ZNGA - Earnings call transcript Q1 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Zynga First Quarter 2019 Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference Rebecca Lau, Vice President Investor Relations and Corporate Finance. Ma'am you may begin.

Rebecca Lau

Thank you, and welcome to Zynga's First Quarter 2019 Earnings Call.

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

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

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

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

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

Frank Gibeau

for Rebecca. We our and afternoon thank joining Good XXXX you with QX begin earnings tremendous Thanks momentum. call.

by services and bookings of Mobile of outstanding bookings results. full-year with franchises and generated XX% we we million, $XXX XX% XX% mobile bookings. now and our forever Our ever portfolio $XXX bookings up QX in mobile year-over-year. quarter up revenue XX% our Gerard for our million, revenue revenue delivered year-over-year total XXXX accounts of year-over-year. year-over-year shortly. up are produced raising We mobile XX% will up and which total XX% highest QX In live Today guidance discuss anchored detail five more revenue of

Merge strong revenue franchise by its portfolio and our QX Dragons! delivered best Empires performance revenue CSRX. and Puzzles, live & QX by in history. bookings services Our With record also Words bookings and Friends from particular is in driven performance

exciting time an for portfolio our While contributed Zynga. Social and meaningfully. Slots Zynga incredibly It's Poker

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create our Second, and our foundation. acquire is add franchises to forever new to to goal live services

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we half of and we quarters, second player the release titles and coming soft in launch expect worldwide based engagement long-term additional games on will feedback the new metrics, XXXX. Over to

technologies markets, platforms and growth. accelerate are we Third, investing to future in emerging

and appeal games doubled bookings. be to revenue In pursuing people globally, continue Android games will audience and by QX We're we've to expanding our our playing ever XX% building more proliferate that As before. opportunity grown worldwide. players our Android mobile Android by devices this than year-over-year

streaming and innovative distribution. streamlined higher new forms games, experiences and player arrival of will of performance the enable XG addition In technologies more

of emergence and now future. turn chat as as will for results to our market. of the as also expand I well play our games that, cross-platform and in to the QX the raised New such platforms over outlook addressable Zynga's overall and as With therefore categories further detail, casual, total will call hyper accessibility the well Gerard as discuss

Gerard Griffin

Frank. you, Thank

With the finishing momentum on to of phenomenal QX better services start expected well XXXX leverage. and ahead live strong with expectations our than operating

of deferred Given of was this first partially QX. of Revenue revenue revenue million. outlook million are guidance million. of $XX $XXX momentum, of a live higher bookings. bookings increase we million revenue comprised by $X deferred full-year was services raising offset But million bookings ahead and of in a on Revenue our $XX in discuss for $XX $XXX increase by million our offset let's speed a net

line in better-than-expected recently Hit or from million bookings deferred acquired up was well Empires was Words strong strong and was Merge It driven a revenue, Slots. by With top and which the partially outstanding up or or contributions as Puzzles performances from $XX Dragons! Our year-over-year Revenue Friends $XX & million CSRX, performance of XXX% as year-over-year growth by offset by driven XX% $XXX growth XX% significant year-over-year. million Rich!

the our including growth & the Puzzles The than primarily deferral and Our full on of and increase declines of well forever a web deferred franchises offset performed portfolio which our bookings both as driven contributions our which expectations. in change added significant income XX% and was in of performance increase from top note portfolio, that & million bookings of in million, mobile was by live up revenue mobile function line this continued Dragons! Empires bookings majority year-over-year XX% our best ahead Empires well Mobile The to Puzzles, year-over-year year-over-year of as our our more services quarter was bookings in $XXX Zynga's was Dragons! quarter legacy growth bookings of and and respectively. the revenue games. Merge were variances, revenue history negative now XX% million, in representing component delivered in mobile up in revenue net total Merge continued with and year-over-year adjusted XX% mobile year-over-year. $XXX EBITDA. an growth year-over-year revenue In variance of $XX We assessing the represents in deferred please the

of QX call year-over-year, prior XXX% representing of number to a $XXX There operating a QX GAAP million when comparing from year. operating are year-over-year. the out $XXX items I or expenses expenses of like would up GAAP XXXX XXX% revenue, to in Turning XX% in expenses, up revenue our GAAP were million, our expenses

