ZNGA - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Zynga First Quarter 2018 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time.

As a reminder, this conference may be recorded. I will now like to turn the conference over to Ms. Investor of Director Lau, Relations. Rebecca begin. Ma'am, you may

Rebecca Lau

quarter Thank first you, welcome to and earnings call. Zynga's

we with call Chief Griffin, Officer. call and the today questions. Executive Gerard up Shortly, for Financial live Chief On our me Officer; our are open the will Frank Gibeau,

of risk we'll materially performance. future our the for Please in business may statements differ our the recently XX-K, make Actual related results filed review our course clarification. further elsewhere as During and expectations strategy, for forward-looking our most well to from predicted. filings plan in factors as today's call, well as Form SEC our results as

In addition, non-GAAP financial will discuss measures. also we

when or Relations reconciliations substitute Our will webcasted measures be our be Investor measures. our for will for our results. Please XX-Q to of as available hours. are few being to be not superior non-GAAP intended earnings is conference slides, include and This at website look a to in the on call replay a financial letter, sure GAAP and non-GAAP these filed, our earnings reconciliations GAAP and audio

Now, call for to I'll remarks. opening turn over his the Frank

Frank D. Gibeau

forever with outperforming across margin player had delivering Thank afternoon, our to achieving in Zynga you and to the seeing mobile near-term and audience well a franchises highest our our our all we're years. goals. quarter guidance XXXX, pleased great engagement four for you, call. the We're key financial start and on joining our thank Good Rebecca. measures in over way in we're

stock. decision multi-class conversion move structure high establishes share Class has a our for simplify today shareholders Zynga's voting all enables parity converted creating his rights Mark's single-class us we one-vote of to and detail Zynga announce This performance, to one-share, common structure. that founder Before our a structure. we shares A voting into from a Pincus, our all QX stock Mark

voting overall Zynga, interest no approximately his decision from approximately XX% company to to his Mark's reduces rights is change in economic there XX%. in the While

of will decision significant Directors Mark in forward, Board this Chairman. on sign Non-executive Zynga's Zynga's from future a as Moving of confidence Mark We continue welcome to prospects. growth serve as

QX Turning $XXX.X Revenue our million of both guidance. were and million, ahead bookings our to $XXX.X financials. was

improve $X.X profitability in and our million QX continue moving from of an loss $XX.X of income a of We to million net net our this guidance. to million of XXXX $X.X improvement ahead quarter,

In which great Our portfolio. Words performance franchises. as quarter was by addition our a positive With as driven our the has our particular, been growth to live and acquisition Cards in Casual in Friends, well services CSRX forever recent

Our mobile million momentum audience also continued up year-over-year. up XXXX We to with DAU increased mobile significantly in XX bookings XX% year-over-year this XX% year-over-year. mobile average XX% QX our mobile XX million revenue and quarter, up from

strategy our example focusing emerging and live team's performance of on is Our against accretive our investing an in launching services, our QX of platforms growth execution new M&A. games,

most committed deliver forever our the growth beats Universal's the with SXXXX. in acquire gave Honda franchise this that the Fast what's innovation. we quarter on we're in series events the and services performance Last to like our bold opportunity in-demand CSR's blockbuster and First, when new a the Furious possible delivering history shows of players live franchise the to released quarter teams cars in

to growth. world at XX% growth bookings supercars live can X% that to the auto and two real release launches in Lamborghini services these of the were Additionally XXXX International Geneva in revenue Show. strong These and with with deepened vehicles highlighting year-over-year QX, how innovation year-over-year our growth, timed we year-over-year worked efforts our contribute CSRX new Motor partnerships drove in

with games creating forever focused building goal new on of new we're Second, the franchises.

such our in relaunch. Words the sequel We following features from holiday tile new boots challenge radar the strong us their which attention as game engagement X and release like and lapsed have of benefited momentum mode, hindsight new family. experience more capture enhance and delivered player With with game value Friends players players latest successful saw features and This lightning new increasing to well as continues overall. as solo word engagement friends Our swap, continued and

Words ability new were result, bookings of revenues forever than to a delivered average franchises. moves and strengthen up games mobile XX% our our by As average XX% and X% mobile up mobile year-over-year per DAU highlighting we up to DAU year-over-year more launch year-over-year increased team's Friends portfolio year-over-year. XX% With

Invest categories. In addition Casual, in to have the Casino Express With Words Friends Action Social development X, new Strategy, in and games we

Match-X some We beyond. expect continuing and which we've Today, that titles half categories soft the genre. share a launch to we're with the mobile within popular Adventure, of Sweet into combines second in Match-X launch beginning entered new and Casual game, these XXXX new excited innovate into in to to Builder Willy or of gameplay all Wonka's XXXX and

on to with platforms like audiences Third, engage emerging and we're innovate new continuing chat.

