ZNGA - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Zynga’s Q4 and Full Year 2018 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. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference, Ms. of and President Finance. Vice Lau, Investor Corporate Relations Rebecca Ma’am, begin. you may

Rebecca Lau

Zynga's welcome and and you, fourth everyone call. Thank earnings to quarter XXXX full year

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

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

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

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

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

Frank Gibeau

and million Words for consecutive revenue near million X% We were year-over-year year-over-year. bookings and and up $XXX up XXXX our our term Dragons! generated and Thanks, our revenue $XXX QX results XX% QX driven bookings momentum. mobile and up CSRX. up and all-time difficulty] with quarter These we With revenue QX, achieved in are $XXX million, tremendous for bookings margin XX% In record guidance thank $XXX year-over-year. Merge bookings year-over-year. We results We mobile entering finished of Rebecca. up and up goal Good of you strong is raised [Technical earnings second afternoon mobile up joining Friends, year-over-year revenue X% mobile delivering bookings call. ahead XX% were and the highs in surpassed XXXX by million, with XX%

collectively Our year-over-year strong in Friends, revenue With which mobile delivered double-digit by and CSRX, led results growth bookings. were Words Zynga Poker and

Dragons! our talented May Small We life acquisition are teams, of Giant These added teams completed also Gram well Games our two new cash January Puzzles. who as X, Games acquisitions up services expanding Empires forever & with since as portfolio year-over-year, franchises, of XXXX. flow Merge Zynga’s XXXX. now effective XXXX, is our in and $XXX operating turnaround In highest XX% million, complete. was

positioned we place significant Our operating well growth are are fundamentals in for beyond. and XXXX and in

our on by strategy launching scaling which on focused platforms emerging our services life includes business and the growth executing new technologies. growing are and successfully We titles exploring portfolio,

With life pursue Words add X to franchises portfolio to also and we X. acquisitions. & have Dragons! through CSR Puzzles, Zynga our new Empires services, will Poker, Merge opportunities Beginning from franchisees We talent forever with and grown Friends, Racing.

offset particular, our Potter new in Thrones, expect by live these In Playstore. portfolio more grow pipeline to and games. are high than in bold services Both the have & declines of existing android bring games players. top games, on introducing innovative will the and Merge grossing services Game Harry recently markets. new in expand life chart we the We XXXX, play to and in and exciting licenses Star IPs our including Puzzles were franchises XX Building a to CityVille, international audiences, mobile of foundation, featuring and owned mode games U.S. designed get and Empire lapsed growth web Google Dragons! and presence Wars. FarmVille, these this strategic also upon older we of players growth more In back beats attract

In new working titles. on also Games are addition, and Games Gram Small Giant

franchises. forever that with have is become development Game new titles create to potential goal Our new the to

launching will potential pipeline XXXX in from the and XXXX which our enhance We beyond. this growth half in will second begin further of games

meaningful margins to our few will next basis. expect towards now as QX to progress the QX to call detail like-for-like year achieving as we guidance. results that, over more Gerard turn inline peers years, well the and With discuss Over XXXX in financial I make full on with a our further our

Gerard Griffin

Thank for raised margins delivering near-term We beating key the capped another great our second our across measures you Frank. successive off of goal and quarter with XXXX ahead quarter. guidance financial

revenue ahead respectively. X%. of Mobile million million year-over-year. Year-over-year and $XX million, were and XX% $XXX QX $XXX million, comprised increased revenue release revenue anchored guidance, performance XX% performance bookings million now net average $X of expected better expected We our million increase $X Bookings Revenue of million stronger mobile a X% up guidance, was than quarter. while cost compares was The or mobile bookings by increase guidance, mobile average in the Our bookings year-over-year. year of $XXX million MAUs XX% or year-over-year. Zynga a offset mobile of of our of by up decreased best top $X line were million and Mobile net in was of XX% million representing $XXX in a off bookings were and by was results in delivered holiday in revenue total record effective mobile net deferred DAUs than by with revenue our our ahead year-over-year. up $X and history of X% ahead $XX and deferred to prior million. $XX XX% Revenue management.

these representative company total moving in earnings many noted to metrics or we either of performance. to audience longer investor of of As as less our our less forward publish part become certain relevant plan letter, have no materials as

performance. our which systems. metrics, company total metrics, increasingly include exclude -- of an chat Specifically, audiences which unique evaluating identify audiences users we inability to given de-duplicate web with across are which me secondly, and portion account excuse our our data from And acquisition recent audience the audience smaller our for games

up prior down net from income XX% the expenses bookings decline bookings net down of revenue in XX% year. QX million, revenue XX% expenses were in year. million expenses. year-over-year operating up XX% Non-GAAP GAAP or million of a to million, $X million representing operating the or prior XX% Turning of were XX% $X better $XXX X% income $XXX operating of from a year-over-year. and delivered year-over-year $XX of guidance, of $X in We our than million representing

