King Digital report confirms it’s still a one-hit wonder

August 12, 2014, 9:31 PM UTC
Candy Crush Game Maker King Announces IPO to List in New York
The King Digital Entertainment Plc logo and "Candy Crush Saga" game are displayed on an Apple Inc. iPhone 5s and iPad Air in this arranged photograph in Washington, D.C., U.S., on Tuesday, Feb. 18, 2014. King Digital Entertainment Plc, the maker of popular smartphone games including "Candy Crush Saga" and "Pet Rescue Saga," is beginning an adventure of its own on a path to becoming a public company. Photographer: Andrew Harrer/Bloomberg via Getty Images
Photograph by Andrew Harrer — Bloomberg/Getty Images

The takeaway: Shares of King Digital Entertainment plummeted more than 20% in after-hours trading on Tuesday after the online gaming company released disappointing sales numbers for the second quarter and lowered its full-year forecast. The company, which is best known for making the popular game Candy Crush, saw more than $1 billion of its market cap vanish as a result of the after-hours dip in its share price.

King Digital (KING) also announced a special dividend of $150 million to be paid to its shareholders at roughly 47 cents per share.

What’s interesting: King Digital actually met Wall Street’s expectations by earning 59 cents per share in the second quarter, while its gross bookings and revenue also increased significantly from last year’s second quarter. However, the fact that the company failed to grow its numbers from this year’s first quarter, combined with the downward revision to its full-year outlook, clearly spooked investors who have long had doubts as to whether the online gaming company could repeat the success of its signature game, Candy Crush Saga. Another bad sign is that the company blamed subpar sales totals in the second quarter on lower gross bookings from its Candy Crush title.

Since going public with a disappointing IPO in March, the company has seen its shares fall from their IPO price of $22.50 as far as $16 per share, though the company was trading around $18 per share when the market closed on Tuesday. King Digital is trying to avoid being perceived as a one-hit wonder, but there hasn’t been much excitement over its big follow-up coming later this year, Candy Crush Soda Saga, and the company is also facing increased competition in the online gaming space from rivals such as Glu Mobile and its popular Kim Kardashian: Hollywood game. Fellow rival, FarmVille-maker Zynga (ZNGA), also experienced a disappointing earnings report last week that sent its own shares plunging.

The numbers: Dublin-based King Digital posted profits of $165 million in the second quarter, up 31% year-over-year, along with a 30% jump in revenue, to $594 million. However, those sales numbers were down 2% from the first quarter and gross bookings also fell 5%, to $611 million, from the first quarter. The company also reported a 1% increase in monthly active users, up to 485 million, from the first quarter, but daily active users and monthly unique users were both down – 3% and 2%, respectively – from the previous quarter.

King Digital said it expects gross bookings to decline in the third quarter, predicting a range of $500 million to $525 million, while full-year gross bookings are expected to be between $2.25 billion and $2.35 billion.