million estimates noted this we've Empires quarter, of additional well & as Puzzles deals, of the of as As our Included Dragons! a of our expectations. million previously Games we for acquisition Games, credit to Small in acquisition R&D assessments $XX their expenses the $XX million we $XX lawsuit. of the our expenses outs. Merge are have booked onetime GAAP guidance. lifetime of one-time of well Gram G&A derivative Games and GAAP are also Based earn ahead million related and the our to respective to settlement proceeds and these ahead Small Accordingly $X latest of on consideration net Giant raised received value related Giant contingent performing from

the expenses and non-GAAP up decline of quarter Giant Our XX% of Games. contingent accrual, of partially consideration $XX to $XXX or to prior was contribution representing well primarily to $XXX variance in non-GAAP the influenced contingent deferred year, guidance higher year. significant million the by year-over-year The net expenses XX% well year-over-year Small a in $XXX XX% as bookings, from increase loss was reported guidance of heavily below and deferred Games bookings our We million accrual revenue net prior a The primarily the as consideration million, is a operating $XX driven expenses the million, million The prior booked operating performance year-over-year. acquisition-related versus were in year Gram due by down from full by we variance as income increase XXXX. better-than-expected as and offset in operating profitability. higher revenue in QX and

the leverage $XX was Our than significant better-than-expected loss revenue, year-over-year our in and adjusted of and revolving $XXX cash which of our in and million the offset by million million $XX performance. guidance cash million facility. $XXX due million $XXX of $XX had closed debt a more credit to than EBITDA with the We decrease better quarter increase year-over-year strong deferred in million a outstanding and operating equivalents we operating improvement of

We of to include well through the long-term Francisco through assess a building, actions potential as enhance These additional acquisition, as our sale leaseback well as continue increase as other further to to reserves funds cash value. actions fund shareholder our San alternatives. number to raising financing actively of debt

to and billion versus $X.X for our Turning are our guidance revenue, to XXXX our of an in year-over-year up we million prior momentum increase services, raising beyond, guidance. and given XX% XXXX full-year expectations $XX in the strong live

guidance. XX% We raising million to year-over-year $XXX our billion, increase of guidance versus $X.XX and are up prior bookings also our an

an and and highest deferred We revenue to strongest expect us million, million deliver This guidance. $XXX increase our $XX track up the in year-over-year a prior versus increase puts revenue annual of of in history. since XXXX Zynga on the XXX% bookings net

Our driven our in be anchored XXXX collectively live forever performance service will in portfolio five our growth by by primarily franchises.

expect enhance an We of will from primarily XXXX, number have of XXXX half We launch games and the anticipate pipeline to under development further XXXX defer growth we in well from new Puzzles, & as Dragons! launches. and revenue in bookings outpace game recently title growth bookings in beyond. new second will exciting a as games Empires in bookings and of our Merge our the that as acquired which growth

which result metric. represents to financial this largest million net in $XXX revenue, our expect build in in GAAP deferred increase We this a

and While profitability XXXX, to a user net In and the royalties reduction on income years, have on of mix release to in on positive margins EBITDA in anticipate licensed pay it revenue continue increase impact pressure this in and an intellectual higher $XXX million will future deferral gross in due a properties. represents revenue we XXXX. GAAP adjusted

weigh increasing spend on overall These pipeline but in deliver are future investments to releasing and XXXX, expect we marketing years. are margins titles expected and our addition, our on will In development returns on launch new modestly in to invest in operating our game XXXX.

our XXXX against in plan XXXX. execution further position growth Zynga Continued should for

greater bookings We game revenue XXXX service operating from expect in with as live launches. XXXX by and growth new leverage is full enhanced contribution our low double-digit our growth further

few to make with the we in towards line more on next peers meaningful achieving our expect progress like-for-like Over years a basis. margins

$XX will from As million, guidance. or million in increase net $XX loss expect like I'd guidance Gram Giant Games $XXX Revenue Small revenue when is contribution benefit assessing adjusted million full up revenue, consider from our we million factors or year-over-year. $XX of of of EBITDA year-over-year QX you and quarter XX% and in with for some $XX and million of bookings $XXX to Games. In net a follows: the $XXX million million. million, up XX% $XXX quarter QX of bookings loss million, QX There's XXXX QX deferred $XXX as of for

live mobile forever anchored our Our by by our services five QX will bookings performance be driven franchises.