$XX $X This assessing debt Effective variance was short million Games of share driven the Our of Xst X.X of movement EBITDA. million deferred million operating counsel court since the XXXX, in $XX strong $XX above performance change on approved equity. cash, litigation million In million revenue and XXXX. credit from that million. was plaintiff related working variances, EBITDA and and stockholder adjusted of fee $X as million, note $XXX XXXX, a This by our million guidance a quarter term later XXX which year-over-year was income in year-over-year component $XXX net will decrease revenue, derivative generated investments, year year-over-year. and the on operating equivalents We received please We $XXX of effective of QX, of $XX the we the best distributed January and revolving represents a be quarter. million as management. our year-over-year million we cash, negative $XXX in repurchase adjusted capacity closed our in million and current to settlement case outstanding for with Giant Small facility closed our acquisition January in by $XXX program. capital the cash the flow results of cash of and remaining million the to In in million

further are alternatives. additional growth actions fund actions currently a financing to sale include through Francisco leaseback to as well as of reserves of building These acquisitions. We assessing our cash the our potential debt San number increase

and expectations beyond. for XXXX to Turning

This we in and revenues deferred of of by XX% driven represents increase a in revenue offset net of comprised of in to XXX% increase revenue. by deferred partially by expect $XXX XXXX, a deliver a For growth XX% the bookings a offset billion in growth $X.XX revenue billion growth net $X.XX bookings million.

by games of in our year. combined service XXXX be launch the by X of the half in performance new in a the franchises of the growth growth forever primarily of Our strong life portfolio, and would our second number anchored driven

performance outpace second of Empires acquisitions bookings company’s growth our in We bookings XXXX as growth history. anticipate in our our line the Puzzles half revenue deliver mobile as the to year. we new expect as recent the from launches strongest top & defer in We this well bookings initial game of

represents this which result in We revenue, million metrics in GAAP since build net expect XXXX. the deferred this a largest to in XXX increase financial

will adjusted revenue, XXXX. on positive of a XXXX, profitability net a in $XXX the and be GAAP and represents While measures release revenue this EBITDA in million reduction in deferral it income impact

the well IP. second lift a our we as game and QX in services. We as our user top as an by year, well from anticipate due expect to be mobile in the additional primarily similar new layer as mix line a advertising. of In in versus our we to In from growth increase on life to seasonal pressure higher performance paid also expect driven our advertising margins gross on of royalties XXXX, QX licensed launches half

for flow, and our our – throughout XXXX, excess on million releasing double game against XXXX to growth year seasonally position launches. In further space In where Francisco on the to development across year These leases will half pay invest the full Execution greater operating related in excuse ramp in year. the in years. from prior we will weigh year. launch we XXXX, ramp in future operating also levels company to excluding marketing in our in second XXXX through flow to modestly service low on our pipeline, on new of digit live and our over XXXX QX, we expect continued expect as returns end enhanced spend operating overall flow deliver growth bookings tenant the the grow plan will revenue in the in our me years, expect expect improvements. impact QX improvements operating titles QX our but fact core with addition, XXXX, cash from tenant of leverage generation by Similar cash launch to to game to $XX margins in to levels is our we collectively of and investments From growth contribution we in the headquarters. the new low the San stronger operating cash

QX, Dragons! in expect our to driven five year, our excuse great as anchored loss net and Empire loss $XX of of Puzzles. a and quarter Guidance to from increase of & the be EBITDA follows. including contribution million. for full a services franchises, mobile Merge by forever full QX life we start XXXX by a Now to me, million million $XXX $XXX million, $XX quarter Revenue and adjusted million of of revenue deferred is net $XX bookings and

factories revenue. the as this deferred by $XXX $XXX will offset is financial net a XXX% net in consider comparability represents increase to assessing the guidance as recognition to growth clicking bookings driven XXXX we QX in financial revenue and XX% timing bit growth double time material to in QX,FY million in expect include; metrics. well on deferred comprised a GAAP It by revenue bookings, in a revenue, XX% metric as increase of offset in little our spend a is which revenue net increase have more impact important of Some on revenues, by profitability in of deliver in $XX a deferred growth in partially of million. This million a

growth increase deferral Puzzles and Merge QX, financial deferred in be growth to net of bookings XXXX. driven QX, We will the since Empires as as in bookings is Candy largest drivers the which build of & from strong well in World in the FY Dragons! titles primary this GAAP these outpace quarterly Our revenue bookings $XX initial expect Wonka’s the for XXXX, QX metric by million of continued revenue

the While profitability in net be FY EBITDA $XX the deferral QX to million those impact of change revenue it future an revenue, adjusted component a the quarters, income positive measures metrics. million and negative XXXX release financial reduction in and year-over-year represents in and in a will on $XX

will mobile We anchored our be franchises. by our five our performance services, driven by bookings forever QX expect life

Wonka’s quarter be web contribution will We the full by declines year-over-year Games Words With Zynga a Gram This Friends, growth CSRX. mobile. bookings World as Candy as expect to Games of and Small growth offset older well primarily in and Giant in be well Poker, partially in from as as driven and by

We revenue an amortization in expect and increase the in from acquisitions margins the declining intangible and of build in sequentially. to assets meaningfully deferred year-over-year gross result

will mix further QX and FY advertising pay sequential the margins gross user XXXX a reduce seasonally basis. stronger in In addition, lower on

factors, year-over-year. gross Excluding comparable our these margins are

as on of the significantly in as to the FY percentage of QX and We revenue revenue the impact well deferred expect due increase a non-GAAP XXXX, negative expenses. impacts expenses to build sequentially year-over-year our in to operating GAAP operating higher as following revenue

investment expect expenses we year-over-year to impact quarter year and a full flat but expenses We as expect a a year acquisitions That Gram development our operating line increase Games said, against of our to to pipeline. non-GAAP Small remain bookings in Giant new due game non-GAAP Games that change from item mix over to meaningfully. primarily operating and percentage our the total ramp