have expect While we a gaming don't a make big to more impact in social we XXXX, accessible. to meaningful opportunity see monetization

fast iterate what's mechanics, players. with We're resonating move and lightweight simple starting to quickly impact on our to audience. and have and apply positive chat determine is proven approach a see design Our tech platforms to

the positive chat Card execute M&A our million chat MAUs growth our strength revenue Cards] our through our average XXXX. our from per DAU million or in of acquisition. Casual a balance use of fact, enhance sheet average mark the year-over-year Facebook Games, to XX quarter growing overall cadence quarters, of contribution QX first expect the which operations near-term. cash our QX audiences games XX fluctuate XX% cause Casual XXXX that to opportunities the in metrics on could mobile key average over the we've and flow QX to [Casual will (XX:XX:XX)acquisition, we'll launch from Cards potential. full as Fourth, (sic) shown recent Instant to coming bookings accelerate In were we In from to contributor

with expectations operations. and team Our our meeting is their pleased publishing studio integration Istanbul studio and into we're our successful

shareholders continue We'll a take team Gerard, that we're Istanbul delivering are on In margin have our QX value turn confident diligent With our will delivering excited innovative further that way he our to and we M&A, in the guidance. the year new approach shareholder that, experiences our continue our and to how strategy to we bringing towards discuss Cards to that to I'd players can in our about performance focus like Casual the life through and as so to of the over value. gameplayers to results long-term. ahead. started we summary, execution continue accretive world-class we're bold prioritize prioritizing We're QX near-term goals call XXXX are and ahead, opportunities content to and proud Looking create over to beats. and growth

Gerard Griffin

kicked off another We've Frank. progress strong XXXX as margin continue quarter to we towards our Thanks, with goals. near-term

cost and Our with across engagement services effective delivery was player live strong our monetization by coupled management. driven

Our Cards a Revenue was exceeded was revenue our our X% or million were year-over-year. million, guidance revenue $XX.X primarily ahead and from million. driven our of in bookings Casual of our $XX.X guidance bookings million X% million, in $X.X up up deferred increase Bookings or revenue an $X.X our which both full by revenue and increase of and $XX.X first $XX and guidance comprised is of increase The change bookings The guidance. net was versus change a in of $XXX.X acquisition. ahead million deferred net year-over-year. million $XXX.X of deferred of quarter the million

year-over-year to bookings. or were Friends Words million, the XX% Our top represents XX% XX% our our and With on pay a portfolio, double-click forever live XX% from offset pay This was year-over-year $XX.X $XXX.X up $XX.X or This up were million in quarter revenue $XX our million beat by driven of Words particular by $XX games. portfolio. mobile acquisition primarily $XX.X or CSRX, now And Mobile minute or expected in million, and was by and revenue revenue million, performance line or in driven $XXX.X Casual declines partially which advertising mobile million, was million mobile full or than Mobile year-over-year. Cards year-over-year. acquired up year-over-year. better double-digit by Mobile year-over-year. up was Cards recently growth Friends in user franchises, quarter were was our growth mobile in and bookings primarily advertising service contribution $XX.X a was million, million Casual across a bookings million, With bookings up mobile XX% and million monetization Solitaire. collectively driven older $X XX% across $X.X $XXX.X Taking X% million user up our revenue $XXX.X advertising

expenses. bookings representing year. Stock-based prior the in $XX.X down in QX were Turning revenue operating of expenses down year-over-year down the X% was operating from X% of from GAAP XX% $XXX.X year-over-year year. revenue, in to XX% Non-GAAP representing down million, down bookings down year-over-year, million, revenue, $XXX.X of compensation were expenses XX% revenue from X% of of prior prior the million, of X% XX% representing year. operating XX% our

net million this $XX.X of year-over-year. improvement to and of All $X.X of income contributed million an of million, $XX.X a our guidance ahead

short-term follows. had $XXX ended to existing today, income shares operating payment net new million $XXX in to EBITDA, is million. average program quarter. year-over-year. increase was adjusted up prior net a with includes of follows of as of at revenue use of our of adjusted million in by million, cash which a of and $XXX net flow repurchase million where a the year's cash Our XX now million. in $X.XX program. We $XX $XXX guidance, our and $X.X price bookings was net announced was This the repurchased of million $XXX $X million we a revenue EBITDA $XX.X and we QX of negatively completion of million impacted quarter million $X.X deferred deferred as And the million program $X.X million. $XX of flow increase This $XX.X a use and of settlement of net which share. compared share $XX.X above legal investments This of and We cash million year one-time million, per around million an guidance Revenue

to QX Some the in consider our include following. additional factors assessing guidance,

we be acquisition. our and to profile our live services. to planned those to the our bold performance QX against from from beats live by year-over-year Cards year anticipate we to in Similar Casual delivered QX, full QX, expect cadence benefit services our growth a similar We driven contribution in of

slots games. double-digit CSRX social by be We by older collectively mobile our partially partially Friends growth This expect Zynga low and and in Words With declines Poker. web declines growth will offset portfolio, across

more summary, ability to margin over and delivering peers year our We fiscal expect our services with our long-term. are we line achieving we're proud respect questions. started how we be our continue With financial that our of the XXXX, goals to to ahead. margins levels. broadly near-term performance operating are follow in the executing and to the the delivering gross continue we're with expenses your our about QX and as will and to broadly believe themes we to in value financial way strategy XXXX happy live in earnings XX% to in deliver performance XXXX deliver we to growth on investors. In excited letter. in We our track we that, line bookings. players on mobile We're quarterly and QX double-digit particular, against remain we to With prioritize and low revenue confident take the margins in remain In expect than execution in committed and year are our growth to more outlined our of bookings track

