(Bloomberg) — Zynga Inc. reported revenue that beat analysts’ estimates, reflecting a pickup in interest in mobile gaming as omicron forced new restrictions late last year.
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Adjusted revenue rose 4% in the fourth quarter to $726.6 million, beating the average analyst estimate of $711.3 million, according to data compiled by Bloomberg. Adjusted earnings before interest, tax, depreciation and amortization were $147 million compared with $90 million a year earlier. Zynga reported a net loss of $67 million.
“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,” Chief Executive Officer Frank Gibeau said in a statement on Wednesday.
The report comes just weeks after Zynga, the San Francisco-based game company behind FarmVille, Words with Friends and Zynga Poker, agreed to be acquired by Take-Two Interactive Software Inc. in a deal valued at $11 billion. Zynga’s strong mobile presence and recent $250 million acquisition of mobile game ad company Chartboost gives the company strong appeal at a time of increased attention on mobile gaming, the fastest-growing segment of the industry.
In 2021, the mobile games market brought in $93.2 billion in revenue, according to analytics firm NewZoo, a 7.3% increase from the year earlier. The free-to-play business model Zynga’s games rely on promises repeatable income through in-game purchases of virtual goods.
Take-Two, by contrast, is primarily a console and PC business. Speaking on the pending acquisition, Chief Executive Officer Strauss Zelnick said that working with Zynga would empower the company to “optimize the creation of new titles based on Take-Two’s core intellectual property,” which, he adds, have been “nearly entirely unexploited from mobile and free-to-play.”
A spike in engagement at Zynga, an early pandemic darling, has evened out as Covid restrictions have lifted. At the same time, early 2021 changes to Apple Inc.’s privacy policy have taken a toll on Zynga’s in-game advertising business. Zynga had also delayed two games — Star Wars: Hunters, due out this year, and FarmVille 3, which released late in 2021.
Zynga reported 37 million daily active users, up 3% from a year earlier but the average in-app spending per user decreased by 1%.
Zynga has also been making moves into nonfungible tokens and the blockchain, technologies that have proven to be immensely controversial among gamers. Last November, Gibeau told Bloomberg that he thinks blockchain technology will be “part of the fabric of the industry long term” and that the “underlying fundamentals are positive.”
That month, Zynga brought on a vice president of blockchain, Matt Wolf, who told Axios on Wednesday that the company plans on expanding its blockchain team from 15 to as many as 100 people this year. Wolf added that he would like to launch a “ground-up, dedicated product” sometime in 2022.
Zynga told Bloomberg on Wednesday that the company will integrate “NFTs and blockchain technology into Zynga’s existing portfolio and owned IP, as well as developing games from inception that are built with NFTs as part of the core gameplay loop.”
Take-Two’s overture for Zynga kicked off a feeding frenzy in the games industry. Microsoft Corp. quickly followed, agreeing to buy Activision Blizzard Inc. for $69 billion, and Sony Group Corp. made a $3.6 billion offer for Bungie Inc. Analysts expect more consolidation throughout the year and Take-Two could find itself the object of a takeover.
Zynga didn’t hold an analyst call or offer guidance due to the pending acquisition. The shares are up 43% this year, largely due to the Take-Two offer. Activision is up 23% and Take-Two is down about 3%.
(Updates to add comment on NFTs in ninth paragraph.)
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