Zynga acquires StarLark, posts record Q2 revenues

Zynga today released its second quarter financial results, continuing the company's twin trends of growing revenues and making acquisitions.

The latest company to join the fold is StarLark, the studio behind Golf Rivals. Zynga acquired the game and the developer from Beijing-based Betta Games for $525 million in cash and stock.

"With the acquisition of Golf Rival, Zynga becomes home to a talented team with the proven ability to create a global hit, while expanding Zynga's international footprint with a new studio in China," Zynga CEO Frank Gibeau said.

"Golf Rival has rapidly ascended to become the second-largest mobile golf game in the world, with 6 million downloads in 2021 alone. Together, Zynga and StarLark are well-positioned to grow Golf Rival faster together with additional new projects in early development."

Zynga also announced that its last big acquisition deal, Chartboost, closed yesterday, although the company doesn't expect it to materially contribute to revenue and bookings until next year.

For the three months ended June 30, Zynga reported revenues up 50% to $720 million and bookings up 37% to $712 million, both record figures for the company's second quarter. While the revenue figure was well clear of the $720 million it forecast after its first quarter, the bookings figure was just barely above guidance of $710 million.

The bottom line was better than expected, however, as Zynga posted net income of $28 million, a significant improvement from last year's Q2 loss of $150 million and better than the $30 million net loss it had been forecasting.

In a letter to shareholders, Gibeau and Zynga CFO Ger Griffin said the company saw "choppiness" in its business of late that it attributed to "the great reopening" and Apple's recent privacy changes requiring users to opt-in to tracking from apps.

"[A]s communities began to reopen and reduce their COVID-19 restrictions, we saw softness in our bookings primarily driven by declines in player cohorts who installed our games in the early part of 2021"

"Toward the end of Q2, as communities began to reopen and reduce their COVID-19 restrictions, we saw softness in our bookings primarily driven by declines in player cohorts who installed our games in the early part of 2021," the executives said.

"At the same time, the adoption of Apple's privacy changes resulted in a higher cost to acquire our players. In response, we scaled back our [user acquisition] spend to maintain target returns, resulting in fewer players installing our games during this period."

Zynga reported mobile monthly active users of 205 million for the quarter, nearly triple the 70 million it reported for last year's second quarter, while mobile daily active users have nearly doubled from 22 million to 41 million.

At the same time, the mobile average bookings for each daily user have dropped 26% year-over-year to $0.183.

Gibeau and Griffin credited Toon Blast, Toy Blast, and Harry Potter: Puzzles & Spells with driving growth, although it appears Merge Magic and Merge Dragons are losing momentum as the company projects declines in those games for the current quarter as well as the full year.

Zynga's current quarter will also have to get by without the launch of Farmville 3, which has been delayed to the company's fourth quarter.

For the third quarter, Zynga is projecting revenue up 32% to $665 million and bookings up 5% to $660 million, with a net loss of $110 million.

The company is also planning to record a charge of roughly $82 million as it prepares to depart its San Francisco offices.

"Given the ongoing evolution of our workplace model, we are taking the opportunity to optimize our office footprint in the Bay Area to better fit our needs and enhance our operating leverage," Gibeau and Griffin said. "As a result, we plan to exit and sublease our existing office space in San Francisco..."