Operator

Tim come will O'Shea question first the from our of with Jefferies. And line you. Thank

Your open. line is

Timothy O'Shea

Yes. you question. my Good taking and thank afternoon for

to So there to hear publishers speaking, with franchises if any? your impact What's I'm broadly if established just mobile, recently business. just as coming PUBG And I'd thoughts Thanks. competition audience measurable the on gaming seen then curious your any love and overlap to you've mobile? Fortnite to bring maybe

Frank D. Gibeau

about attention destination with of our our and mobile The this gaming Frank. we've play it the to we from there that and Fortnite new think play fact no serve can your brings in two seen like cross-platforms we drawing to attention you game and mobile. we But PUBG, platform. to is bringing I on that excited The genre for new seen Thanks there. games. those fact, that question. We've audience a innovation shooters as is lot innovation new is fact services, on is impact no mobile that audiences impact Tim, are an the from business a a in

IPs. big the those In big the them question, terms of We and audiences in to a way we're both and believer second organically generate brands to are that think sustain long-term. big the over

Zynga like FarmVille, portfolio We history Friends, brands have Poker. our Words a CSRX, lot With like of company's CityVille, and in obviously a

So get blur brands platform mobile, – devices brands establish to destination over performance to is we're of standpoint, great and mobile platforms brand money. and gaming I more think as mobile as believers a a big the as in time coming that really a PC console it's and again and power to type between coming or gaming the place line capable, a it's from more traditional spend going to your more

Timothy O'Shea

Thank you.

Operator

the the of Eric UBS. Thank line next with will you. come And from question Sheridan

now Your open. line is

Eric J. Sheridan

the maybe for if can. question, two Thanks I taking

bets the inside the business model going going model versus nice that the You to demands of continue those for question progress capital, the want little – big the forward the a increased bit, on the about through margin to we you to talk for medium one, for think demands show terms how long-term. leverage, leverage where OpEx leverage the about in of should in equation. side make getting Maybe business

of on ruling the respect Casino. get with investors court from federal we to Second, intra-quarter a Social lot questions

you any should about Just want which comment that? there think way to know if have in guys. or investors Thanks

Frank D. Gibeau

goes for Thanks, leverage Frank. Eric. foresee we on that of take This At in question, any view to and in topic. view ruling. I'll the It's business impact the many. the start to hand from this Gerard and State something watch. It the our don't Social Washington material State the will President and we'll time, Casino Washington against decisions in to with then off margins continue resolve our years is

Zynga. and bookings, that's total Casino an perspective, going a time issue Social this narrow Washington different in than so issue, it's the have business perspective, Other on manageable our State. X% our to states our is issue have low a on of our take it's and a not extremely less For it's positions from impact risk lot one very very of

Gerard Griffin

Eric, it's Gerard.

to And we live our live the shape few we about development. into our of investment ship chat. right-sizing areas the spent our support In years feel into refocusing games it like last terms of new leverage, the of think innovating good addition structure the against in about way new and terms and to innovating the operating and in as we new portfolio company games

forward, live that's believe to drive they And time. we're our think drive get we As looking our over bookings to contribution games time. drive as to in come looking from into over we're new continue business, live obviously strong improvement the portfolio a will scale, margins we from what

will a and to ambition leverage And the sheet course our stronger teams into margin portfolio continue the to progress showing We appeal player we add for to that that stronger talented also and growth at is the IP very obviously, bookings obviously over our more and of growth strong stronger against base, balance same profile. forward that can in a happy with drive looking making the then we're to drive come. a to we're so

Eric J. Sheridan

Great. Thanks so much.

Operator

Robert with of Thank Sebastian Colin next from question the come will you. Baird. line the And

line is Your now open.

Colin Alan Sebastian

can the me. more Casino is on on Poker. Social My first hopefully Great. you and maybe a Thanks. question follow-up And specifically hear

You talk sort maybe game what or the reflective development about in to monetization seeing product that much relative the secondly, Thank you wanted And a you. as Messenger. the capabilities franchise? unfolding? ask we title. think do approach of And of a that platform the to didn't the should Are of Is that for customer vehicle that acquisition you platforms? as long-term, then that changing maturity about see Games more other I or to about Instant roadmaps context

Frank D. Gibeau

you Thank for the Colin. Yeah. question,

beat deeds well. Poker, the of In first in one, healthy be in a Tour at have when half. second the we going a that bold past it's us announced have World we the we've – doing very you bold for second to with the planned think and half, franchise, lot I On the look is Poker for major

year. just you Poker the the get lot structure It's well to of in the to of year. the have and of half tournament half to and flesh lot compete grow first had into out. a ways second We news able the planned that that We of it features today done a very out be in can

communication absence of Poker wasn't So the a there.

a the entertain what Instant mobile. a But social time of is channel people in and like Games in chat, becoming platform. most new it is we terms part pre-monetization phone is, like where their people In technically to it's on Messenger, The spend capable about there. it of and it's more that's to more

