Three key factors that bode well for Zynga (ZNGA) going forward

Shares of Zynga Inc. (NASDAQ: ZNGA) stayed in green territory on Wednesday after rallying a day ago on the back of a strong earnings report. The company delivered better-than-expected results for the third quarter of 2021 driven by strong momentum in its live services portfolio and growth in ad sales. Here are three key factors that bode well for the mobile gaming company:

Strong performance and outlook

Zynga’s total revenues in Q3 2021 increased 40% year-over-year to $705 million and net bookings rose 6% to $668 million. Online game or user pay revenue rose 31% YoY to $571 million. Advertising & other revenue and bookings both grew 99% to $134 million, thanks to the strong performance from Rollic’s hyper-casual portfolio.

During the quarter, 97% of the company’s total revenue and bookings came from mobile. Mobile revenues increased 41% YoY to $685 million while bookings rose 6% to $649 million. Revenue and bookings in the US rose 36% and 5%, respectively, year-over-year. International revenue increased 46% during the quarter while bookings were up 9%.

Although the company reported a net loss of $0.04 per share in the quarter, it was narrower than the loss of $0.11 per share reported last year and the guidance for a loss of $0.10 per share given by the company.

For the fourth quarter of 2021, Zynga expects revenue to increase 10% YoY to $675 million and bookings to rise 2% to $715 million. The company expects to see growth in ad revenue and bookings driven by Rollic’s hyper-casual portfolio and the first full quarter contribution from Chartboost. The addition of Golf Rival and the initial contribution from Farmville 3 are also expected to drive revenue in the fourth quarter.

For the full year of 2021, revenue is expected to rise 41% YoY to $2.78 billion while bookings are estimated to grow 24% to $2.81 billion. Zynga expects to see low double-digit topline growth year-over-year in 2022, helped by full-year contributions from Farmville 3 and Golf Rival as well as growth in Rollic’s hyper-casual portfolio.

Strength in franchises

Zynga’s strong topline performance in the quarter was driven by momentum in its live services portfolio and growth from Rollic’s hyper-casual portfolio. More than 60% of the company’s revenue and bookings came from Forever Franchises while 15% came from Social Slots & Casual Cards. Hyper-casual is one of the company’s fastest-growing categories.    

During the third quarter, average mobile daily active users rose 21% YoY to 38 million while average mobile monthly active users grew 120% to 183 million. This growth was mainly driven by Rollic’s hyper-casual portfolio. Titles such as Arrow Fest and Text or Die remain highly popular and the introduction of new content and game play modes within key titles has helped in driving engagement. The company expects to generate further growth from Farmville 3 and the newly-acquired Golf Rival.

New games

Zynga remains remarkably optimistic on its new game pipeline. Its first cross-platform play franchise Star Wars: Hunters will enter soft launch soon in select mobile markets. The company has two new titles that are doing well in soft launch which are Pirate Evolution by Gram Games and Star Blast from Peak.

Within live services, the company has been introducing new game play modes and content to drive user growth and engagement. It will roll out Alliance Quest in Empires & Puzzles, Fantastic Feasts in Harry Potter: Puzzles & Spells, Dragon Missions in Merge Dragons!, and Piggy Bank in Toon Blast.

All in all, these factors can be expected to drive significant user growth and engagement as well as revenue for the company in the coming months.

Click here to read the full transcript of Zynga’s Q3 2021 earnings conference call