Given G&A weighted offset and our to expenses sales heavily our lower bookings. a be of expect more recent operating as percentage we acquisitions, to and R&D spend marketing by

namely sales marketing's Dragons! of of are which bookings percentage titles, Specifically, and Empires both and we growth Puzzles & are mode. acquired higher investing in Merge a in key significantly and high

non-GAAP as bookings in to and new ramp expenses against sequentially percentage imperial a seasonal lift pipeline the due expect of gas primarily well to We costs. as operating QX development our our costs the investment increase as

expect what to expect seasonally normally flows minimal still low generate to cash operating is in up cash a quarter. we be While year-over-year, we marginally flows operating

ramp noted In year-over-year we’re call up looking through we And our As fiscal to will turn I be operating to for expect to previously, with QX. XXXX. and year balance the the back summary, flows delivering of cash to strong a Frank. that, forward the really

Frank Gibeau

Gerard. Thanks,

how live a Zynga to positioned complete. for we turnaround take Before moment call I Zynga’s today. highlight open now to is is want the Q&A,

XXXX are operating we fundamentals tremendous momentum. with in Our entering place are and

As to are capitalize free largest we evolving and platform the services the live growing gaming the uniquely a on developer play, leading to fastest publisher landscape on world, rapidly, and positioned in life demand a has highs. portfolio time five digital anchored Zynga for a services a and is is interactive diversified experiences forever franchises. first reaching at company, when mobile by new highly

predictable delivering services player of foundation, life driving XXXX. are launching begin cadence strong, games growth had from of a by half the engagement We this upon Building portfolio development, will steady beats. robust bold on focused through in long we under term innovative, second new exciting which this

years. will opportunities explore emerging platforms to will as acquisitions. the incredibly talent up technologies and Zynga, enable and us more and and In continue new margin line through at exciting on strategy scale shareholders. top With confident in It addition, are business we call time portfolio to an and growth growth our to our drive expansion franchises as open add we’ll here through to over to and coming we is Executing well this for your the ability generate questions. the significant players value that, for

Operator

Our comes Instructions] question Thank you. with UBS. [Operator Eric first Sheridan from

is line open. Your now

Eric Sheridan

Thanks for two parts. the taking question. Maybe

velocity versus think we franchise to The you is, marketing we what do of or as key and items about of with part XXXX, out XXXX? thinking as marketing Thanks promote As franchise everyone. array do might you across about more dollars, agenda the those company? How less be what dial how on the DAUs, allocating the to see look those to an franchises. put to trying think turn mobile look broadly sort about second with engagement out Where you you behind opportunities an dollars should existing it you to should dollars? dollars you’re think about launching or marketing allocating this

Gerard Griffin

take and in as I’ll that Gerard. is this well. Eric, may chime Frank

nice are look at as we each and they’re the some those marketing, existing monetization. of parts they’re doing obviously services our some more different the mature we we of look our As and life -- we’re in is, in very time metrics lives look at look lifecycle. portfolio, Overall, titles obviously against at we of franchisees of of profitability at terms their what looking engagement

looking on it there. on Merge we’ve set mentioned titles, as marketing for we’ve they opportunity are and terms audiences of continue go So the return our some increase obviously to a in budget we full bookings fairly to they some an at are expect of But like in each then, in Dragons!, through will lifetime & our growth the as of those and newer question, driving of see I invest are out They beats for earlier, acquired your against against fundamentally Puzzler games will. for of lifecycle set value Games are where year, that there. obviously titles where time, DUA investment, over But how are teams off bold their you’ve we we their and and and differently, driven titles. to to some our or continually inflicting significantly second percentage year, index we see early that’s Empires in with are mode reallocate the And it’s that of higher expectations meaningful that our got spending audiences.

to deeper actually we’ve acquisition. relates game, growth user by it the As driving addition portfolio, the actually existing through organic in what bold can we and drive engagement rest of within beats to found our is growth driving

So that’s paid is bring CSRX within like acquisition. continue the true spending and to there look at. to beat that game as new a -- the stronger Is opposed lapsed opportunity players other legends lever into there we’ll to a we like bold say

continue well. that as So evaluating we’ll

Eric Sheridan

you. Thank

Operator

question O'Shea from Thank you. Jefferies. with our next And comes Tim

Your line is now open.