expect and Words from Giant to We year-over-year by bookings to primarily growth quarter With be driven Games in CSRX. and in Friends Small full the Games strengthen contributions Gram addition

by this growth other as year-over-year expect in well will be partially offset declines mobile softness Web games, We in Poker. Zynga as and

of revenue million deferral in and & growth for driven bookings by will bookings QX increase majority Our Dragons! deferred continued $XX on $XX year-over-year. the This net account Empires primarily million the up of or will XXX% outpace Merge in the revenue, Puzzles

revenue the EBITDA of reduction profitability and $XX on a adjusted positive and deferral XXXX. While quarters, QX in will release it net future represents in in this have an revenue effect million income

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

Excluding margins we comparable gross our these factors, to be year-over-year. expect

and We a in by year-over-year percentage driven increase as to the a as of XXXX. GAAP QX be revenue and on in to will compared operating will consideration QX expense a XXXX. QX as a expense to build an but due decline deferred basis. sequential significantly increase contingent in to increase percentage be expenses acquisition compared down contingent revenue reduced expenses year-over-year, The higher to primarily our The XXXX QX expect sequential in consideration XXXX be as

expect we be be offset a line broadly operating to basis. on lower sales Similar marketing with mix QX more R&D the a quarter. We as in prior expenses expect of expenses and percentage bookings the non-GAAP to to year heavily and percentage to weighted G&A by to XXXX, our bookings

operating live marketing prelaunch momentum, enhance to non-GAAP to percentage to initial increase our as our game investment primarily well a due next to new We launch. our marketing expect bookings sequentially higher services on further as as expenses

would expenses like with our R&D seeing new We see in to I we in that ramp also In continue game to to expect a are invest pipeline. in to and back business. With slight summary our are execution the Frank. we as very turn we QX momentum positive our pleased it

Frank Gibeau

Gerard. Thanks

to how open we videogame for a Q&A, is the Before live to industry. positioned want moment within the uniquely Zynga highlight take I call

mobile has anyone gaming It ubiquitous anywhere. reach First and the ability world. is platform anytime to most the the in

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the services layers new services is of live companies generate we M&A live Another about In way summary the gaming fastest-growing leading of on live games, or the In we to on our emerging top largest free-to-play driving think be success platform. platforms existing will any services additional fastest one foundation. our with Zynga a is growing public this company mobile-first from vast growth. of XXXX game majority

term the long we'll reaching positioned the interactive for up at your a when time questions. we gaming call rapidly landscape to the evolving that demand capitalize for is With Over open are entertainment on highs. new well

Operator

first Jefferies. question with Our Instructions] from [Operator Tim comes O'Shea

Your open. line is

Tim O'Shea

So thank taking you my for question.

outlook, bookings Ger to XXXX? speaking Puzzles is outperformance providing you curious that impacts but some increasing investment & might guidance thinking know million. to you. know the outperforming, EBITDA you mentioned if to line? Or a way certain that like how guys would around down raising the I generally that invest flow $XXX you're allow and like EBITDA Given in a R&D. Empires aren't by EBITDA I'm margin find outperformance explicit areas Thank I you game full-year for And your

Frank Gibeau

QX we Tim at thinking a nice looking we're QX the way a our very it very business. way and now obviously the completed live thinking - strong right we're Yeah, about is by driven we're

a half royalties the I'm And will of that the As and year, see basic But new intellectual we against second money into that right be properties there spend launches. some the our now obviously you investing will holding thesis profitability to dilution be early get in will obviously on against against to growth. the game us But the potential based given strong potential. - the that there the we're could how performance right that business in flow ultimately now live is calling too the rest offset. for year year, be our is the of but there

Operator

Ng Our from next Sachs. Goldman comes question Mike with

is Your line open.

Mike Ng

expectation Ger, I for billion guidance year. else? versus new, from much. XX? SEG live the I of How you the And was unpack bookings just that hoping contribution much very now? the is $X.XX you believe could two if of previous was the Thank versus anything

Gerard Griffin

are reflection is the that seeing is In business. Merge a of $X.XX & the terms seeing just in also both we're contingent given the billion games. driving Obviously of that our and being obviously build-up services in the live Friends, Words Empires With predominantly strong driven live We're of momentum consideration a significant the amount from Puzzles the beat and and contributions that guide seeing you're of most CSR. we're in seeing Dragons! by the momentum those

this last time not seeing outlook momentum be way games, there I around new had the right didn't we It as thinking too in less now. performance, relevant year view. new. outlook come attach but a we our terms In to on the truly there's out depend a - point would they deep we're unfold. the how games on in new really upgrade that characterize as That's versus the new new was could but delve contribution We of kick live to this of we're about for how won't into is will to and live it felt based say monetization from

similar you're live. at is to So looking majority what what the say I is XX XX the is would of

