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Zynga (ZNGA) Incurs a Loss in Q3, Delivers Revenue Growth

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Zynga (ZNGA - Free Report) reported a loss of 4 cents per share in third-quarter 2021. The company had reported a loss of 11 cents in the year-ago quarter.

Revenues surged 40% year over year to $704.7 million on broad-based strength in live services.

The Zacks Consensus Estimate for earnings and revenues was pegged at 6 cents per share and $664.6 million, respectively.

Total bookings came in at $667.7 million, up 6.3% year on year on strong mobile bookings. The consensus mark for bookings was pegged at $667 million.

Zynga Inc. Price, Consensus and EPS Surprise

 

Zynga Inc. Price, Consensus and EPS Surprise

Zynga Inc. price-consensus-eps-surprise-chart | Zynga Inc. Quote

 

Quarter Details

Zynga’s online game or user pay revenues (81.0% of total revenues) increased 31% year over year to $571 million.

Advertising and other revenues (19% of total revenues) increased 99% year over year to $133.6 million. Advertisement bookings (20% of total bookings) rose 99% year over year to $133.6 million.

Mobile revenues (97% of total revenues) and mobile bookings increased 41.5% and 6.6% year over year to $685.1 million and $649.3 million, respectively. The upside was driven by robust live services performance.

Rollic’s portfolio now includes 16 games that have reached the #1 or #2 top free downloaded games positions in the United States App store. Zynga added that recent game titles like Arrow Fest and Text or Die attained the #1 top free downloaded position in the U.S. App Store since debut.

On a geographic basis, revenues from the United States (60% of total revenues) rallied 36% year over year to $425 million.

International revenues (40% of total revenues) surged 46% to $280 million.

User Base Details

In the third quarter, user pay bookings were $534 million, down 5% year over year. The decline was due to tougher year-over-year comparisons.

Zynga’s average mobile daily active users (DAUs) surged 21% year over year to 38 million. Average mobile monthly active users (MAUs) soared 120% year over year to 183 million in the reported quarter.

The solid uptick in user count was driven by contributions from Rollic’s hyper-casual game portfolio.

Average mobile daily bookings per average mobile DAU (ABPU) declined 12% year over year to $0.188.

Operating Details

Non-GAAP operating expenses (49% of total bookings) rose 16.4% year over year to $325.3 million in the reported quarter, due to higher marketing investments.

Non-GAAP research & development (R&D), general & administrative (G&A) and sales & marketing (S&M) expenses shot up 18.9%, 21.7% and 14.8%, year over year, to $88 million, $28 million and $210 million, respectively.

Adjusted EBITDA came in at $197 million compared with the year-ago quarter’s figure of $38 million.

Balance Sheet

As of Sep 30, 2021, Zynga had cash, cash equivalents & short-term investments of $1.34 billion compared with $1.50 billion as of Jun 30, 2021.

Cash flow used by operating activities in third-quarter 2021 was $98.6 million compared with the previous quarter’s $161 million and year-ago quarter’s $113.3 million. Free cash flow was $96.1 million in the third quarter compared with the previous quarter’s free cash flow of $158.4 million and year-ago quarter’s $108.7 million.

Guidance

For fourth-quarter 2021, Zynga expects revenues of $675 million and non-GAAP bookings of $715 million, up 10% and 2% year over year, respectively. Adjusted EBITDA is projected at $122 million, while loss is expected to be 5 cents per share.

The company’s revenues are expected to benefit from live services. Growth in advertising, particularly from Rollic’s hyper-casual portfolio, contribution from Chartboost and initial contributions from FarmVille 3 and Golf Rival will drive the top line, added management.

Per the company, declines in Merge Dragons!, Merge Magic! as well as other older mobile and web games might partly offset top line growth in the fourth quarter.

For 2021, the company now expects to deliver revenues of $2.78 billion compared with $2.725 billion guided earlier, indicating growth of 41% year over year. Bookings are now expected at $2.814 billion compared with $2.8 billion guided earlier, indicating growth of 24% year over year.

Adjusted EBITDA is estimated at $616 million compared with $575 million guided previously. For 2021, loss is predicted to be 9 cents per share.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the broader consumer discretionary sector are Red Rock Resorts (RRR - Free Report) , Sonos (SONO - Free Report) and NeoGames (NGMS - Free Report) . Red Rock Resorts and Sonos sports a Zacks Rank #1 (Strong Buy) while NeoGames carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Recently, Red Rock Resorts reported strong third-quarter 2021 results.  The company’s adjusted earnings per share was 93 cents, which beat the Zacks Consensus Estimate of 53 cents. In the prior-year quarter, the company had reported adjusted earnings of 56 cents per share. Quarterly revenues of $414.8 million surpassed the consensus mark of $404 million and soared 17% on a year-over-year basis.

NeoGames and Sonos are scheduled to report earnings on Nov 10 and Nov 17, respectively.


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