Zynga Posts $5.6 Million Profit in Q1 of 2018

Zynga has enjoyed an unexpectedly successful start to 2018, with its revenue for the first quarter up by 7% to $208.2 million versus Q1 of 2017, and its profit reaching $5.6 million, after the company initially predicted a loss of $9.5 million.
Commenting upon the solid results, which now strings together four consecutive quarters of profit for the US social gaming giant, CEO Frank Gibeau praised the firm’s key game offerings, which he refers to as “forever franchises,” stating:
“We had a great start to 2018, outperforming guidance in the quarter across all key financial measures and delivering our highest mobile audience in over four years. We are pleased with the player engagement we’re seeing across our forever franchises – CSR2, Words With Friends and Zynga Poker – and continue to make strong progress towards our near-term margin goals.”
Social Gaming Giant
Founded in 2007, Zynga is a social game developer headquartered in San Francisco, California, that primarily focuses upon creating games for mobile devices and social networking platforms, such as Facebook.
Zynga is currently benefiting from more users being prepared to spend money on its mobile games and buying virtual goods while playing its top products, including the likes of Zynga Poker, Farmville, Words With Friends 2, and CSR Racing 2. Furthermore, new games are continuously being added to its product range, with a new line expected to be launched soon by its studio in Helsinki, Finland, and from its UK-based gaming company NaturalMotion, which Zynga acquired for $527 million in 2014.
In December 2011, Zynga started trading on NASDAQ and reached a peak valuation of $10 billion, but by 2013 it had lost half of its user base and had to layoff 18% of its workforce. More recently, Zynga has managed to turn around its fortunes by restructuring itself, and focusing primarily on mobile-centric games, as well as changing its CEO on a number of occasions.
In 2016, Frank Gibeau subsequently took over from Mark Pincus at Zynga’s new CEO, and today it employs around 1,681 staff, with the company’s share price of $3.64 giving it a market valuation of $3.22 billion.
Q1 Results
In the first quarter, mobile gaming accounted for 88% of its total revenue, up from an 82% share for the previous year. The social games maker also noted its highest mobile audience numbers in almost four years, with 23 million daily active users, and 82 million users playing its games each month.
Overall, the mobile segment reported a 13% revenue rise to $182.6 million in Q1 versus the $162 million collected in Q1 of 2017. The company’s most popular game, Zynga Poker, which is available across Facebook and mobile, noted a 13% revenue increase in Q1, while the game returning its most impressive growth was Words with Friends (+18%).
“We are growing the audiences,” explains Gibeau. “One of the things about mobile, because there’s something like a billion and a half smart devices that can play games, it’s very hard to get market saturation.”
Pincus Relinquishing Control
Mark Pincus founded Zynga more than a decade ago, and after stepping down from his CEO position in 2016 still maintained a controlling interest in the company until it was announced recently that a new structure would be put in place to ensure “parity for all shareholders”. Currently, Pincus is the company’s chairman of the board, albeit it on a non-executive basis, with the reorganized stock class structure now meaning that the 10% share of stocks he holds will give him an equivalent amount of voting rights, and not the 70% he previously enjoyed.
“I’ve stayed involved but with an eye to stepping back, and my decision to become a non-executive chairman and simplify my shares reflects my confidence in Zynga’s momentum,” commented Pincus.
Zynga has also announced a brand new $200 million share repurchase program, having already bought back $200 million worth of company stock, or 67 million shares at around $2.99 each.