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Zynga turnaround continues, company buys Peak Games' card studio for $100m

Zynga has now posted two consecutive profitable quarters for the first time since going public

In August, for the company's second quarter, Zynga posted its first profitable quarter in quite some time, with $5.1 million in net income. Today, for the third quarter Zynga continued to show positive results with net income of $18.1 million, along with revenue of $224.6 million, above guidance by $14.6 million and up 23% year-over-year.

"We had a strong Q3, delivering our best revenue and bookings performance in over four years," said CEO Frank Gibeau. "Bookings were $213.5 million, above our guidance by $8.5 million, and up 9% year-over-year. Our mobile user pay hit an all-time high for both revenue and bookings, up 44% and 20% year-over-year, respectively. Mobile now represents 87% of our total revenue and bookings."

Much of the quarter was driven by Zynga's "forever franchises," Zynga Poker, CSR2 and Words With Friends. The company noted that Zynga Poker delivered its highest quarterly mobile performance in franchise history, with mobile revenue up 78% year-over-year and mobile bookings up 81% year-over-year. CSR2 also grew sequentially over Q2, with mobile revenue up 8% and mobile bookings up 12%. Zynga said that its Fast & Furious partnership helped to give the game a boost.

Words With Friends, which is now over 8 years old, saw mobile revenue up 9% and mobile bookings up 10% sequentially. Zynga is aiming to build on the franchise's success this week by launching Words With Friends 2 to global audiences. The new game will offer "new features inspired by our players as well as a more modern look and feel."

As Gibeau mentioned, not only does mobile now represent the lion's share of Zynga's earnings, but its users are way up as well. Zynga's mobile audience for the quarter was 19 million average DAUs, up 19% year-over-year.

In addition to beating its fiscal guidance, Zynga today announced the acquisition of Peak Games' card studio for $100 million in cash; the deal is expected to close in late Q4 2017. The developer will strengthen Zynga's card game efforts with titles such as Spades Plus and Gin Rummy Plus, along with popular local Turkish titles 101 Okey Plus and Okey Plus.

"We're excited to welcome this talented, Istanbul-based development team to the Zynga family. Combined with the recent growth of Zynga Poker and our Solitaire titles, at closing, the addition of Peak Games' mobile card games will give Zynga the world's largest portfolio of casual card games," the company stated.

"These games have broad, evergreen appeal to millions of people around the world and they build on our strategy to continue growing our card portfolio over the long-term. These additions will enhance our card-based audience - adding millions of DAU - and will be accretive to our near-term margin goals."

Moving ahead, Zynga said that its growth plan involves not only continuing to invest in its forever franchises but also to launch new titles in its Action Strategy, Casual and Invest Express categories. Specifically, the company is aiming to launch new titles in some or all of these categories in the second half of 2018. Beyond that, Zynga also cited the burgeoning AR market as an area to explore.

"We're excited by how [AR has] captured the imagination of gamers around the world," Zynga remarked. "Apple's ARKit and Google's ARCore will allow the teams at Zynga to create innovative new augmented reality experiences. Later this month, we'll be launching a bold beat in CSR2 that leverages Apple's ARKit to bring player's in-game car collections to life by blending virtual cars with real world environments."

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