Mike Ng

you Puzzle minus think me. one what I know games And just of the expected are to was half just you're year? Combat a back let us was not expecting able that follow-up, or by the as for new

Frank Gibeau

go Yes, going not detail. to into we're

before, got Under variety and we've We development in of Potter. have our brought in up games a know, got acquired that's said Small soft we've that number two a launch. mentioned obviously year Farmville as and Thrones The one of was Puzzle our on in launch, you licensed that game, a development. Game Combat or a we got a whether we it games, out of one CityVille turns games as we've type Harry P we've that next in said technical they've in concept was this letter. year soft when TBD game We Giant

expect not I launch say would but a second ones. say in now which for So we're number games quarter, to specifically the going to we of

when has out. them Frank past As said they're let in the ready we'll

Operator

question with next from Our comes Sheridan Eric UBS.

open. is line Your

Eric Sheridan

along. I it acquired let's supportive market the the on the years? Is dollars? as it two of Of in how or color you lot guys? is approach that again learning Maybe marketplace? Thanks little think get in the and really terms Any in live the color between the Is approach IP couple we table in platform of additional the well if things over given year, in fact put but can. what's the have by there? that to to And pushing about could we a that be IP that market of you brought of, now that expect licensed sort helpful as what position marketing the strength IP go fairly consumers on the driving back the bit a of to you could known services would acquisition different approach there to IP Is it of channels marketing additional marketplace? a terms look of you from the even of different last the part transform business terms you're of a on

Frank Gibeau

Eric. Thanks

So question, steady coupled of of if with middle last look has your new first platform expansion the really beat been year, a partners. marketing from has the support and Merge at cadence since Dragons! starting you with support bold features evolved how it of

So you we've the how puzzles how markets. same characters, footprint and lot of the a new the features game of regards time is and with to really you Dragons! at Merge more unlock in into new expanded socialize the game added

really title. and get Our Apple have behind partners the at helped Google

on Google and just We're the Android too the has accessible seeing Zynga really Gram's not using long It does those ago. really has the it the good franchise seeing against we're high-quality it's market impact, It PDP now game creating a So gotten engagement marketed advertising, proven bringing start and multiple game the retentive, data been very very standpoint go-to be expanded overall science, team the title. very extremely & has a beats platform actively especially really on very for really into bold that really the being and very behind with broken It's management, multiply the mechanic from our high-quality publishing We've but with building for an It a Top the X. really into was products. That systems partners the engaging engagement worldwide. teams, in product player title. in player it territories blended amplified Puzzles. is incredible also to same and on Empires have that the results. a proven of gameplay the is high-quality #X at is returns story RPG Match-X and the much investments support Helsinki our team in

strong momentum, it of seeing the with cultures combination its platform. the it's great of in Zynga into building plugging teams we're its exceptionally game strength compound really products but high-quality terms publishing So and

create and regards you In very to strategic the and a give is Thrones, the a right and companies a to terms market and with Game how into will sought terms question with platforms, of in because us that second terms Star us games of we on reasons those partner of with new Thrones are of of and to Wars one in audience. marketing the market ways its and fandom now launch strategies Harry wholly advantages those of Game some acquiring channels we at go traditionally don't licenses IP. is Obviously they raised you games for ability was brands to that will high-pitched the that Potter, that other halo product the that find fantastic owned to the go-to new opportunity market of

as of the new build goal audiences Wars, look campaigns also fandom for Harry Game our and very at the Potter, So to maximize franchises. Thrones is those we global launch that forever efficient and Star and

Operator

comes question with Jaffray. from next Mike Piper Our Olson

Your line open. is

Mike Olson

question. one have just I

kind You how been and XG mentioned or in way any types what mobile does result guess want going - have XG which raise does development bar of and the in of position have done forward. focus development potentially words, really in at for you game I be that? optimize to change kind I like was the that themselves even players that changes of just look genres be can curious may kind titles some to you'll various that anything for material to space for better of on in certain other

Frank Gibeau

performance Games of we believe that that the XG for and potential it higher inside I'll The growth profound think will exciting. because be the have larger also can will enable It massively possible, question. capabilities we take mobile something always multiplayer will connected, be that experience will be opportunities. really is more worlds distribution enable much be always will will new on, games.

be it's go able into from with coupled an when streaming. advertisement to seamlessly straight game For a you'll example

in able of they client on to will drive have efficiency believe friendly and funnel, technologies very large the devices, memory games customer content hand stream to manage in they be store I terms XG this streaming also things in XG that act their growth hand the how enable will There's highlight acquisition still tailwinds that is there's will will they'll as coming more on and to devices, that's innovations next ecosystem, mobile be our much of in of one try it's really greater games our companies won't cover their to lot the and but being mobile combination like and letters higher impact the few effectively the performance efficiently numerous over player work So a in before we to of years a see coming. remarks here streaming in in in two that ground for entire get and environment that that it the platform ourselves. we

Operator

comes question Justin Post next from Our with Merrill Lynch.

