BUSINESS

Social casino helps Zynga post rare profit despite flat bookings and less players

TAGs: social gaming, Zynga, Zynga poker

zynga-profitsSocial gaming operator Zynga posted a rare profit in the third quarter of 2015 as its core social casino franchises continued to grease the company’s wheels.

Revenue in the three months ending Sept. 30 rose nearly 11% year-on-year to $195.7m, although this was down 2% from Q2. Gaming revenue fell 8% year-on-year to $151m while advertising revenue rose 18% to $45m.

Bookings – the in-app sale of virtual goods – were essentially flat both year-on-year and sequentially at $176m. On the plus side, mobile bookings grew 26% and now represent 69% of total bookings, three points higher than Q2’s share.

Despite the stagnant bookings, adjusted earnings were up six-fold to $12.4m while Zynga reported a $3m profit versus a $57m loss in the same period last year. The company attributed the profit turnaround to aggressive cost-cutting moves as well as a tax benefit associated with the recent purchase of Rising Tide Games.

Zynga’s player stats continue to be broadly negative, except for the all-important average daily bookings per average daily active user, which was up 27% year-on-year and 10% sequentially to 10¢. Meanwhile, average daily active users were down 21%, driven by a 55% decline in Facebook desktop users, while mobile users fell 5%.

NEW SLOTS DOING WELL BUT POKER SHOWING ITS AGE
Zynga’s social casino franchises continued to carry the load, with Zynga Poker, Hit It Rich! Slots and Wizard of Oz Slots accounting for 17%, 16% and 12% of gaming revenue, respectively. Poker’s share was down one point from the same period year-on-year, while Hit It Rich! Slots was unchanged and Wizard of Oz Slots improved two points.

Total slots bookings were up 123% year-on-year but down 2% sequentially. The sequential decline was pinned on Hit It Rich! Slots, but Zynga believes the introduction of new features and brands will right the ship in Q4. Rising Tide’s Black Diamond Casino launched in Q3, while Princess Bride Slots will launch in Q4.

Zynga Poker saw bookings decline 13% year-on-year and 8% sequentially due to decreased web-based play. Mobile poker bookings were up 4% year-on-year but down 7% sequentially. Speaking to analysts, CEO Mark Pincus (pictured) said Zynga had made a significant investment in improving the quality of its poker product and the company expected the game would return to “clear growth” in 2016.

WORDS WITH OUTGOING CFO’s
Zynga’s Words With Friends casual game had a stellar quarter, with bookings up 34% year-on-year and 28% sequentially, while the Farmville 2 game remains a top-five highest grossing game on Facebook. Web games may be on the decline, but still represent 16% of Zynga’s overall bookings and the company says it will continue to invest in maintaining this audience.

Zynga’s new action strategy game Empire & Allies has so far performed “below our expectations” but the company says monetization has been strong. Two other new non-casino titles, Dawn of Titans and CRS2, have seen their release dates pushed back to next year, with the company reportedly seeking to boost each title’s social components prior to the official launch.

Zynga announced a $200m share buy-back program to take advantage of the $1.1b in cash the company has been carrying on its balance sheet.

Zynga also announced that chief financial officer David Lee had handed in his notice and will officially depart the company as of Dec. 11. Zynga’s chief accounting officer Michelle Quejado will take on the CFO role until a permanent replacement can be found.

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