ZNGA - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Zynga Fourth Quarter 2019 Results Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Pleased be advised that today's conference may be recorded. Instructions] [Operator

to Vice to and President Please ahead, like Ms. speaker Corporate the go Lau, Rebecca of ma'am. hand now your conference today, Finance. I'd Investor Relations

Rebecca Lau

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

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

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

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

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

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

Frank Gibeau

afternoon, call. Good and Rebecca. everyone, joining earnings for Thanks, thank our QX you

revenue QX strong in bookings in Zynga annual we performance history. highest Our capped the off as an year delivered outstanding

growth continue to strategy We are growing XXXX. expect multiyear in as all executing business and our against on of our this well build aspects momentum we

XX% year-over-year, million, achieved million, XX% bookings and of year-over-year. of up $XXX we QX, revenue In $XXX up

a Empires forever become build also quarter on in seasonal Magic! beats. bold services, were across a and With Merge and & ahead with achieved advertising. momentum driven franchise. record and of combined all to our continued ever newest with to had Our executed by key financial of strong well measures guidance results bookings, series well revenue Friends Words remarkably and is holiday successful live strength Puzzles were track

line year-over-year. in Looking and foundation the Live revenue at year, innovative bold and XX% the portfolio. results we the $X.XX multiyear of our from of full bookings our delivering top up growth year-over-year; billion, growth our XXXX, delivered billion, strategy. of are of up are $X.XX services were beats, a performance driver primary strong with record By driving we consistent XX%

On we launched will of two games services top both Merge Slots Thrones and years the meaningful off and come. in great are live foundation, Game XXXX: contributors in Casino; new starts to to our of Magic!, be

level bookings our We revenue and were since year-over-year. also grew their they to up international and highest XXXX, XX% as XX%

we results decision Asia, are seeing & Korea, to Puzzles and Taiwan. self-publish in our from In South positive Empires Japan

Our more we in results to multiyear on strong as to strategy. our growth demonstrate scale execute for XXXX us XXXX growth positions Zynga, our and ability continue

The first pillar our is of to strategy services. live our to grow continue

enter XXXX, we life in services our we highly As momentum portfolio. have strengthened diversified

Merge to Friends, expect X and our franchises, Merge one, Zynga increase Racing, Puzzles, newest Poker, Words X from & Empires With We to CSR Magic!. Dragons!, forever

and as our new more franchise Forever! provides franchise least five entertain Friends operating Adding annual can service a forever with a for game to than another more growth generate bookings. define We years that scale us million drive leverage. and of players $XXX at overall

on is strategy The top forever foundation. services our create our to layer of pillar second new live of franchises to

QX. test games robust our progressing Potter markets. Currently, new well new with later product development. in track Harry FarmVille in a stages pipeline in have X several title launch And of is Combat soft on to We Puzzle are enter various in

soft which player delivering approach the iteration launch engagement. goal includes testing rigorous long-term methodical hits, frequent a of maintain with and We and and to engineering tuning

XXXX, In to invest is and Puzzles platforms, technology. pillar with on investing Asia. strategy additional titles third of & in experimenting The in marketing new markets Empires we'll our continue in chat platforms,

ad markets such also mass are titles game including by of testing new exploring casual experiences driven developing and Puzzlescapes. series as We a new

these in increase to our believe the we in the are stages, the our have they initiatives still While early growth term. long investments potential over

we talented and categories franchises time. to our Lastly, there franchises world is Mobile’s further around acquire all the see accelerate are opportunities to the new growth. and base talent and teams global emerging

as Gram part are and We Casual the have been Peak, with Games studio from Giant Games of pleased Cards how Zynga. Small performing

model teams to scalable us leveraging to talented together. our both cultures, of while maintain faster enabling their unique grow publishing operations Our enabling proven studio platform, creative and

would discuss turn I the as Gerard that, the our year. coming to over in call more to for detail, as well now With to like results our outlook

Gerard Griffin

off QX delivered for Zynga the great full our our Frank. year. revenue in and highest margins we and ahead as goals annual capped you, of term Thank a and history year in near bookings QX

our results. Our advertising strong QX coupled across by life results in were key remarkably well our ahead driven with financial strength of all services measures, guidance

million, million, of Revenue bookings of offset $XX revenue up ahead our year-over-year. million. was increase of deferred and guidance million net was $XXX in $XXX by XX% million $XXX comprised Revenue of $XX or

million quarter. revenue The guidance ahead million of of year-over-year. Bookings guidance, versus were our deferred and increase increase net was XX% of million the $XX and a or up in $XX prior our $XX net $XX $XXX in million year million