Your line is open.

Justin Post

I about just revenue to Empires what tell Puzzles, obviously other do so you the Thanks. large how that Can the opportunity to anything like relative how & your games? ask charts. us the you there well to Merge about appreciate is in revenue compares trending which doing and see quite disclosure that and Dragons!,

Gerard Griffin

terms as very in growth on - Puzzles Puzzles is Just even a a is pre-acquisition Merge & & games in Empires Empires absolute But - post-acquisition, nice both of bigger trajectory are obviously is game. terms have our Dragons!. showing

them both titles again. see So that we from we a perspective growth significantly of investing as are

I on call, changed overall As our last of given franchises. our has mentioned profile P&L our the shape of the forever

growth in Empires growth but & Dragons! Words driven. With in and being Merge seeing is and Puzzles We Friends, we're the have CSR

are fueled term game margins generating company significantly it's of goals said monetization the Frank and of I the the those average. the long-term games near higher the the being margin marketing also by that than and will of company. above significantly say that are As but quality engagement both by sort

of a games. good. all development investment shape is way those smaller The it's P&L So mainly that it's against because

trajectory obviously the but size growth both is Empires a from games larger. comparable, net So Puzzles perspective and is in &

Justin Post

online is why if you Maybe see disclosed it when follow-up, didn't us XX not about that? Top I just disclosure can understand wondering in your it's the I'm help it you there. maybe games one larger bookings in

Gerard Griffin

not mentioned. than greater we of XX% revenue as It's

those One the majority a the bookings is, of games a meaningful game deferred. are of your that has gets accounting of technicalities bring when the into vacancies new in of one portfolio already bookings as you

one Dragons! at like take look itself. that you games time this to Empires continue been Gram portion one even continues year two when though larger Merge care for nine we months. revenue of to from its of a it's and Over defer perspective over Merge So you & over out a to of amortize the a game grow Puzzles our quarters it's Dragons! sorry similar a it will of games. but perspective obviously bookings. on our bookings has from well But average not smaller next With

So as needs there's get in filled you out. quarters That's truly a revenue imagine line. the that still you to before the and can more few a bookings come see book

Operator

Nowak Our Stanley. next question Brian Morgan comes from with

Brian Nowak

really I only have of one, and platform, question at couple so the so outsize driving the job turning heck the have done a growth. is a Frank you acquisitions integrating guys around

you still we these just of or two one where improve target As you say sort of give sit sort where this this and areas user there now portfolio you could could franchise, areas and this look improve at us base. the

portfolio? longer growth game this really So drive Thanks. sustained really current across a genre mechanism in or improve to even a the

Frank Gibeau

Thanks Brian.

puzzle services And We at up of it's running we from they of to live lots You're talking kind company. in something on. and teams each PDP games. job category brain pick driving categories a span of game different to kind day that were about learned the the Match-X

data So learning flat of teams game have each other's analysis all the a across cohort see lot and organization. very games. share we a of The we that

development generating learn to conversion for stronger on but learn & We teams key process. With from that quickly innovations start or that games and or and or games ripple the a apply the can features those we from And Empires are something will are And includes They So in something the rest rates. out coming if that it. to live Puzzles. improvement we'll it's list not where big of Friends up will that kind that the Words development learn the in of learn through have now. pick process systems and they game only and learning see continuous learning engagement example organization and the

we're that really traction done in excited last areas over big the think what gaining the with year. Android is we've I more about

Android for the started to one footprint heavily And the is pleased being us seen, we've international Europe. we as there. expand growth think and of So, the more weighted do doing we're was in but Western that that's our lift from America key with their to we've and objectives North to to key still markets And big of emerging why away that. with lot that

there other look lineup, partners and Asia the know. large very to ways existing you portion under of with addition market the as market development. In but the at starting a We're with is how mobile to also games go we

So from and internalize Android franchise of the look learning excited the journey one continue start we're Asia we'll over to years. to couple operationalize to Zynga We'll on as next forward look the in continue to expand for the to we others. begin to and

