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Zynga remains in loss in Q3 despite record revenue and bookings

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Social gaming giant Zynga announced a net loss of $41.7m for the third quarter of its 2021 financial, despite also reporting record revenue and bookings for the period.

Revenue for the three months to September 30 reached $704.7m, up 40.0% from $503.3m in Q3 of 2020.

Zynga noted growth across both its core business segments, with online game – or user pay revenue – increasing by 31.0% year-on-year to $571.1m, primarily driven by a change in deferred revenue.

Advertising and other revenue rocketed 98.5% to $133.6m, with Zynga putting this down to both the addition and strong performance of Rollic’s hyper-casual portfolio.

Zynga also saw total bookings climb 6.4% year-on-year to a quarter-high of $668.0m, though this was entirely down to growth in its advertising segment. Bookings related to advertising and other business almost doubled year-on-year to $134.0m, while online game bookings dipped 4.8% to $534.0m.

Meanwhile, average mobile daily active users climbed by 21.0% year-on-year to 38 million, while Zynga also saw the number of average monthly active users rocket 120.0% to 183 million.

Looking at expenses for the quarter, total costs in Q3 amounted to $717.0m, up 14.7% on last year primarily due to a one-time charge of $66.8m due to the impairment of a vacated office lease, related leasehold improvements and other property and equipment.

While this resulted in an operating loss of $12.3m, this figure was still a vast improvement on the $121.6m loss posted at the same point in 2020, while adjusted earnings before interest, tax, depreciation and amortization (EBITDA) climbed 23.9% to $197.1m.

Zynga also reported $1.6m in interest income, but this was more than offset by $14.8m in interest expense and $600,000 in other costs, leaving a pre-tax loss of $26.1m, still a much better result than the $131.0m loss seen in Q3 of last year.

After paying $15.6m in taxes, Zynga ended the quarter with a net loss of $41.7m, compared to a $122.2m loss in Q3 of 2020.

“Execution of our multi-year growth strategy has us on track to deliver Zynga’s best-ever annual topline performance and the largest mobile audience in the company’s history,” Zynga said. “We have multiple growth catalysts in place to drive our continued expansion in 2022 and beyond.”

In terms of Zynga’s year-to-date performance, revenue in the nine months through to the end of September was 54.9% higher at $2.11bn, with online game revenue up 46.7% to $1.72bn and advertising and other revenue 105.0% to $389.9m.

Operating spend was 20.4% higher at $2.05bn and after also accounting for finance costs, this left a pre-tax profit of $17.0m, a significant improvement on the $358.5m loss posted last year, while adjusted EBITDA rocketed 180.3% to $493.8m.

Zynga paid $53.9m in tax during the period, leaving a net loss of $36.9m, compared to a loss of $376.4m in 2020.

Looking ahead to Q4, Zynga expects revenue to reach approximately $675.0m, which would represent a 10.0% year-on-year increase. Bookings are also forecast to rise 2.0% to $715.0m and adjusted EBITDA by 36.0% to $122.0m, but the operator also said it expects to report a net loss of $60.0m.

For the full-year, revenue is likely to reach $2.78bn, which would be 41.0% higher than last year, while bookings should increase by 24.0% to $2.81bn. However, net loss is forecast to total $97.0m, though this would be a vast improvement on last year, while adjusted EBITDA should be 131.0% higher at $616.0m.

“Overall, we are entering 2022 with strong momentum across key growth drivers and are targeting low double- digit topline growth with enhanced net cash flow,” Zynga said. “Over the next few years, we also expect to further expand operating margins toward our long-term goal.”

Shortly after the end of Q3, Zynga completed its acquisition of mobile games developer StarLark, the company behind mobile golf title Golf Rival, Betta Games for $525m.

In addition, Zynga has appointed Matt Wolf as its vice president of Blockchain Gaming. Wolf will focus on the opportunity to integrate ​​non-fungible tokens and blockchain technology into Zynga’s existing portfolio and owned IP.

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