Zynga still failing upward as acquisition earn-outs eat profits

Social gaming outfit Zynga reported record revenue in the first quarter of 2020 thanks to pandemic isolation but the company still managed to book a nine-figure net loss.

This week, Zynga reported record revenue of nearly $404m in the three months ending March 31, a 52% gain over the same period last year. But rising costs, including significant earnout payments associated with its numerous acquisitions, resulted in a net loss of nearly $104m, which is actually an improvement over Q1 2019’s $128.8m loss.

Gaming revenue shot up 72% to $344.3m thanks to some new titles and bored players stuck at home because of the COVID-19 pandemic. But advertising revenue dipped nearly 9% to $59.4m as companies reined in their marketing due to the pandemic.

Zynga said its primary gaming growth engines were its Empire & Puzzles, Merge Magic! and Merge Dragons! titles, as well as the new Game of Thrones: Slots Casino. The company said its Social Slots portfolio achieved record revenue and bookings in Q1, with Hit It Rich! Slots given a shoutout for overperforming.