Games platforms Instant we we that games well a more and a an see as engages audience, reach bite to also so frequent Facebook other on to social basis a some they're more size as other at some look making, younger the audience audience. investments real of of games that are And as that opportunity appeal with the lighter

Facebook some with found actually playing monetize different Words an versus it's others they and in more audience, sometimes We're to have but With acquisition games games, But we into that been Words for schedule release we bring of velocity paid acquisition, players to the the of announcements about without chat. platform, high it do that pursuing very new Friends able have we propose be to to native. that nice overall, and is the able time a we're chat games, and With innovate so Friends we its the those introduce build will one be our position platforms, a for to differently, they the long-term. going that able over audience, on is And lot And of on things experiences to will like how a channel. resorting a on male, you believe to to native, start there's and organic dynamics. really develop in it terms engages like on recent love it's younger it's nice very

see it mobile, So, the our transitions looking channel it an platform, we as platform the AR/VR, that to at that new be third position always in is leg we're strategy and XG, it's whether mobile, it's point whether of we gaming growth. becoming in for within a and opportunities experimenting chat within four constantly innovative want come those for

Colin Alan Sebastian

you. Thank

Operator

Thank you. Olson next the line will of with Jaffray. come question the Piper from And Mike

Your now line open. is

Michael J. Olson

had of questions. I afternoon. good Hey, a couple

it, all, secondly, what ARPU maybe was you'll apologies Casual on I remind bit but acquisition up repurchase and the the remarks, execute could share but through then over time first case? long $XXX lot so prepared $XXX just you of missed how thoughts a down to And Cards took I previous million the DAU that a First, us period mentioned on Thanks. was work the the why was any million authorization? program, you you if it

Gerard Griffin

I'll start repurchase. with share the

when share The I joined, my we announced was quarter. first first repurchase was it

So was a over we in year, a it it year a did and just quarter.

in it relates against execute to on out share ability will really of as terms our one, So market ultimately that. it the this to the price there depend and

it average The of a one in price at done first we year, $X.XX. an essentially got essentially year-and-a-quarter

feel good the we be. So where stock that really about should given believe we

that question, repeat the you please? In DAU of again, could terms just

Michael J. Olson

is it so was Yeah, I explained lot down and Cards acquisition, why was Causal really a was more mentioning ARPU around I basically just the ARPU, but question. up was DAU the was

Gerard Griffin

at earlier, terms new ecosystem, but so the things average. of the groundbreaking in of we're into think not diluting talked moment, the those one about we think growing players our is building chat as obviously it it's audience, players monetizing audience, great are I our is overall which Frank about it

Michael J. Olson

Okay. Thanks.

Operator

come Lynch. next Thank from with Post Justin you. question line the of Merrill will The

Your now line open. is

Justin Post

kind have. titles Gerard. go beats nice over kind $XX it whether on and new you or incremental potentially think wanted to year-and-a-half hi, Appreciate in down months. it. now see where thinking Thank lot I are $XX XX future? Thank the about franchises and could coming franchises And feel Hi, the the there the it's are the on of to new stuff How next the you about ask of big incremental of to you million leverage a franchises the that you How over next that? got more brand then, as you. these with R&D, about and new where about with do you both you it you. million Frank,

Frank D. Gibeau

about Gerard question, Thanks I'll one for and Justin. two. talk take can number the

There looking very brought to in where see IPs in new be and There next of very that want where vault idea FarmVille brands that will that the franchises been terms open there. successful, Zynga CityVille haven't the back new In have that will category Invest traditionally been you'll released titles over be year-and-a-half, portfolio a we've successful categories, the that have been that we before. will original the so at back been We've seen from we're will be into past. the opportunity get we Express products in category. about be

licenses. we a at we licensing additional adjacencies are now, looking pick have Wonka's but as to some builders. feel In launch in up and right We Obviously, that is we is soft room announced in some addition an there's which our in that today of lends experience to that Sweet strategic our that audience uses Match-X portfolio in opportunity. and Adventure game itself

so that it audience an us experience we've successful with. that there, we've a an all new it's past brand built been within but the gives And

licenses a So new sequels. mixture it'll all titles, adjacencies, be and strategic of

Gerard Griffin

you leverage, with the of to model as previous my efforts answers, Justin one know, sharpen the essentially in R&D operating we've the the said company. in I very of across happy taken terms we're

live R&D, new. within talent As within a of and relates our spent the we it realigning lot core focus on to time focused

in. live You four think as are know now in our the but company the forward, obviously also building in going the have they're that in driving as we are you've business, the momentum we we studios about genres operating core games right seen

capability to new have games business areas in invest to today our and to new support build we chat. also live the So like

about feel good So we that.

But manage the continue we a we're I add a that time over leverage and in from you see very potentially obviously may operating we absolute as dollars. additional we acquire studios carefully. an more good to business I feel think portfolio, perspective, we to games place take up like think that in

I studio sure a in, and into focus Matt experience and the area. that's things Frank of in and that new then roll-on have of that there's ultimately One lot the new projects, of CEO Bromberg, – teams and our from into managing a and roll-off leadership lot we're and of the our a is live making

framework think in-place put development it's solid past we've in lives. the we've is a that I used one one our

the and as you at we beats, on business going focus obviously new games our into building new so, And to are investing new look future, bold continually live areas.

