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Zynga (ZNGA) Incurs Loss in Q3, Revenues Increase Y/Y

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Zynga (ZNGA - Free Report) reported third-quarter 2020 loss of 11 cents per share against earnings of 24 cents in the year-ago quarter.

Revenues surged 45.8% year over year to $503.3 million, driven by strength in live services.

In particular, contributions from the Social Slots portfolio, Words With Friends, CSR2 and the Casual Cards portfolio drove the top line in the reported quarter.

The Zacks Consensus Estimate for earnings and revenues was pegged at 9 cents per share and $628.1 million, respectively.

Total bookings came in at $628 million, up 59.1% year over year. The upside was driven by strong mobile bookings. The consensus mark for bookings was pegged at $627 million.

Zynga Inc. Price, Consensus and EPS Surprise

Quarter Details

Zynga’s online game revenues (86.6% of total revenues) increased 54.8% year over year to $436 million on the back of its forever franchises — Empires & Puzzles and Merge Magic!  — alongside Toon Blast and Toy Blast.

Moreover, advertising revenues (13.4% of total revenue) and advertisement bookings (10.7% of total bookings) increased 5.8% and 5.1% year over year to $67.3 million and $67 million, respectively.

Mobile revenues (96.2% of total revenue) and mobile bookings increased 47.8% and 61.3% year over year to $484 million and $609 million, respectively. The increases were driven by robust live services performance.

On a geographic basis, revenues from the United States (62% of total revenues) grew 46.8% year over year to $312 million.

Moreover, International revenues (38% of total revenues) rose 44.2% to $191.4 million.

User-Base Details

In the third quarter, user pay revenues were $436 million, up 55% year over year. User pay bookings were $561 million, up 69% year over year.

Zynga’s average mobile daily active users (DAUs) surged 53% year over year to 31 million.

Moreover, average mobile monthly active users (MAUs) increased 23% year over year to 83 million in the reported quarter.

Average mobile daily bookings per average mobile DAU (ABPU) rose 5% year over year to $0.213 in the reported quarter.

Operating Details

GAAP gross margin, as a percentage of revenues, declined to 53% from 61% in the year-ago quarter due to higher net increase in deferred revenues.

Non-GAAP operating expenses (55.5% of total revenue) grew 37.4% year over year to $279.4 million in the reported quarter, primarily due to higher sales and marketing investments.

Non-GAAP research & development (R&D), general & administrative (G&A) and sales & marketing (S&M) expenses increased 14%, 8.1% and 55.4% year over year to $73.8 million, $22.6 million and $183 million, respectively.

Adjusted EBITDA was $37.7 million compared with $27.5 million in the year-ago quarter.

Balance Sheet

As of Sep 30, 2020, Zynga had cash, cash equivalents & short-term investments of approximately $758 million compared with $1.55 billion as of Jun 30, 2020.

Cash flow provided by operating activities in third-quarter 2020 was $133 million compared with $145 million in second-quarter 2020. Free cash flow was $109 million in the third quarter compared with $142 million in the previous quarter.

Guidance

For fourth-quarter 2020, Zynga expects revenues of $570 million and bookings of $670 million.

Management expects the top line to benefit from mobile live services with full-quarter contributions from Toon Blast and Toy Blast and Rollic’s hyper-casual games portfolio. However, a decline in older mobile and web titles is expected to partially offset growth.

For 2020, management expects revenues of $1.9 billion and bookings of $2.2 billion.

Zacks Rank & Stocks to Consider

Currently, Zynga carries a Zacks Rank #4 (Sell).

TEGNA (TGNA - Free Report) , Callaway Golf Company (ELY - Free Report) and Malibu Boats (MBUU - Free Report) are some better-ranked stocks in the broader Consumer Discretionary sector. TEGNA sports a Zacks Rank #1 (Strong Buy), while Callaway Golf and Malibu Boats carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Malibu Boats is set to release quarterly results on Nov 6. Both Callaway Golf and TEGNA are scheduled to report earnings on Nov 9.

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