Operator

question next Doug Our comes Cowen. from Creutz with

open Your is line

Doug Creutz

your I I'm months thoughts opportunity, curious now guess on Is it Apple just just was hear take two your is Apple Apple an announced ago it neither a what is that? Arcade to guys Last-month it. curious threat, I'm on it

Frank Gibeau

is our largest partner. Look I platform think Apple

We really a have them. good relationship with

subscription Arcade Apple a so service. oriented look how is designed free-to-play if and a premium are We company at it's game really you

participating this, we with we're premium So in build the don't games. that part

would However, be do it to it premium if them involve that we would talk include to they about. absolutely something

of I think subscriptions is services right that is them. that tied a to topical streaming of have the things now lot the one

do. clarify what to but isn't a only - on you that to subscription Zynga to is streaming, think one very is it necessarily the linking thing I bullish have

the for that we my a a from look term of in In will model component per we over near franchises mobile long-term. on a viable streaming business I perspective how us our several see basis. opportunities subscriptions So it in to but the global distribution a in we lot of going is be how games very be terms really that, to think of key unfolds at and a in make

Operator

with comes question next from Crum Our Stifel. Drew

line open. Your is

Drew Crum

titles boxes you design be forward? in-game loot change us Thanks. in the you on how is and exposure way of scrutiny can any given to Frank mechanics spending what Is remind that the increased seems for going those? your what

Frank Gibeau

comes things from loot other revenue our Sure, the of than majority boxes.

there. design. free-to-play. of see very are start our Again I'll viable as We part freemium So do games a it

You then light people the you lot that the of way It's from who the pack? the don't much very disclosing is loot as buying as odds we journey. in in loot and is premium with boxes the try possible so and the baseball in them. part like designed did fun that day be back There cards get start get loot of the boxes. to the boxes proconsumers individual on in a that purchase get We're player

and you games icon actually So items go you what the the on into loot for click in and you different if in little see go percentages boxes. our the are

engage the players if the to like to type people boxes. field loot make a We how have possible very can We company. of they pay-to-win level want for best in are So compete. decisions definitely not playing

not engage So a we to for - high-level. boxes really able award really love use as gate try in, it's fans inside special game the that but loot to a game being a to play and at really behavior the

Operator

Our with comes next from question Macquarie. Schachter Ben

is Your open. line

Ben Schachter

discussed Frank about Android. A a I bit few if could. you

separately think seeing how going that's genre the you iOS? any of you there follow-up. forward? what you you actually giving Android about there economics have - what's see Social just a and could So Casino what us high-level give on one different I then And quick versus seeing are And you're in view do there different broadly

Frank Gibeau

the I'll So with as roughly Apple. start same and economics the the are Android

that the markets in no to heavily are there's than weighted there. more So are they There Android real are iOS. to differences world

those optimized our markets looked go-to-market we've of terms So plans. at how of in we've some

iOS manufacturers. that there lot standard platform in in the of a are on to than more based addition in different is there open differences Android In

work on geo games device configuration. we component. definitely also getting work performing to So more that hard that to the across ties obviously back more And

of We difference terms also of that size, the in our that things flows, iOS that in terms lot There Android little of of and the make how experience have games Android. user a client been a player optimizing some feels. differences is between

and lot at. we metrics there's that basic kind nuance of So geographical look some technical a of and other performance

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Ben Schachter

just like then growth, bookings would out look could, acquisitions? of And if organic Thanks. you the strip that quickly if what you

Frank Gibeau

Words Looking at Poker. seeing we're services is we that organic to that franchise of a Friends, the have the live bookings With that existing tied CSR, like overall, lot

against look overall from really it's no really there's is lot because with puts seeing that out that the can at in and - So acquisitions making titles. comingle it's a decisions takes. - way no single-digits not you that we're something pull but My the there's we up of - view a we're the on

if this the up, not that it's doing segment a okay it's it's fair segmented but puts you way totally it, of and So takes. analysis

Gerard Griffin

I'm & and some Friends take that's even if that and you that CSRX, look legacy Social - the mobile our Merge Empires Casino Overall our of the at talking the Dragons! would and web Puzzles, is you mobile. collective QX you if if core older Poker, and With offsetting and growing Words QX, see take out you about