Timothy O'Shea

Yes.

my taking So Two thank if you question. may. for I

follow up. this or maybe situation progressing off where quarters simply a first just. just Facebook still and reset this users a just it of the issue this we’ve sort and growing looking level player of now situation now, lower we’re the and Poker, we’re this Is base So a about through base at lower for at we’ve losing a active new then several is where talked issue,

and got takes annual really there’s revenue. margin. puts So a lot million of XXX the this around But We’ve appreciate deferred of guidance. first

there games spend margin, have will How margin ads. to We should user we I some us quantify, are when arrive about in due issues. is the across from about these, right. marketing is from trends? our models, half the way thinking this the all the pay user a this about these on these up pressure pay know that from overall some and I more to from is you of that help away guess then of overall to you. optics, building new that But think Thank away impact gross we’re understand to second that this XXXX. from quantify shift talk we all or all with towards mix any there holistically Is way impact

Frank Gibeau

Thanks, Tim. tackle is take Frank. XXXX and I’ll Poker can then the This the question, part. Gerard

you us well, as In a in businesses as terms we weakness also mobile for to back saw And mid-to-late our set had same on the Poker talked offerings. platform of know terms we which that web at the Poker has of addition about, Poker, we’ve as audience. that platform issue of a summer in good part in the time, been

So We’ve that been through way that. our summer. the mid-to-late working that happened in

inside economy. look In how levels to of currency, structures tune against at addition, We unfolded. challenges we’ve some to have the need had the the how tournament

And see game. fundamental kind so of quality a of take the strain inside the their life after you you some inside you of of where cycles terms some life have some and and time opportunity issues you go to see when where we place are the players, economy, there in points existing in in of the life services, strain

go right the kind also balances. terms of the and interfaces, where that’s reacquire in paid over through back currency you make the time up up are Poker. in you now clean And tighten adjustments we and means, acquisition then of and you organic ASO players You

good, it’s we growing You level XXXX to isn’t know it that Poker the matching has which quite it want was performance, to. but been

quarters. you on to in XXXX. of are last in very generated And rest to Poker the our problem terms some the can so new of that of the returning one in best in fourth and and to in Words ever portfolio of eight couple And the years. Friends of points can & of We I coming numbers think Empires know Poker having Puzzles with will strengths in best seeing time a for as it’s And growth have we at terms that’s CSRX growth forever the quarter focused ever a franchises. the the Merge fifth resiliency. same had. it Zynga of prosper. Dragons! continue

the of company to the allows resilient having same best the a services growth, that our make to going of the continuing us and forward. while to time at to adjust it’s able be that foundation life diversified changes of that Poker So, nature and in by players grow interests portfolio are

Gerard Griffin

about of between lot GAAP But a Tim, thinking full year, time because it metric it. between timing deferred have in and a to is understand it's it about terms I years. of simplistically issue purely revenue a the you talking quarters and spent is important fundamentally material

And understand we metric what it excluded so, view line We so on is what’s our analysis. for flow purposes our take internal that bookings our driving based that actually profitability EBITDA. the and top internal we we of use, out through metric we of but We and it, from understand is.

the So suggest you would same. I do

in to and will game the inflect royalties think the as come games. point licensed other our from from investment a is where In a that in growth think would mix opposed as time primarily broadly user then, could the looking And because the somewhere to be in an obviously we’ll marketing what gross be growth I is year-over-year will and from about refer pay an coming our. secondly last coming element development margin that you the game about that’s think range of point Opex see just some to terms around they’ll of in driving IP what for either some what purely And One of launches of we which new terms think the of two-point. XXXX, it advertising. pressure dilution you in in you perspective. said there's ramp And I addition about speaking as new stronger the about secondly, with we at

the or it our be that games point against bringing to new I leave You of our invest important we strong you is, life could XXXX guess execute becoming I level marketing market. see points would and depending obviously on the with most we would in But thing games. objectives, could X.X driving as against that one services our

We did will plus expect that we’ll terms where margin into XX% we into back in margins it return see of dissipate see to range. grow our XXXX the

Operator

Thank comes Stanley. Brian you. question And our Nowak with Morgan from next

Your line open. is now

Brian Nowak

my I’ve Thanks two. for taking questions.

you think How How the China? you about in at Asia new just in thought Merge the here? Just and the Dragons! IPs bit first one, How really analysis little forward you investors potential? that the then, of appreciate the in commentary? about commentary point? do about can you XXXX about and the the could XXXX. sort puts IP. just new or type are us performed, Where about Was understand talk wondering, And if are to talk of you we you those takes sizing material opportunity potential titles to this

Frank Gibeau

lot or have game is Brian, a Hey, five new can last more, that back and go attain game then start franchise and launch. we that we And Farmville, very engagement in development CityVille, retention of potential have need the -- Game achieve. aim we launch. assumptions at. we ability, if potential we can the we looks when of through forever were the on north light Harry fairly fairly started invested had a the kind what we cycle. Game were so We and rigorous want into initial clear those or to look believe we year. we into what on for we years a see We data this the new to at and criteria internal at rigorous does like are? Potter We look Frank. games the market order soft sizing per capital a going results So franchise. when a launch. to we $XXX return we become we And from Star go rates that of process soft then we regenerate forever use or define at for And that deliver a what exercise. Wars the game they’re proceed to the And that We and million the of production rate CPIs, hit goal that When standpoint Thrones the rigorous production Games when that execute or green verify take run

as about games in whether the process XXXX it So XXXX, the or you’ll going the kind that’s And new think half. contribution of second see indicated that’s you XXXX, the that XXXX underneath it's in through. games of we’ve for system we’re

starting to top launch to In that’s You’ll billion X.XX testing. see soft is be market games first small. enter the of doing guide in line the half therefore and rigorous our we’ll when relatively contribution bookings the

