Zynga Sees Strong Revenue Growth In Q1, And The Momentum Will Likely Continue In The Near Term

by Trefis Team
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Zynga (NASDAQ:ZNGA) recently reported its Q1 2019 results, and the top line saw strong growth led by some of its recently acquired games. This note details the company’s Q1 performance, and Trefis’ forecasts for the full year 2019. You can view our interactive dashboard analysis ~ How Did Zynga Fare In Q1, And What Can We Expect From Full Year 2019? for more details on the key drivers of the company’s expected performance.  In addition, you can see more of our Information Technology data here.

How did Zynga’s top line fare in Q1?

  • Total bookings, which includes deferred revenues, grew 64% to a little under $360 million in Q1.
  • This can be attributed to strong demand for Empires & Puzzles, Merge Dragons! and CSR2 games.
  • However, monthly active users (MAUs) declined 12%, as growth in the games above was more than offset by a decline in older games.

What are Zynga’s key sources of revenue?

  • Zynga generates its revenues from two sources ~ Online Games, and Advertising.
  • Online Games refers to sales of all of Zynga’s games, and accounts for over 70% of total revenues. Key franchises ~ Poker, FarmVille, CSR.
  • Games from recent acquisitions ~ Merge Dragons!, Empires & Puzzles.
  • Advertising refers to revenues generated by Zynga through advertising services by helping marketers reach and engage with their audience in a targeted manner.
  • Advertising accounts for over 25% of the company’s total revenues.

How much can Zynga’s revenues grow in 2019?

  • Zynga’s guidance for the full year ~ $1.45 billion in total bookings, reflecting 50% growth over 2018.
  • Revenue growth will likely be led by its new acquisitions of Gram Games and Small Giant Games.
  • The company also expects to launch new games, which should aid revenue growth.
  • New games in the pipeline include ~ Game of Thrones, Harry Potter, and Star Wars.
  • The company expects the top line growth to come from its live services portfolio, which includes downloadable content, subscriptions, and other supplementary services offered.

How did the changes in top line impact Zynga’s Q1 earnings, and what is the full year outlook?

  • Zynga’s Q1 loss of $0.14 per share compares with earnings of $0.01 per share in the prior year quarter.
  • The plunge in reported earnings can be attributed to higher contingent consideration accrual, and higher deferred bookings, which led to an increase in expenses.
  • Full year 2019 adjusted earnings will likely be $0.20 per share, reflecting a 14% decline to the prior year.
  • Earnings decline can be attributed to expected decline in margins, as the company sees increased marketing expenses for new games. The decline can also be attributed to an increase in deferred revenues.


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