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Operator

question Barclays. next from Gee Ryan comes with Our

line Your open. is

Ryan Gee

that the or more than a mobile roughly you So Asia is the market I of XX% good chunk XX billion Frank half believe mentioned China. believe and of I $XX I that mean TAM. earlier is

in your us for & Puzzles exposure that are those So can already Thanks an or for specifically two your China China? remind much specific expansion geo in those you titles opportunity forever just you franchises? in and business of XXXX? in guys Asia, And in How Merge! for is XXXX guys launched Empires then

Frank Gibeau

think started I just we're getting Yes in Asia.

no Korea Dragons! Empires Puzzles & scale there's at Geos. So recently and just starting the into or We're Japan. in for right now Merge us gone business or especially China started with getting that's

So prioritize do in opportunity South at us. look we like Korea, higher a certainly Japan those footprint. us opportunity our to were as right long-term looking East grow that key territories China audience now and tend Asia. do China We for slightly as a for expand but like We at and to to

weighted North opportunity we've so traditionally more as America. to Europe our is to actually been exposure Asia an because think it of Western and So we

Operator

Consumer Our Ray Edge next with question comes from Stochel Research.

open. is line Your

Ray Stochel

maybe acquired XQ, not could of a XXXX for Can you us sense about incremental & making? from Puzzles a you a versus XQ, perspective? XXXX? marketing that in Could XQ, give talk versus spend not XXXX Empires you're whether us give of terms sense increased XQ, of or you in And versus marketing acquired XXXX the UA investments you've

Gerard Griffin

fundamentally average deal of bookings to life of contribution seeing as the in quarter return it, when strong at on investment, think over terms in cycle. And little the and UA Empires operating you on look overall, are you also about & contribution in I'll a the have Puzzles a in basis now on those It's and a you a XXs. XXs and when to about look we has and investing their strong at you significant so of the lifetime. games percentage operating low titles the are very but our probably XX% Dragons! that's higher think those opposed function high those company with fairly that's Merge closer to it historically business it we their within and been when cohorts sales in obviously marketing see still we're but level a Yes marketing at look in where if

past we basis significant increase not as wasn't think conservative our we you see to said did as try when would the it asked overly you just set yes, in investing cycles the even terms CSR or growth are this of where of a very in pump also QX others, we're an relates of past, QX tank but saw marketing but the we see it's of not so about north little guide still as And we means titles. we the the and about in think say two that on increase invest it. And I near-term cycles So and bookings, to on those in force just investment? quarter upping fueling to those in our QX. Words margin in goals the it percentage QX, conscious we're of we've going question levels and have but opportunities contribution of and for this seen and into being growth What to and year money I will. growth to are actual in definitely growth QX think you the a QX, we about but we at are would we is we my that those terms than we it's when if those we're against in investment lower which been Frank a kinds

once returns, fluid their lifetime in day Every in and giving that may said their returns good roll-offs the bit can't and returns of are that as little find and we returns find back. we values that QX at not actually. channels giving will look are channels if are We can they invest they their saw pull good As a through they will at a they if we the of manage the what see quarter, we event. past, marketing our that's teams but very terms go is in we what make business look the in they that

I able to of for deliver to our little not when bit part the QX. marketing another for of goals back pull return near-term a the that we is of strong saw expect powder that did because our So north where I hold margin guided quarter quarter we're investment and on but

Ray Stochel

could follow-up if would again acquisitions. on you a be then And

If down inorganic. break versus between And or organic bookings advertising you it can would for be Thanks. the me. that

Gerard Griffin

organic. majority The is

roughly at business, If of broadly you look think mix sort are all the speaking. business those XX-XX I

Operator

Markets. [Operator from Instructions] comes KeyBanc question Capital Evan with Wingren Our next

open. line Your is

Evan Wingren

the that you on the or extent you're conversations with and had of the about How potential you've relationships wondering success how just Just to think that is that out? playing the acquisitions impacting having in that? marketplace integrations other that that's

Frank Gibeau

is This Frank.

arrangement in we're new how going to into platforms, And so starts grow leadership at win with business M&A a there a at markets all in It games, between it building go culture look and alignment we pipeline there's then live said there category Do franchise, we both or a As a growing the or looking new interesting new moves new of company, as bring able a that a the will the services. connection out fit? game a there those us the service And What for goals. things. that. all you underlies on though to ultimately all or teams and have three M&A find of market have is to a live is the there's scale that's is after if is create call. new teams that similar a way companies. can opportunities worldview that are user that join to to we company the team do If can an

Peak with had from series try here can back Gram simply And in better very outsized very approach and the company news perspective that some typically is seen with investments good returns. we've a now developers what and Zynga result where the so starting it how is good of bringing of we we've and success and into thesis about the possibly on Giant, Small all additional and

So they that is now that reputational word-of-mouth support there. and

like we So that.

is we don't news the grow. we to buy growth have the place have anything to about strategy good Now in

starts and the that we for selective going between then we're teams, fit needs we're be how something the looking and a be together of an two the who in cultures sense companies together. very So terms ultimately leadership and in and to term then long for partner to grow makes really team over who getting to of terms come Zynga alignment it the And with with.

a to place allows great you be And a lot anything have more that it's where grow. So to to don't you be to buy selective.