& for very Poker And Friends. With high three then We’re Merge and forever really to on. Words looking see growth good at our forever Dragons! CSR, our start Empires Puzzles working Merge – are years growth relatively They year to through Empires and high Merge for how for Dragons! Puzzles growing successful our related your and five launched franchises. more back And and to margin year. new It’s of in and much then new new going have the be talking see we’re franchises. you’ll game modulate going untapped coming to in second where then relates goals & introductions we that about be the putting in to to franchises and the the services Dragons! portfolio. development not in question both And second And that's we’re how off core the they a they're their start if market Asia. slate the They On life half pay game XXXX as we’re into games marketing in new and contribute you'll and stack. start games it existing really progressing at money will XXXX of scale.

go Our bring audiences to market to those to plan across Asia.

hopes We at enter But a to well very is high there. have that those market Asia. can times. difficult games it It’s do

games. those start later careful taking Puzzles to from our Dragons! XXXX. some a very we’re indicators. look seeing we’re Empires then so And Asia Asia we’ll in Merge to promising to certain in -- and bring in markets And perspective & launching thoughtful is available and approach to

Brian Nowak

Thanks guys. Thanks, Frank. Great.

Operator

Thank question you. comes Sebastian Robert next And our Baird. from with Colin

Your line is open. now

Colin Sebastian

this older the this some pipeline Great. is have year. in later way the for and With in improve in of year? games With I a any you. respect quarter trivia the legacy as format monetization With respect a Thank And of engagement this alive, the the tool? how as you you with talk know with and congrats of acquisition the Or existing see that Words portfolio of each some look that template Friends, different, to a does to the to but would and you you Do in other had expect as Friends performance with more users customer Words have about traction, Thanks on little more you might then growth terms games in of games serve formats. can the that secondly, evolve?

Frank Gibeau

Colin. Thanks

from Friends at of one our from Words CSRX. the share game across With from actually learnings We actually lessons from total Beats, and key portfolio. If Bold that Words we you Poker benefited Friends services develop from live look lessons and lot With a

franchise at were levels features -- a it's Words research for lessons player player and one to very And that next. activities that really a are what led putting players to Friends we engagement things from could in key plays. others. to them can new mode also daily and the that those good types competitive With take And what led we into to they was that and great learned into and some market learnings the we advantage apply had it's put engagement of team-based game. So we on looking looking different The a segments basically like single increase

those are CSRX other PDP player compete each so, against year.You'll modes And applied lessons more to players being that a games investment in see new greater to are that like allow other. this oriented,

from has advertising its did -- that as majority understand we other an we learn of we Words and what data engagement to the products advertising learnings opportunities micro-transaction those them many we’re of game mix as ways it it's hyper economy, utilize using we the and is those racing now generated a still on of of place to in game. One the we’re game across driven Friends science look products a but it's because in its inside learned at types from respected whether placing of advertising rest inventory a user pay terms revenues a to the products start things of lot in impact that how or casual With

that feature that very terms Friends of beta. It's a innovative. in In With was Words live was

and flows it. got to understanding we want user those are it a down the All performances members to cadence we eventual we’ll We And I’d still have on it it have key the should with has to lot community engagement rollout game higher what impact it as launching some that a into of out and a encouraging be polished there had With we mode at engagement a by research beta, and positive its then they've the We’re roll better But done still experience, rolling audience, resonated very obviously the Friends get do has questions generates looked standalone that out new broader instead With really feature. that questions idea The things aggressively. other it is of and really and work humor there’s more the the that fine-tuned it really adoption in we and the strong. a of in shaking types the to – some a solid, of with in game where it thought there the game market of more we trivia of terms in time have mode still now Words – around feature found that out say see we’ve the part getting position attained. start been so for hosts. how appointment and on based a to is being people But very products done on it and Friends. like an impact and the Words of new And core words.

Colin Sebastian

Thanks.

Operator

next Mike our Sacks. Ng And question you. with Thank Goldman from comes

open. now is line Your

Mike Ng

$XXX could the about with XX% you annually, for a the game for generated talk consider for million call million just one Thank what titles games? Thanks and your define a you merge Gram new rate Gram question. from think run as how a Could likelihood And perspective? about I and what Gerard. Gerard, new I one us success merges $XX it, in of quarterly Frank for acquired how when for also bookings have much the doing wondering marketing to up I to quarter. was typical you $XXX Hi. million if that so what’s success And whether just of $XX million new game new and with Zynga Frank, Gram mobile a increase rate you’re remind you development percentage sequentially that’s that you. games? for to success or

Frank Gibeau

Mike. Thanks,

think year. how and deliver success about the dimensions In the little of that more of mobile, terms for one we at forever earlier around game in Poker for years can around engagement With talked a Friends its be is long-term call therefore I CSR five in is fifth franchise, Words on can does for Racing like, look now been a Zynga has it how the has or become years, game been we much XX eight, around

think like So it and players, Zynga. it to that very we We relationship we systematic engineer at look long-term a and at engagement approach. how long-term into with plays that’s delivering that

much as the our as and same try and for understand time early game And at go systems of or is ways as drive and our as elder we’re and those not whether mechanics, how possible we learning aspect play really so the innovation, development the but possible, product apply to into on test what portfolio. do to every market track, look across