Justin Post

Great. Thank you. Appreciate it.

Operator

Thank you. And the next question Creutz line with will of come from Doug the and Company. Cowen

is line now open. Your

Doug Creutz

portion Is there Hey. last I add the noticeable seems is change. or would over be web you're noticed your color that is couple be to it of something can about Thanks. Thanks. any flat doing differently, something sustainable the a you helpful? quarters, sequentially, pretty something of business just which

Gerard Griffin

we As business decline. do our we've expect the said past in to web

not we're giving However up on those players.

focused web continue we've what playing long challenges web, fairly players you're is, around you're you and players. performed our keep that's focus And the going overall excite delight look on we point. to as I XX% ahead quarter-on-quarter audience it's you to still with think to waters games content Flash, on say choppy particular, when found on if business and of in or there's believe what business, just to audience this hang entertaining compelling like bringing player right other very got still much well, to continue now, the at I as is X%, obviously and think the it's an down our bringing them. to them, on we through go like aim an there parts And is opportunity our year. I those again, declined to but – at core QX we sustain as It's terms our we're Just the But it. side, around would of we mobile in still a

However, probably future biggest see issue the relates and the in the the it issues to we that Flash as business. deprecation is

Doug Creutz

you. Thank Great.

Operator

line with Stanley. come of Morgan the Thank next you. Nowak will question from And Brian the

Your is open. line now

Brian Nowak

Thanks questions. for my taking

The you've in-game monetization X, first and a advertising. job a one, Words Friends at done good of With blend showing bookings and

in sort can look building? of some investments versus talk can the hear the help just new we versus about updates dual us you're of new sort you so the IP new any is IP? for the so about investment on stream other Is franchises across or of you spend potential across the a If And financing really understand other then develop to secondly, model spend? of on understand making the potential And you franchises, sort now the have? good the to existing revenue to fast, around much. core of investment Thanks way any level arrangements lastly there

Frank D. Gibeau

Yeah. number I'll one, Brian. take

you we boost Swap, that and we Radar be proven Words players Word was always those driven model allows Friends created and year an Hindsight, with been with around engaged So With X popular Tiles have are modes really up new drive system that inside some ad game Words X to year-over-year, with the players been is and within when very in get the value features this something engagement that that has innovated has that phenomenal the excited game result. Team especially multiplayer but really to With is a Friends like new also ways, look created about of Battle, the we've new some added at which helped like has XX% engagement,

of of doing and Words is think more our stream diversified underway With I a ambition business from well. create So kind well Friends to

there. for also look or advertising opportunities Poker, We CSRX businesses, at like for IAP we other Zynga look things and our

that better been in digits we that that new is that serve doing quarter. way year-over-year is can and a of A for in first optimizations operate lot well unit the ways We adding inventory doing engagement our that first To up drives Our and players has players quite found for orientation, advertising business what looking gameplay. double an with ad always but the with we've a thanked what engagement. Watch our we've if to advertising at is player example in Earn the us to enhances do

With Words doing in looking actively are we we've inside been that what and Friends. addition So to with at IAP

Gerard Griffin

sort questions, the on four the think right our I to like your includes acquisition, in of in earlier we as that we're and right and growth our to what shape the games in Brian, Cards I now, Casual pool we've it would talent market is to deliver build today ability also in at and IP in new investment say the some said feel what we look other operating I investment, holistically addition that have of R&D we got portfolio in, gives the us live chat. the of our categories

development in lot in to obviously focused what on sure teams of we're to and creativity their games, important what going got you've innovating good the make on that's the organization doing. are very it's So keep a

terms of absolute terms or innovative studios. a reason studios category go you – in we you sometime add managing right but studios that future. and that if new building that. that of overall is were the in If different shape spend in is through into the And acquisition In the if more profile through add either They're the team mix businesses new grow by studio. obviously like should is Helsinki to are only IP you much Dawn build now, spend, totally the very of in action But strategy Titans, new live London, for they're game release on focused our new. the and they're building also they CSRX out

efficiency. against you is building, we as spend in that I the our excuse in a basis Oh, the that growth marketing into So know say you inflect to think if the it's look on main – we and I you today, shape P&L, look would What the more around P&L on a on percentage that bookings, is, at and like I P&L absolute me. terms sorry of mix. variability drive operating

Gerard Griffin

On it's the first front, the appreciated I investor is know think and I've a – ways with now for on with Since know shareholders I we're Nowak]>: – you building. But the the that cash [XXVXXX-E what's optimize of and going continue in generating from is year-and-a-half, Brian not evaluate been our book, value and other Q an one now a what's happy value, we're we with building here then, obviously asset, creates Thanks. with questions got the but building going for it's happy Great. you to Zynga. the building to that. for on that

Operator

from Thank come of The Goldman next Chris question Merwin with will you. Sachs. line the

open. now line is Your

Christopher Merwin

Okay. Thank you.

of you so price growth bookings the for competitive marketing, think So had you reasons ad sensitive, the of in the XQ that. about also mobile the ad talked but I solid a about some talked couple in for and you Frank, questions, letter, and