Operator

last And Benchmark Company. our Mike Hickey with question comes from The

is line open. Your

Mike Hickey

then guess, more that to to specifically where you the XXXX second I to be half. between I expected margin in second Poker of questions. driving just guess you how terms in you of half think two you sort expect your prior quarters. Just next playbook goal us I hopefully to you. curious year expect was the Thank And growth your said on of do Zynga into so in are And struggle and operating I last remind the long-term to maybe Poker, and of you margin bridge your it the and on plan accelerate to be GAAP like continues that where sort goal. looks

Gerard Griffin

peers. with line and in medium are goals get our our long-term Obviously, more margin to

view. our operational of margins, excluding level revenue do at deferred looking this point I'm If you of going peers look at macro from a just more an to it at

bookings. will we You want be that's sort somewhere to report XX% range. that to how in And of on XX% our

we term in in can that on past if QX. QX. the so And did we QX, And actually break We said let's we XX? see in near we did the that

that. continue from as we full with we services. games the current to some there. that be if what there a significantly core for get business our ultimately and is indicated then XX course So better this speed high-level and and growth had our then and continue delivers obviously and releasing full focus scale XXXX, than in to to services contribution live on you our live sustain those fiscal businesses of should getting a Frank and said, as sustain able beyond we to at Those one into is gets What year

plus aggregate you get layering that if in So continue in helps XXXX XXXX. and games that to grow additional to can

a that that breakout or a right layer strategy. at but line also get additional core that's or goals helps. top can we Again a find lot teams of you talented the that if kind IP margin If that helps organic into

Frank Gibeau

of is terms performance than you're the The Poker sequential Zynga In of better the much game right. comps. year-over-year

think And the requires things is to like now player So in time some the than facing to I to and us platforms able doing we to issues it we're engineering be our that really growth of us behind also related beats features for more into spend and performance addressing second been of we feel the get worst service. position and starting the inside a recently bold we've lot on half.

our our of that to is on we're years and a the revenue excited So Poker after is Poker growth standpoint The in business first slowdown get contributing of very meaningfully beauty profitability few growth back. very on explosive here.

nicely is Our news goal The purpose is strengths. the flatness is good use to the performing our of of it of for period of kind to our S rest fit and one curve really portfolio gives get return of diversification is that growth. it, this very and of the time to portfolio

Gerard Griffin

I up. like follow would just to

in live we in for a and of our the well as trending very as terms over of live a growth the this If is services, time or whether into significant invest momentum as guidance core it top see year predictable games exciting is and effectively entering Because amount of our you actually live the existing into us driving when actual XXXX. look against allowing the That invest just the XXXX. we're the that's we core and at we predominately new business, games markets. obviously growing very exciting against you business, line you XXXX it it's the of just our and services, look for pipeline in not new when markets XXXX. franchises but and market at quarters coming business what and really games to is It's the capital rest performing of over said think forever giving today our guys business

thing I ago. company look at versus you two, three the critical think if today years that's a

quarters franchises, years. now a five forever portfolio few of going games ago a of and franchise were live that we preferment a that to coming layer equation have versus the years We new and three into pipeline defined have over very

our worry right services, day that games about against player sure every And bold game make to to new excitement our engagement of his investing remarks. core we we're that because level we the and we in perspective, making track new in are seeing progress beats our continue said, so Frank in on and from prepared wake live Frank development parallel up in areas the addition in outlined the

Operator

session. Thank any to like would concludes question-and-answer Lau remarks. to you. I the for Rebecca back now today's turn closing This call

Rebecca Lau

Thanks, forward over to thank call earnings for everyone We with coming Lauren. the connecting weeks. want you look We more today. our to joining

Operator

all you a great and conference. Ladies does for have Everyone, program gentlemen, thank in This participating today's you conclude today's and may disconnect. day.

Zynga (ZNGA) 1 May 192019 Q1 Earnings call transcript