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Zynga reported fourth-quarter earnings that showed it continues to grow its mobile social game business. The results beat the company’s guidance for bookings and revenues.

Take-Two announced in January that it was acquiring Zynga for an enterprise value of $12.7 billion, a big premium above its trading price. It’s one of the biggest deals in gaming history, though it was dwarfed by January’s announcement that Microsoft would buy Activision Blizzard for $68.7 billion.

San Francisco-based Zynga’s revenue was $695 million for the fourth quarter, up 13% year-over-year; and bookings were $727 million, up 4% year-over-year.

In after-hours trading, Zynga’s stock price is flat at $9.17 a share.

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“Our strong Q4 results capped off our record 2021 performance where we delivered our highest annual revenue and bookings ever, while reaching the largest mobile audience in Zynga history,” said Frank Gibeau, CEO of Zynga, in a statement. “I am proud of our team’s execution across all aspects of our growth strategy including live services, new game development and investments in our advertising platform, new markets and technologies to solidify Zynga as a leading mobile-first, free-to-play live services company.”

Zynga won’t be doing an analyst call because of the pending acquisition.

Zynga is buying Starlark and Golf Rival for $525M.
Zynga is buying StarLark and Golf Rival for $525M.

Deal-making machine

The door is still open for anyone to come up with a higher bid for Zynga. But it’s interesting to see one of gaming’s biggest acquirers get acquired. That tells you the financial stakes that we are in as gaming’s historic boom continues during the pandemic.

While the pandemic has been a tragedy in lost lives and economic hardships, gaming is one of the few industries that is emerging stronger than before the coronavirus hit. People are still playing more than before, and the San Francisco firm has also benefited from its acquisitions.

Zynga bought rivals aggressively under Gibeau, and the whole game industry has been following suit. In addition to StarLark and Chartboost, Zynga has been making regular acquisitions since the 2017 purchase of casual card games from Turkey’s Peak Games for $100 million. In May 2018, Zynga bought Gram Games for $250 million, followed by the late 2018 acquisition of Empires & Puzzles maker Small Giant Games for $560 million.

The big one came in June 2020 as Zynga acquired all of Peak Games for $1.8 billion. In October 2020, Zynga bought hypercasual game maker Rollic for $168 million. It took a step into PC games with the acquisition of Echtra Games, which was started by the makers of the Torchlight series. And it acquired Chartboost for $200 million. Zynga said the integration with Chartboost was making significant progress as the company creates a next-gen mobile ad platform.

Most recently, Zynga added Golf Rival as a new franchise, thanks to the closing of its acquisition of China’s StarLark for $525 million. The company has just started looking into blockchain games, hiring Matthew Wolf as the head of that effort.

Gibeau said in th previous quarter the company has been talking a lot about nonfungible tokens (NFTs) and blockchain, and they think there is a place for it where players can own their content.

Latest on IDFA?

Apple changed the Identifier for Advertisers (IDFA) so that people can more easily opt-out of being tracked. That’s good for user privacy. But it makes it harder to target ads at gamers who spend money, which is what game companies have had to do in the absence of great discovery on iOS devices. Without access to IDFA data, game companies will have a harder time finding users. Zynga had noted previously that IDFA was hurting the ability to acquire more users, and that is one of the reasons its stock price fell, enabling Take-Two to acquire Zynga.

Zynga said that it believes the IDFA issues are behind it now.

Earnings details

The stock market reaction to Zynga’s results has historically been driven by whether it hits revenue or earnings targets. But it’s complicated, because Zynga is required to report some revenue later than when it actually receives it (like when a user buys in-game currency but doesn’t use it until much later). This is called deferred revenue. But if you add the changes in deferred revenue and current revenue, you get a better picture of the actual quarter’s results in a number dubbed bookings. Zynga’s management uses this number in how it guides expectations. And its investors view bookings as more important than revenues.

As a public company, Zynga is required to report quarterly results on a U.S. GAAP basis, while analysts and investors use non-GAAP financial metrics to assess a company’s underlying performance. Bookings and adjusted earnings before income tax, depreciation, and amortization (EBITDA), excluding the impact of deferred revenue, are among those metrics that are most highly scrutinized as they reflect the actual operating activity of the company better.

Here are the numbers that really matter when it comes to stock market trading for Zynga’s stock.

More Q4 details

Frank Gibeau is CEO of Zynga.
Frank Gibeau is CEO of Zynga.

The company had online game (or user pay) revenue of $534 million, up 7% year-over-year, and user pay bookings of $555 million, down 5% year-over-year. Ad revenue was a record $161 million, up 37% from a year ago, and ad and other bookings were at a record $171 million, up 46% from a year ago.

The company had average mobile daily active users (DAUs, or those who play at least once a day) of 37 million, up 3% year-over-year, and a best-ever average mobile monthly active users (MAUs, or those who play at least once a month) of 184 million, up 38% year-over-year.

The company reported a net loss of $67 million, compared to $53 million a year ago.

Adjusted EBITDA was $147 million, which is up $57 million from a year ago. Zynga did not release any outlook for the year or quarter ahead. The company said it has a little less than 3,000 employees now.

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