And of in the balance then you of going XQ light a bookings So comments, trajectory just to ad some intention beyond light your shed as forward second on you of in what a your sheet the competitive context M&A and acquisition. for just you guidance those leverage more M&A, mentioned companies well? help more us obviously question environment can the change anything focus late? of did completed you seeing expand of private the into or to that made Are Thanks. and one genres looking in with as you're

Frank D. Gibeau

M&A relates has has guidance. to start with question, always I'll change Look, Yeah, in very as with a the it. has talk mobile large of it hard, advertising community about been opportunity it's an global lot a the development that M&A can Gerard then

the a perspective, from offering casual cultural large right if with we've we social and our right through gaming. always team very talent, very been player company interested Obviously are women. so that fit base the right have the with fit franchises in And a that have the we we mission growing with large Zynga in of find the acquisition,

overall that So fit look at we able construct. tend to are that to acquisitions into

turnaround ever being participating trying our as not M&A started been since been and through be opportunities. have growing get business looking we We inorganic the and just been on in overly the we've about in disciplined to fixated the so And nine then has very able over to last of the quarters, plug focus the growth opportunities we've organic which going, part at seen.

two of done as acquisitions, casual we've Solitaire So as card the Turkey. games well business out the

games, we culture, are we conversations the things to of there's on on – the able we it execute inside the about we So feel going find now, we we on lot how same I on inside get new in then our opportunity right a evolve. right to should to because now fits focus of But look focus that's after just I going on company finally how M&A in and that. to the industry say games chat spend continue And then the that then focus we that terms like activity on we prioritize. wouldn't has accretive, good with in to mission we live overall, our at and and it's feels time are, when our that increased. we momentum that is would have be M&A it that say good

Gerard Griffin

people lot that industry the particular would a or a through just talent when got it's in is add whether in momentum the creative easier. acquiring I company through organically you're ours, that's like Yeah, in company acquisition joining

Frank's company. opportunities very So, see there. do looking of out being to at the we terms to want But bring what in we're into judicious point, we

continue that to We In my power and very plus and of had franchise the of into the competitive QX put With Friends it a terms obviously we've and the was position is will market, Solitaire. of a brand the good with space. down that ad innovation the I rejuvenation that Words

will think that about imagery our we to to do have. one as advertising is business it year, optimize I the thing year. be audience grow we but advertising expect we'll relevant we it the competitive, the expect do model, relates for We continue As ultimately, the and to our course look against of business the addressable our audience to over ways

to ups course But expect feel now, going of Right downs. do to now. the over expect see we areas it's sort in we now I business it year. again, we and good right one digits low it's I and it. where would So say grow single of grow about advertising to of that right the our you're believe those

Christopher Merwin

you. Thank Okay.

Operator

Mike question Thank Hickey from you. The line the of next comes with Benchmark Company.

line is Your open.

Mike Hickey

Hey obviously point taking an guess you in it's ask Peak, perhaps the guys, I'm basis, bookings size in my first if could Two contribution helpful you curious questions. me. also but to ongoing from and that on DAU. thanks maybe wouldn't I I for quarter, if do new you're starting the it. Appreciate as a Peak like, Poker, for me the looks Poker if on And out, a sequentially year-over-year? but obviously within forgive was this strip Zynga in QX. while, asked, fallback still you here that has if FarmVille, this are within or aggressive including to second pretty can if grow question able Zynga year-over-year been it you deteriorating but

seeing looks Just a deterioration you. aggressive there what for and any insight to we're – more little FarmVille? be Thank what

Frank D. Gibeau

this talking start Peak with bit. Mike, little the a Frank. is – about I'll

opportunity in that more the good a it on in is and issue Friends the over Poker in card MAU grow games, so second by our being CSRX was Words XX% to in with help had there. front, X% in big In a growth did up up bookings there did negative the around Poker into the on on but in being chat it the impacted also do contributor casual Friends With the with on focus front X our that performance Words year-over-year not revenues With big quarter, It or year-over-year quarter, was expansion and lot audience, Tour the was one. and World half terms a Peak of and a mix. the certainly

updating headwinds, actually But time. that that web, its the fallback, the native. Escape operated and FarmVille out in saw was Country with lot on Tropic of has FarmVille own grew the done it's and play. on regards having new user we're held It well Escape okay the period X et In X of to terms Flash a on web installs, a of of also and of things to happening FarmVille with decline as with platform But structurally that doing good there the there's group content, India cetera. overall new base our deprecation overall, job a that very ways the impact like as

Mike Hickey

you. All right guys, thank

Operator

will JPMorgan. next of come Douglas the And Anmuth line the from you. question Thank with

now is line Your open.

Dae K. Lee

is Dough. this Lee on for Dae Hello,

on my question or similar launch Just closer a full how would you launch? gauge bold first from timing soft understand trying think to big on the be messaging more about you can is And resource-intensive how we second, it how launches? of (XX:XX:XX) then to fast it move to can new So is should us going to beat help game there?