overall of so from for XX, to beautifully at on. terms and get of terms at we in profits. if XX, add forever on IOS. it so, the of growth the in XX, at look platform the to perspective to broader into franchise the do We When one and impact we is publishing can create our top because more in XXX, chart android. forth so ability top terms look position another our top And top scales we look our success define we market We start look

markets. can't that green is have only mobile to market lighting a so reach to games gigantic across of look idea really the The full really work that that global that are spectrum the market We missed opportunity an at opportunity. is so global,

get charts IP as decisions other testing it. android into the rigorous and prepared about remarks perform the android XX on top features how our talked in those we’ve XX Dragons! engine, And into ultimately we reach the charts. brand, we combine we on Top grossing have to recently, on then on been want So, Top do Empires games get Puzzles Merge & the well. see And

are those at. the dimensions so that And look different we

thing forever and that be building you Now that that out ways the time. the the on you being businesses coverage create will franchises do very one a is pretty don't every five to such it's can allow in that that are large business beneficial be definitely scale can by you mobile is in big top profitable but that that got

in you the our as as so see our focus studios, that but as you well. like We of don't that games mix. effort that typically portfolio opportunity main do some see And

Gerard Griffin

that Dragons! north obviously Just about relates all to existing deep the to of but Merge I $XXX said, definitely studios, I of bookings Dragons! a when rate individual into to and for majority numbers in in. historically in dicing of it total And run as with rate the of the it terms was want at don’t and get the million ramp I think company XXX quoted run XX%. studio Merge Gram, about slicing in and

little put really strong The That is higher a that than is at QX. a this only caveat we holiday bit quarter. its in point. obviously driving So performance it is

So nicely of though rate. take be quarter is out holiday it you got even careful to run point ramping as to data a

Mike Ng

Okay, Thank you, great. boss.

Operator

And from with our comes next Crum you. Drew Thank question Stifel.

Your open. line now is

Drew Crum

guys. Hi, Thanks. Okay.

continued more differently, driving Friends for you And coming about themselves improvement sequential Thanks. this or is of that’s Words growth for booking the and With are As ad there address you the and I you’ve games with portfolio new additions from payer on then And any there acquired board, think that the they XXXX? guess aside something title trend expectation some advertising? the some to of how in might XQ the making can to year? asked conversion made lend separately

Frank Gibeau

start with first question. I’ll Hi, Drew the this Frank. is

in games services advertising that develop on past had messenger driven. hyper and We also we the out casual games are

title about of see plan you will free games you slate the light casual we’ve our charts see in included not products more are our talked a So in -- that model are that driven. that are are that ad that in

that in We and an ability be grow very are doing available experiments terms as some XXXX! franchise if is an type out portfolio a franchise the and incredible has continues through that of there out that see studio to to there of with advertising Gram a there business does popular model. there's more. game, of to Examples job its

Gerard Griffin

Yes.

growth, highly game payer the obviously more to pay add about we engagement with engagement very & monetization experiences will in on macro live Puzzles. the experience as in Beats that focus our years the terms down launched of retention give is more go ultimately as conversion. payer think a user add giving through to helped. with existing through as titles strong about us And and a when obviously much about on value Wonka's think they we’re they're in More opportunity from within quarter to active you that's and players mix that to taken creating of from that who's highly immersive new focused deeper it's spending opportunity as think obviously terms of why build That’s monetization. through very somebody we further World opportunity actually much player relationship driving a into in give being conversion, that that obviously see and you the the Empires game. their the value us Merge deeper and real services game games Candy players because more you to grow the audience Bold quarterly base of -- fundamentally the In getting engagement And our ultimately to and what isn't monetizing grow conversion, we as the which addition players Dragons! payer active Obviously

Operator

Thank comes with next question Piper you. And our Mike from Olson Jaffray.

is line now open. Your

Mike Olson

Thanks. dependent a of the sense exists continued in said from guidance titles not from on sure new at good trying or It but titles half down the bookings its is break much to if you those you’ve you will the not said four specific I’m percent of versus the title in of but get could sure second ugliness comes you give, titles. that sort I this then this versus point that sounds And of just like that three of what I maybe be could number of existing released you four be it, kind specifically. to going the I’m the the guess for of solid X.XX year. today? or back a just relating of billion title are kind the the other but portfolio to year XXXX how In titles new confirming Hey, that three afternoon. performance words in

Frank Gibeau

Yes. Mike. Hi,

I there think is XXXX. four titles the it’s of available to second in assume half safe three that to

for forever terms small is the new franchises. that is of in the In second driven games half the total majority big a five of The percentage. really of X.XX the billion contribution very by

Mike Olson

you. Thank right. All

Operator

Justin our Thank And with Merrill from question next Lynch. Post comes you.

now open. is line Your

Justin Post

Great. Thank you.

couple a Just of follow-ups here.

you thinking Gerard, you. First, Thank And on about know of and that about talk trending us how it’s or now? Small that your Wonka, what contemplating January guidance you from there? run remind monetization can I secondly, in Giant, How how and right early. are things rate went just then the is the the just very contribution

