down from 12.2 million in Q4 2013, although significantly up from the 4.10 million reported for Q1 2013.

King attributed the fall in MUPs to reduced payment activity among occasional paying users, as well as the introduction of virtual currency on some games.

More positively, the company reported record mobile gross bookings (the total spent on games and virtual items) of $480 million.

And with investors concerned about an over-reliance on its biggest hit game, the contribution of games other than ‘Candy Crush Saga’ increased during the quarter, accounting for 33 per cent of gross bookings compared with 22 per cent in the prior quarter.

King CEO Riccardo Zacconi said ‘Farm Heroes Saga’ performed particularly strongly during the period after being launched in January, meaning the company had three titles in the top 10 grossing titles in both Apple’s App Store and Google Play in the US during the quarter.

“With the massive reach of our player network, our existing portfolio of highly engaging games, and our development plan for additional games well underway, we are well-positioned for gross bookings growth and diversification in 2014,” Zacconi added.

During the quarter, King announced it would be bringing ‘Candy Crush Saga’ to China in a deal with web giant Tencent to distribute the game on the Mobile QQ social network and Weixin messaging platform.

After pricing shares at $22.50 for its IPO in March, King saw them fall to $19 at the close of the first day of trading. The shares continued to trade below its initial valuation with the Q1 results hitting their valuation further to reach a low of $16.25 at the time of writing.

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