Frank D. Gibeau

Frank, is messaging this is development the model Hi, very game efficient.

terms in of single teams them fast number of you they sometimes talking less in them. terms You're small digit bring the be develop how very of market and can about people, can to very

already know R&D in comparison, So a included them is a lot we've they're to lot the really – bit you And faster. not a demonstrated. to of a way very comparing a in and smaller, fund those is discussions not they're a had fully native able good you're that that

what do robust can soft soft clear of the launch of very terms into trying launch, in game to there, In the we on have games more launch go that to as quickly possible. process terms with full is we're as reads so

soft We to launch. going also frankly find want the than fun earlier into

one year launch And of we'll to or focused would That and as a acquisitions, the going We're engagement be lot they new focus are when or we're new in retain, have at audience, the we come is reliant our good we company we I that's quarter and mean of layer focusing is we'll beauty quality a to makes iterating, benchmarks Adventure on growing ratios thing audience, announced And would in we'll and it's want context generate able look one when the incremental out when to honestly is quarter on like soft growing have on lots past model delivering tend to or the a so that in engagement then opposed of long-term our only a games to that at – different reason profitability, to line of look aren't of an like but and doesn't that's ways a feel have market. so core where a soft that by to if release really not. that, some six some we Wonka's with remind the be game through top but our new that you But of months is loop Sweet than launch. that to team launches consistently extend in on paid the the sense shape to to different we this services development bank for those added another. and on to still to small year, will having launch. kind a metrics grow past come of the in the need that's mobile, much soft haven't yet, those live new of we terms us in live the question services, organic portfolio

a and mobile what understand able be orientation time really is really you just off. I take pull that of games on endeavor need amount new and so order right in to that mindset the focus And to you launching difficult our to guys our and

Dae K. Lee

you. Thank Understood.

Operator

with Thank from you. will BTIG. of the come the next Rich Greenfield line question And

is line now Your open.

Richard Greenfield

Hi. Thanks for taking the questions.

compelling at or is Mark your And impact view that you've does things average just do of before You shift voting that the current mentioned. your quick feel repurchase of these it's were $X.XX to compelling. how how in on the last move levels, that couple was stock the view mentioning Wondering control given levels? year? in you over had your And price other for purchase your about at your does shift Pincus follow-ups stock a terms pretty made, the stock then

Wonka, You what just Can in terms Zynga just obviously tradeoff time? and on to Fortnite gaming, the you you think of mobile market the And in which IP us licensing looks a economics cost game? talked versus shooters expanding like between the in be Should the of IP for known terms having your that lastly, IP. how category remind that that own of liked. of about about over there's of then of

Frank D. Gibeau

mobile category, then in obviously PUBG the Frank, in Fortnite, looking and little can as a place this on now both exciting well markets. repurchasing at really Asia is dive Battle in Royale, Yeah, it's as the in and We're I'll Ger right Western part. bit maybe start

the a note a and audience way coming that's new mobile something into it's love definitely there. of we we've So that take more aggressive in

known to IP believe and Poker and original I original us, to being we we strategic we own right Villes and of like fairly and for is of about a IPs, on it With IPs the to mentioned additive earlier have are in possible licenses that profitable of that believe strong business Friends in lot rates, we right and the price handle that build Words the a a licenses terms risk In good us and terms we versus we when look have contributive right at being available acquire feel able profile. the and to very

we about orientation, say add range, So, that like But is are ultimately, think it's generic difficult a we last license. we licenses that depends that a to there forever it in can really That's mass how market can potential, global forever on the it more franchise one are and think of to portfolio. franchise of and number it, a years. a as really license and our overall new for

think that how about we piece. that's So

that his bearing just to type decision common, Pincus' impact high or any go we repurchase million or relationship of our convert Mark terms no announced In to that today. vote shares forward to had $XXX

unrelated, average our of we the price the on in was believe $X.XX that in and company long-term. program, last terms of repurchase So

our that with We long-term live Our opportunity the job is itself front tremendous the forever have think a that can is our in franchises, the talent us. at with to in do of we value. presents services, amount build what value mobile that of we shareholder company, global

way stock repurchase long-term we that grow really an value, shareholder to here in levels, current we're So to at sense. there's makes and believe opportunity that a

Richard Greenfield

Thank you.

Operator

you. Schachter line question from the of Thank Macquarie. the And with Ben come will next

Your open. line now is

Benjamin Schachter

a do general And obviously Can so be Secondly, questions. you strategy few on bit a I little important. how there platform, will about changing what impact impacted China, simplifying just believe think is there? was are wondering might road? those might Asia I bit. down the was your Zuckerberg One go-to-market opportunities or that you talk recently how Zynga you you for in the Japan, do tenure changes talking as there could franchise time? chat, have just the that about in but given then on think a a dominant do the can going a to this wondering as just of space, was you Thanks. over been industry, (XX:XX:XX) if has I the is not finally., the expand fad, relates your this sort you you Fortnite as think do new bit How be think it So is it this more in forward? general

Frank D. Gibeau

Yeah.

