Commitments and Contingencies | 15. Commitments and Contingencies The amounts represented in the tables below reflect our minimum cash obligations for the respective calendar years based on contractual terms, but not necessarily the periods in which these costs will be expensed in the Company’s consolidated statement of operations. Licensor and Marketing Commitments We have entered into several contracts with licensors that contain minimum contractual and marketing commitments that may not be dependent on any deliverables. As of March 31, 2019, future minimum contractual royalty payments due to licensors and marketing commitments for the licensed products are as follows (in thousands): Year ending December 31: 2019 $ 11,679 2020 42,328 Thereafter — Total $ 54,007 Other Purchase Commitments We have entered into several contracts primarily for hosting of data systems and other services. As of March 31, 2019, future minimum purchase commitments that have initial or remaining non-cancelable terms are as follows (in thousands): Year ending December 31: 2019 $ 20,382 2020 20,165 2021 9,513 Thereafter — Total $ 50,060 Excluded from tables above is our uncertain income tax position liability of $10.8 million, which includes interest and penalties, as the Company cannot make a reasonably reliable estimate of the period of cash settlement. Legal Matters The Company is involved in legal and regulatory proceedings on an ongoing basis. Some of these proceedings are in early stages and may seek an indeterminate amount of damages. If the Company believes that a loss arising from such matters is probable and can be reasonably estimated, the Company accrues the estimated liability in its financial statements. If only a range of estimated losses can be determined, the Company accrues an amount within the range that, in its judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, the Company accrues the low end of the range. For proceedings in which an unfavorable outcome is reasonably possible but not probable and an estimate of the loss or range of losses arising from the proceeding can be made, the Company discloses such an estimate, if material. If such a loss or range of losses is not reasonably estimable, the Company discloses that fact. In assessing the materiality of a proceeding, the Company evaluates, among other factors, the amount of monetary damages claimed, as well as the potential impact of non-monetary remedies sought by plaintiffs that may require changes to business practices in a manner that could have a material adverse impact on the Company’s business. Derivative Litigation Since August 3, 2012, eight Beginning on August 3, 2012, three of the actions were filed in San Francisco County Superior Court. On October 2, 2012, the court consolidated those three actions as In re Zynga Shareholder Derivative Litigation On April 24, 2015, the court endorsed a stipulation among the parties staying the action until the Delaware Chancery Court ruled on the defendants’ motion to stay or dismiss in the action described below. On May 2, 2016, the court endorsed a stipulation among the parties staying the action until final resolution of plaintiff’s appeal in the Delaware derivative action that is discussed in further detail below. At a status conference on March 8, 2017, the court stayed the action, in light of the Company’s formation of a special litigation committee discussed below. At a status conference on September 29, 2017, the court extended the stay in the action until April 9, 2018. On April 20, 2018, the Special Litigation Committee (discussed below), acting on the Company’s behalf, filed a motion to dismiss the action on grounds that the appropriate forum for resolution of the action is the Delaware Court of Chancery. On May 25, 2018, plaintiffs’ counsel requested, and the court granted, a voluntary dismissal of the action in its entirety. This action has now been dismissed. Beginning on August 16, 2012, four stockholder derivative actions were filed in the U.S. District Court for the Northern District of California. On December 3, 2012, the court consolidated these four actions as In re Zynga Inc. Derivative Litigation On April 4, 2014, a derivative action was filed in the Court of Chancery of the State of Delaware captioned Sandys v. Pincus, et al. . On December 9, 2014, the defendants filed a motion to stay or dismiss the action. The court held a hearing on defendants’ motion on November 17, 2015, and on February 29, 2016, the court granted the Company’s motion to dismiss. On March 29, 2016, plaintiff filed a notice of appeal of the court’s order dismissing the action. On December 5, 2016, the Delaware Supreme Court reversed the Court of Chancery’s dismissal and remanded the case for further proceedings. On June 7, 2017, the court endorsed a stipulation among the parties staying the action through July 31, 2017, in light of the Company’s formation of a Special Litigation Committee, as noted below. On July 18, 2017, the court endorsed a stipulation among the parties continuing the stay in the action through September 7, 2017. On September 11, 2017, the court endorsed a stipulation among the parties continuing the stay in the action through October 31, 2017. Subsequently, on January 5, 2018, the Special Litigation Committee, acting on behalf of the Company, filed a supplemental motion to stay the action until February 20, 2018, to allow the parties to engage in settlement negotiation. On February 3, 2017, On March 1, 2018, the Special Litigation Committee (on behalf of the Company) and the Sandys In response to the filing of the stipulation of settlement, the plaintiff requested discovery relating to the settlement, and following negotiations over scope of the discovery, the Special Litigation Committee responded with written and oral discovery. Following the close of settlement-related discovery in late October 2018, plaintiff informed the parties that he will endorse the stipulated and proposed settlement as a reasonable exercise of the Special Litigation Committee’s business judgment. Accordingly, the settling parties filed a revised stipulated proposed scheduling order that the court signed and entered on October 30, 2018. The terms of that scheduling order require Zynga to provide shareholder notice of the settlement within 10 business days of the scheduling order’s entry and establish a briefing schedule and a date of January 17, 2019 for a hearing regarding final court approval of the settlement and plaintiff’s application for a related fee and expense award. Following satisfaction of all aspects of the scheduling order, and the lack of any objection by any shareholder, the court held the final approval hearing on January 18, 2019. At the hearing, the court determined the proposed settlement to be fair, adequate, and reasonable, and entered an order approving the $12.0 million settlement and dismissing the underlying action with prejudice. The court also approved a fee award to plaintiff’s counsel in the amount of $2.3 million. The Company has received the $12.0 million settlement proceeds, and has distributed the fee award to plaintiff’s counsel from those proceeds, resulting in a net settlement amount of $9.7 million retained by the Company. The benefit from the net settlement was included in general and administrative expenses in our consolidated statement of operations for the three months ended March 31, 2019. The court’s judgment terminating the action is now final, and the Company considers this matter fully resolved. Other The Company is, at various times, also party to various other legal proceedings and claims not previously discussed which arise in the ordinary course of business. In addition, the Company may receive notifications alleging infringement of patent or other intellectual property rights. Adverse results in any such litigation, legal proceedings or claims may include awards of substantial monetary damages, expensive legal fees, costly royalty or licensing agreements, or orders preventing us from offering certain games, features, or services, and may also result in changes in the Company’s business practices, which could result in additional costs or a loss of revenue and could otherwise harm the Company’s business. Although the results of such litigation cannot be predicted with certainty, the Company believes that the amount or range of reasonably possible losses related to such pending or threatened litigation will not have a material adverse effect on its business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably. |