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Zynga's revenues still soaring, losses still deepening for another quarter running

Success of two 2019 acquisitions has the company projecting a net loss of $550 million for the full year

It was another record quarter for Zynga in both revenue and bookings, though the company's losses continue to deepen thanks to multiple major acquisitions from last year doing better than expected.

In its Q2 financials, Zynga posted revenue of $452 million, up 47% year-over-year, and bookings of $518 million, up 38%.

It also saw record online game revenue of $388 million, up 61% year-over-year, and user pay bookings of $455 million, up 47%.

This is also the mobile company's best operating cash flow since Q4 2011 at $145 million, up 47% year-over-year.

Zynga's strength this quarter was mainly driven by Empires & Puzzles, Merge Magic, Game of Thrones Slots Casino, and Merge Dragons -- the latter of which had record revenue in Q2. Words With Friends also brought in record revenue and bookings this quarter.

Furthermore, Zynga also saw its highest mobile daily active users in April and early May due to COVID-19 lockdowns increasing engagement, though it notes in its earnings statement that its DAUs began to return to levels consistent with Q1 2020 by the end of the quarter.

Overall, mobile DAUs reached 22 million, up 4% year-over-year, and MAUs reached 70 million, flat year-over-year.

Despite all these records, Zynga posted heavy losses for the sixth quarter running with a net loss of $150 million -- slightly better than its guidance of a net loss of $160 million.

This is due to its acquisitions last year of both Small Giant Games and Gram Games, both of which were acquired with contingent considerations that allow the former owners to earn incremental payouts based on their performance for a set period of time.

Because both units have been performing well ahead of Zynga's expectations, the company is seeing the hefty net losses from those payouts each quarter, with Gram Games' earn-out period running through Q2 2021 and Small Giant Games' earn-out period running through Q4 2021.

Zynga also appears to expect this trend of rising revenues and growing losses to continue for the foreseeable future. For Q3, it projects net revenue of $445 million and a net loss of $160 million, and which it is maintaining the guidance it revised in Q1 for yearly net revenue of $1.8 billion, it projects its net losses will reach $550 million by year's end -- well up from its prior projection of a net loss of $245 million.

The company notes that this is not only due to Small Giant and Gram, but also due to its acquisition earlier this quarter of Peak, which appears to have a similar deal to that of Gram and Small Giant.

Additionally, Zynga announced today that it has acquired Istanbul-based hypercasual developer Rollic, though this acquisition has not yet been finalized or included in Zynga's financial projections.

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