Zynga revenue and forecast come up short, but big-name games in the works

Mobile-game specialist lands licensing deals for ‘Harry Potter’ and ‘Game of Thrones’ games that help stock recover after earnings

Zynga Inc. reported a slight miss on its most widely watched sales metric and projected holiday results lower than analyst expectations Wednesday afternoon, but promised a brighter future with a slate of games based on popular intellectual property including “Game of Thrones” and “Harry Potter”.

The San Francisco mobile-gaming company reported net income of $10.2 million, or a penny a share, on revenue of $233.2 million, up from a loss of less than $1 million a year ago on revenue of $217 million. Analysts on average expected a GAAP loss of a penny a share. Bookings, Zynga‘s preferred metric that adds the net increase in deferred revenue to actual sales, came in at $248.9 million, slightly higher than Zynga’s forecast but lower than the average analyst forecast of $250.1 million, according to FactSet. Zynga blamed lower-than-expected net deferred revenue for that miss, explaining that the sales mix resulted in $15.6 million in deferred revenue gains after its forecast called for $30 million.

Zynga (ZNGA) shares fell more than 3% in immediate late trading after results were released, but eventually rebounded to end the after-hours session up 0.3%. The stock has declined 8.9% so far this year, while the S&P 500 index has increased 0.3%.

Zynga stressed the success of reaching its near-term margin goals earlier than expected and success in mobile ads in its announcement, but the turnaround was more likely influenced by details on a new slate of games based on licensed intellectual property. The company said it has reached a deal with HBO for two games based on the “Game of Thrones” franchise and with Warner Bros. for a “Harry Potter” themed game, with the first games from those deals expected in the second half of 2019.

That adds to an agreement Zynga struck with the Walt Disney Co. (DIS) in August to develop new “Star Wars” mobile games and a new game based on “Willy Wonka and the Chocolate Factory” that is debuting this week.

In an interview with MarketWatch, Chief Executive Frank Gibeau said that Zynga expects to launch at least five new games next year and that Zynga’s work this year to land licenses for popular content “will pay off in future years very effectively.”

Most of that return is down the road, however, and Zynga’s forecast for the fourth quarter came in lighter than expected. Zynga projected a net loss of $2 million on bookings of $250 million for the holiday season, while analysts on average were expecting a GAAP profit of 2 cents a share on bookings of $268.4 million.