Gerard Griffin

it's very -- we it's very doing base that an itself terms driving good The acquisition obviously guys, audience In and when growing Puzzles also marketing high a but really of & growing Giant. through a return. investment levels announce as we the of, organically is well both said Small is with Empires title of

for terms In year how thinking this I'm about it. of

Small end through i.e. XXXX, drive, to XX% is term of margins, Giant in and right the goal is future. obviously operating Our for into longer north definition. of the And internal our investing now, this year

now so. So the profitably is that scale the tuning experience the within do quality acquiring data over The the year Candy, But are want see for that’s rest started. few regard very it change at and the inflect is how as to build. to We as our contribution. our it's we’re But it as full good of And we’re it long-term a higher? is and year further margin our you'll we assumption engagement We of near-term game to could on but is of very good. game back a scale category The With strongly. depending we and of engagement kind slow to investing beyond. of in that set pretty XX believe gotten terms quarters. more rate is we into on quarters, the that invest these We’ve my the actually plus. dramatically retention. a But the for game. it coming now, monetization players we right XXXX with expectations on goals. opposed World for contribute XXXX is Wonka's over XXXX Can into very is how in XX pleased with next Match-X

Justin Post

in of you can on the you’ve follow-up, all just what change what thinking Small just one Giant, seen at on has Maybe bookings And January? that you’re us based there? from remind

Gerard Griffin

the They $XXX that the expect we current and in somewhere somewhere the year. the in year grow said, between on valuation. obviously we million When the ended we to three times did two acquisition we’re to

in year for sort we’re like be terms the of our get what to somewhere sort trying better, but It we in full expectations So, of setting lot XXX of is thinking. XXX, ahead of a our could weren’t range the ourselves.

Justin Post

you. Thank

Operator

next Doug from Cowen. our question And Creutz you. with Thank comes

Your open. line now is

Doug Creutz

Thanks.

M&A. to possibility indicated the more you’re raise for capital. you sales-leaseback Obviously got ways You do looking to that additional

I this done opportunistic? terms just it deals a there of deals from? Is Can the uptick we’ll it three to the done talk be that size of about okay several increased at for XX of you roughly think basically of sort like fully feel kind more is that last be by comes scale going Thanks. business target in having in you’re You’ve your months you XX%. – point? scale looking Is where

Frank Gibeau

Thanks, new Doug. to The in M&A teams opportunity us with starts talented forever for focus and the franchises. create

teams have are of There's Europe different so, the when of at you companies expect. Lot been great a out them as is wouldn’t in marketplace rich been in you There's those all and a mobile the majority international opportunity. franchises the there. places of we being new time. acquiring And we’re that cited, built really looking lot

our very cash could goal proceeds An so to M&A combined that create operations would looking strong convert like create to against be does is to value. our a the to used It shareholder existing business of see the that’s opportunity great is scale perspective tool that our line franchises. for opportunity a more to and multiple us as top we from teams, as opportunity increase into be building add the at with pursuit generation the of asset we a we’re billions, we scaling a to get And headed. kind of new number where

typically -- and look the started level franchise So, it us. and on we we where team takes talent see

Gerard Griffin

that. add just would I Yes. to

towards Small from those with back book particular, from Giant last more recently in I very been three obviously marketplace the has think what the Zynga. and Gram from into acquisitions the peak feedback we found studios positive from

think games out I terms has games really grow a Frank’s cool of leadership, given and lot can figured creativity of and to nurturing generate a That think trying focus that we've create got they to under value. would in say obviously a but marketplaces. we’re you're that about Zynga position big relevant with game. coming not we the if you you’re studio open that big us we’re I enough have scale, enough When in a stronger

point to and a for a that driving That’s view acquisitions each but studio what back they're scenario publishing into from so the have us studio Giant, very that's parts we they the talented of for us. very to the Zynga wouldn't meaningful ecosystem. at to been very delivering Zynga of us got And is those And from our games. back integrate scale. for from easy been Zynga relevant their is very Casual for a what to peak, division and taking Gram buy it, type creative are And a is ideal they’ve to expertise, and need Small for company and studios operations say, expertise from meat they today growth great not that's more overall

Doug Creutz

you. Thank

Operator

Thank you. And our Gee with next question comes from Ryan Barclays.

Your open. line is now

Ryan Gee

Yes. Thanks Hi. the Good afternoon. taking for questions.

last believe relates you XXXX said, with more So, would time help aim margin, you just settle guiding around just the you if where the to in who towards its were on related line us note, a of X.XX expansion. you comments of guys in line be kind out? about know in that letter progress peers. margin that great, on consider how guys And the were that Maybe the could will I you you range. your I peers same about made the in who on then And that page? same I you’re billion booking. to in top think

that high back and your XXs during EBITDA go to margins XXXX XX% around range. were You

on not booking your Thank different there So has you going what the where about progressing already get guy is are? margins And business today there comments that your take the towards peers for you're to higher given those you. to given something its base?

Gerard Griffin

This is Gerard.

for think about you at when our I our we is, we’re when going margins, think say would P&L first guess, the gross thing look number. work I off I

opposed you XXX perspective. that's XX of So XX% as a some as pay our user a about think and when over XX%, peers this from over XX% with to

of So deferred impact excluding XX%, that's again, the revenue.

