Zynga posts first ever back-to-back quarterly profits


zynga-poker-profitsSocial gaming operator Zynga celebrated its best revenue and bookings performance in four years by spending $100m on acquiring a popular mobile card game studio.

Zynga turned in its Q3 report card on Tuesday, showing revenue rising 23% year-on-year to $224.6m, adjusted earnings hitting $44.6 from just $3.6m a year ago, while posting net income of $18.1m versus a $41.7m loss in Q3 2016.

The results build on the company’s Q2 report, which showed the company enjoying its first quarterly profits in almost five years. The company has now turned a profit for two straight quarters, the first time the company has managed that feat since it went public in 2011.

Bookings, the in-game sale of virtual goods and credits, rose 9% to $213.5m. Mobile bookings were up 15%, and mobile channels – once Zynga’s achilles heel – accounted for 87% of total revenue and bookings. Zynga has now posted sequential revenue and bookings growth for five consecutive quarters.

Advertising operations had a less than stellar Q3, with revenue down 1% to $46.4m and bookings down 6% to $45.6m. Advertising’s share of overall revenue fell to 21% from 26% in the same period last year. Zynga said it expects FY17 advertising revenue to decline “slightly” due to web declines and softer mobile advertising pricing.

Zynga managed a 12% rise in average daily active users (DAU) but average daily bookings per average DAU fell 3% to 11.3¢ and average monthly unique payers fell 6%. Payer conversion improved slightly to 2.4%.

Zynga’s traditionally strong social casino operations had a mixed quarter. Zynga Poker had its best quarterly mobile performance to date, as mobile revenue and bookings improved 78% and 81%, respectively, and the company expects further growth as it prepares to launch the new Jackpots feature.

By contrast, while the Social Slots division saw increased monetization, mobile revenue declined 2% and mobile bookings were flat sequentially. Zynga added some ‘bold beats’ across its slots portfolio in Q3 to boost monetization and the company hopes to create “a more connected VIP network” to better reward and retain social casino whales over time.

In non-casino categories, Words With Friends reported mobile revenue up 9% sequentially, and the new Words With Friends 2 game will launch this week. The CSR2 racing game reported mobile revenue up 8% sequentially.

Zynga gave its casual card game portfolio a serious boost on Tuesday via the $100m acquisition of US-based developer Peak Games’ mobile card studio, which includes games such as Spades Plus and Gin Rummy Plus, each of which dominate their respective game categories, plus popular local Turkish games including 101 Okey Plus and Okey Plus.

Zynga’s Senior VP of Games Monty Kerr said the acquisition will give Zynga the “world’s largest portfolio of casual card games,” adding millions of DAUs and will be “accretive to our near-term margin goals.” The deal is expected to close before year’s end.

Despite the positive Q3 numbers, Zynga investors sent the stock down nearly 5% on Tuesday due to the company forecasting Q4 bookings of $210m, well below analysts’ projections, in part due to continued declines at its web-based business.