Zynga (ZNGA) ends FY2020 on a solid note as strategic acquisitions pay off

Shares of Zynga Inc. (NASDAQ: ZNGA) were up 6% in afternoon hours on Thursday. The stock has gained 71% over the past 12 months. A day ago, the company reported solid results for the fourth quarter and full year of 2020, driven by strong performance from its own portfolio as well as titles acquired through acquisitions made during the year.

Zynga’s acquisitions of Peak and Rollic gave it two Forever Franchises, Toy Blast and Toon Blast, as well as a portfolio of highly popular hyper-casual games, which have proven to be valuable additions to its own set of games. Rollic delivered a solid performance during Q4 2020, which was its first quarter at Zynga.

Strong performance

For the fourth quarter of 2020, revenue increased 52% year-over-year to $616 million while bookings jumped 61% to $699 million. For the full year, revenues increased 49% YoY to $1.97 billion while bookings rose 45% to $2.27 billion. The results surpassed the company’s own guidance on all metrics.

Portfolio and acquisitions

Zynga’s live services portfolio continues to drive growth. The company saw strong performance from Words With Friends, Empires & Puzzles, CSR2 and Harry Potter: Puzzles & Spells, which was launched in September. User pay revenue was $499 million, up 54% year-over-year in the fourth quarter of 2020.

Zynga continues to release new content, features and gameplay modes to drive engagement among existing players as well as to attract new players and bring back lapsed players. The company has a pipeline of new games that it plans to launch over the coming years and these are expected to drive engagement over the long term. Zynga plans to roll out Puzzle Combat and FarmVille 3 in the first half of 2021 while its first Star Wars game is anticipated to launch by year-end.

The acquisition of Rollic gave Zynga entry into the hyper-casual games market which is one of the fastest-growing mobile gaming categories. Rollic’s games such as Tangle Masters, Go Knots and Wood Shop were among the top 50 downloaded US iPhone games in Q4. Rollic’s hyper-casual game portfolio is expected to drive growth in Zynga’s live services platform and help in new user acquisition.

Zynga is working on developing cross-platform play games which have significant potential to increase its total addressable market and drive margins. The company is also working on expanding its live services portfolio in international markets where it sees significant growth opportunities in regions like Europe, Asia, Latin America, Africa and the Middle East.

Outlook

For the first quarter of 2021, Zynga expects revenues to grow 57% YoY to $635 million and bookings to increase 60% to $680 million. For the full year of 2021, revenues are projected to grow 32% YoY to $2.6 billion and bookings are estimated to increase 23% to $2.8 billion. The growth is expected to be driven mainly by the live services platform and the hyper-casual games portfolio.

Click here to read the full transcript of Zynga’s Q4 2020 earnings conference call