QX XX new live services a QX. to continue in invest get an games. of we Mission it reverse you driving live to were to sort it in be in our it delivered or you’re at. into looking of engineer how is XX% So, internally us is plus one if to what function addition for XX. obviously That talking at and our would EA services was look We Activision

going XX XX in and perspective into we’re call like net new why little you’re we back from get we we this company's report about get we’re obviously inflect to XXXX back to get XXs on of that talking investment when the year then think games we But an saying and for next forward. up the and go when the in As about both us think to But when want you're that's the the from port marketing go be an [ph] to TBD R&D we’ll talking XXXX about will more there. basis. a XX%

said Motherload when So, you if that's five go how you What a breakout, think call also can is I would final new require think think that we to net [ph] if how they we XX to with of a through. saw going but the you hit bookings a about a get what portion get games We've level. when King actually if an largest think something game further, gross I that being the the really want to Candy it. with XX scales basis you Crush. there? that games obviously actually with a to a ability of our smallest into And part breakout R&D about some you higher can again that you is inflect different gives sustainable flow investment marketing, those scale on of that to the

Operator

question you. Schachter And our from with Thank next Macquarie. Ben comes

now Your open. is line

Ben Schachter

fees and that there? on games around they specifically talked and trying Can guys. just Thanks. happening you things might you How looking that the chat then platform other that to participate meaningful? you Epic platforms be And to are going Hey, change some what about fees the at what they’re that might beyond of and there how about are can secondly, android? emerging

Frank Gibeau

Thanks Ben.

Apple channel and market much But innovation there’ how In It's it��s Epic’s comment been great event. to that Google. between there. too forcastable fees, I to terms for certainly a really to out. think tell exactly and bring and us, all obviously on recently reach some going company the to related our They not front. of early audiences. not There's a our help and games partnership There’s the shake me

events So that to unfold to on able it. be leave to more I'll let comment

mobile really dynamic of other there marketplace. and terms is In – platforms a are

start that can potential. on something You’ve higher the interesting it’s start deliver for to experiences, new experiences down still that's horizon trying will platform And guide more will its but streaming figure to to see which players ways that has to XG device. it’s way West, chat, in reach to fidelity still the be a allow content, the you’ll simultaneously, out

out driven, least lot lot into ad the in or there quickly very cross call dynamics a position category snack a lot build you promo that getting use a audiences of there and that is big of of that there already to very addition is hyper us of of play size games people In at casual that games a marketplace at see kind are for quick that. those or

happening Another mobile frankly that cross-platform in technical like innovation and -- is already is sure I play PC coming that console. that’s the and for between some point

these chart look franchises So, at and are going as we and we the start unfold. platform and technology types have to shifts we built we Zynga how of

to when pioneer not able at need the good mass. be a that's get to to not the these, position out right be wave in in start critical if something we’re be think we’re on position position businesses to some We be but to of we I pretty to just want ride time the build those don't able to the of on.

looking really those at carefully we’re So opportunities.

Operator

Research. Stochel last come And will Ray with from our you. Consumer Edge Thank question

is now line Your open.

Ray Stochel

question. Great. taking my Thanks for

has market which reasonable or compare for For or in other titles, And by addressable can about to think -- owned the Thanks. related a willing or a we acquisitions, third to are on should would we party be total previous solely license, had thoughts you studio FarmVille starters, acquire you it quick to total basis. if market that then, addressable user how IP? game you a large a titles focused genre, with any CityVille

Frank Gibeau

Thanks, Ray.

a the strong category Farmville a has the very Hay terms of or CityVille, Sin of category. In and it’s unique kind Day as category builder Township and for robust opportunity been best City represented traditionally by or

to brands that, Farmville audiences massive builder on the time, there. fit lot category. products strictly as builder Facebook We're broadly to for trying so are going and that up base and has at a that web and we forward, as category those in the build had lot demand, of those that but think the on so example you of in and look squarely same So that just about CityVille a more a to mechanics we're awareness not to other the titles, would there’s a going match look late larger the and there’s opportunity

look titles. innovation us those So, for on from

with particular never profile acquisitions that there’s you say I that can I of In Thrones, that terms the called strategic out, Zynga. licenses Wars, following, of Harry right now, good and very would and With at have you Wonka’s strategic Game is Star Oz. we nothing a with of but of Potter no, with fits Wizard licenses that of here say think collection which

we really a So our against, you make development we when from you have we just comes you get are to game don't never, plans perspective, that deal.. not say but or it sure M&A, already licenses already have never good right don't now any really coveting

Gerard Griffin

own game look look Yeah, think at game. assessment to in would we our look IP that, talent, development on just I the at add the to and similar we of we -- our our I

in are to business. fundamental there shot give at three this yourself need a you factors a success to think I right get

the we’re IP we’re to last very But there to economics So we’ve sustainable the it's if we’ll that’s sense from a bringing and market makes there’s Frank’s a as few view licensed the games with IP got IP years, years. happy coming long as portfolio point forward to licensed a company natural of over a point, out and over look. built those of a take the looking

Operator

the I call would Rebecca Thank to over any like to now back remarks. Lau turn you. for closing

Rebecca Lau

more joining earnings coming you say look the to thank our everyone with of want to forward just We you We for call connecting to today. weeks.

Operator

a in great today’s you today’s all you program. Ladies and may participating disconnect. And for Thank does conclude Everyone conference. have This gentlemen. day.

Zynga (ZNGA) 6 Feb 192018 Q4 Earnings call transcript