anticipate announcements partners a platform. they close So and relates platform yards. on to know nine a testing chat, this changes Facebook APIs, that whole with it and been the in we lot about week to as stay lot thing our is try protocols of in monetization, and very changes platforms One there's to mobile change

be So, on as chat is perspective, in the position to are nimble growth our be within it manifesting currently we to could be positioned a the in But the West be it other ones. a leverage Facebook. eventually opportunity platform fast, in potential and from

the our – in a very in China, it's a interested materials, of we significant talked significant platform growth about Asia, in if don't they're they're not investor on think platform, prior for great business we in that business hear have calls I of that driver it and the that market. some Asia Japan, investing it's a be could to terms excited in majority we're So mobile and a Zynga. And and of the in the for really Zynga, and the

to that market. ways enter thing very to actively competitive. looking know at are But We regions those about one they're is

long-term you strategies property, have the have to right right to the have partners, view. a You and have you've to have got right to have intellectual go-to-market the have you

you can't lay have have order kind right going to user schemes, of relationships, a in you in really monetization and and be the jump then lot's really right to game the to So the fast right with really that build the happen, infrastructure, successful. expect experiences,

the So group is publishing the properties appealing, our that significance do quarters of in we mix that two we actively ways looking that currently been of in buying some unit into us franchises that Corporate in the at advertising have Development market is and and markets have drive have some there. Asian are to last have get our of looking we at that the audience to

jumping way watching use – to don't in success that with we I and right guys. do other what's be a then Fortnite fan. a to think know don't kid PC, to on kids streams I'm going all kid I Ninja leads fad, we a there, and playing we not to the case a on where on quickly. got it I've and had one want the of is too phones, go and need but Look, couple So or on from long-term, we together mobile other X-Box, an a

cross game I think dynamics Battle and play available Royal PUBG, there's the social market lot a Fortnite. platform of to in

So think I ground. new don't fad, think actually I a don't it's broken it's I

and has can into super and scale. chart. it and been the shown players There the hasn't come a that mobile They're broad in up at really I and top think just shooter cool PUBG Fortnite West, shooters hasn't to over a also the innovative jumped been it's it's there recently. of – platform base of super very the until that's

stay. little a But love I it's So, think the playing game. I'm biased because here to I

Operator

of from with question comes last our Suisse. Ju line the Credit And Thank you. Stephen

Your thanks. - is line Ju Securities LLC Credit now Stephen Okay, open. Suisse (USA)

incur. on a in a of seems And fees. platform for in booking XX% Frank, if XX% Google economics Ben's probably about instant wanted for to of other a So pay you you so terms fee paid be look to you range I it platforms, the on messenger game on little sort dollar after may the bit at lean XX% the global to fee question, of seems it's like

channels, acquisition be free despite to dollars should for other So more structure same is this you. cost this channel what your you? believe as at found may want that attractive the for Thanks. cash versus look ultimately you that margin I the for be

Frank D. Gibeau

on a saying some early structure, detailed growing. not are fast new or point completely and about are not markets isn't, still Kakao R&D The game just it's good to game. Because flow fast it's of developed, it's I'm that numbers specific market relative yet. talk lot theory or pre-monetization West but WeChat, there pretty level, and these not Yeah, it low. they you I it's hasn't actually that a how obviously a native engagement extreme LINE, game about because but curves be are to the or keep to it's has into market. precedents pretty the different – how PC like a to But want the getting proven a works it's too in – There or in won't detail it moving that there. to It's determined. go is things case come and a to a are

of So it's opportunity, manage this you want the organically carefully are be parts is a scale volume also to the And to P&L might so game really able to paid. audiences as other you you really where conquering acquire game. opposed a that

some So can of there, the pick cheaper to channels and highly are you you room up might they're them more social. build, build faster

So a this in company platform as we out. had company But regardless thesis margin successful believe structure be shake with for to the committed how margins is to of to the we there peers. a line be a that ultimately, on

constantly businesses, do And our platforms a like (USA) constantly shareholders. things way Suisse to LLC for we're we of in or Credit in Ju return a chat we're in Thank so that keeping we - native or Stephen that investment at look our emerging different lines as and provides that you. evaluating mind need Securities

Operator

I Rebecca Thank would remarks. you. this to back closing to time, turn the Ms. Lau for At like call

Rebecca Lau

today connecting forward the look you, coming joining call want We Thank right. to Sabrina. to thank our for weeks. and everyone more over All earnings

Operator

you your thank This in conclude gentlemen, does and for Ladies program. participating today's conference.

have all day. great You Everyone disconnect. may a

Rebecca Lau	Zynga, Inc.
Frank D. Gibeau	Zynga, Inc.
Gerard Griffin	Zynga, Inc.
Timothy O'Shea	Jefferies LLC
Eric J. Sheridan	UBS Securities LLC
Colin Alan Sebastian	Robert W. Baird & Co., Inc.
Michael J. Olson	Piper Jaffray & Co.
Justin Post	Bank of America-Merrill Lynch
Doug Creutz	Cowen & Company LLC
Brian Nowak	Morgan Stanley & Co. LLC
Christopher Merwin	Goldman Sachs & Co. LLC
Mike Hickey	The Benchmark Company, LLC
Dae K. Lee	JPMorgan Securities LLC
Richard Greenfield	BTIG LLC
Benjamin Schachter	Macquarie Research
Stephen Ju	Credit Suisse Securities (NYSE:USA) LLC

Zynga (ZNGA) 3 May 182018 Q1 Earnings call transcript