a up results Puzzles, $XXX and post Magic! line quarter primarily Words $XXX year-over-year, bookings user generated were first its holiday million, tremendous meaningful year-over-year. million, of than up user pay from Empires a by Our and of Friends, Merge launch. We XX% With top full for revenues expected XX% season pay contribution better & and driven

respectively. and year-over-year million, advertising up XX% $XX bookings delivered revenue of and XX% We record

engagement seasonality as from Our resulted in was in This that QX kicked than payer advertising the in outsized strong by further one-time throughout and holiday driven advertising yields. as network earlier exceptionally performance advertising season, by well strong higher benefits amplified expected deals. was

and & the drivers Empires Merge of revenue were primary Puzzles Magic!. The on in deferred net increase bookings

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

ago. million $XXX million revenue versus a We with of the balance ended year year the $XXX deferred

Turning to includes million, Giant while were $XXX XXXX QX of Games. expenses million $XX full $XX were XX% million a expenses. non-GAAP GAAP Please operating Small up million quarter XX% year-over-year, $XXX note, up operating or QX expenses year-over-year. or operating

R&D expenses, our Increased game which lease. marketing increase services for launches on and investment the now of the addition an new driver in new and expense life increase game and to non-GAAP in Francisco GAAP pipeline, in primary our HQ, in rent investments was San our operating

ramp Dragons! and our well of to released the Merge was The was of investment in increase titles. due Puzzles primarily in the material marketing as consideration a GAAP recently expense expenses. Empires of Contingent operating increase driver & as also

was consideration driven an our expense of $XX acquisitions contingent up our perform by in to expectations. as guidance. $XX year-over-year increase continuing million million we $XX recent collect ahead ahead of million, The resulted in expense and This our

non-GAAP decreased XX% Year-over-year, bookings. expenses XX% decreased of of GAAP to operating from operating XX% and expenses XX% from to revenue

strong line in R&D and operating resulted Our performance improved G&A top leverage.

deferred lower by expense. better the primary of contingent and performance strong than We and by posted and operating our loss were million a driven performance our driven drivers guidance, consideration operating million, advertising expected than our expected expected better marketing higher also expected was performance partially offset million, $XX revenue, our guidance, Adjusted lower EBITDA performance. $XX spend better than operating net than $X strong of the top-line than by than lower deferred million our Exceptional revenue. $XX

acquisitions of We generated investments year $X.XX further growth. to billion, up X% quarter. anticipate primarily We with future cash we the $XX and operating ended flow use we’ll cash of million, the our year-over-year fund accelerate in to which

Turning of net Francisco million. a million, $XX that of million Please San a to loss $XXX our of in in and bookings or EBITDA building $XXX XX% onetime up the million $XXX net million $X.X Adjusted million, or down in net million on follows: XXXX. which XX% of million our $XX XX% billion, year-over-year; sale up $XXX year-over-year; or note revenue XXXX or million net $X.XX as of year-over-year; Revenue XXX% a included increase year-over-year. deferred guidance, up of of income XXXX income gain is $XXX billion, of $XXX versus $XXX

of performance. our vast assumes drive guidance top-line Our will majority live the services our

live franchises function forever that are launches, live be the initial of leverage mix, to the ultimately service will from targeted launch pay of a second the and games XXXX, investments our in anticipate user XXXX and applied advertising new game marketing scale services. half versus our performance, new new and contributions our of collectively titles, expect We throughout operating of the our to to year. In scale level timing

to For margins anticipate the pressure the slight year, full advertising. pay higher gross versus on due mix of user we

than offset our and increased launches. improvement R&D in modest We and which in investments G&A, should game more operating in live expect leverage be see both, marketing services new to by

this guidance greater as see provides by G&A that margins higher year top-line new will and offset half operating for games. in scale launch assumes partially stronger R&D Our we marketing leverage the in second

in In line near summary, term of what implies margins full-year our line year with guidance double-digit growth, our another goals. top

follows: price million, a guidance, adjusted million, year million, increase or up $XXX loss of or XX% million million net of million $XX million EBITDA negative year-over-year’ of $XXX Now, down million revenue in XX% for million of QX as quarter; from in of which Revenue or versus the $XXX year-over-year; $XX year $XX quarter. million is loss $XXX net $XX XX% in up net deferred $XX and $XX versus a the a year-over-year; prior of bookings

services, Merge in as Game older Dragons!. by driven network as growth Our will on Slots will be offset in top-line by partially be tickets performance declines Thrones pressure of and & as Puzzles lap the titles, year-over-year advertising of optimizations. advertising Magic! web mobile well addition our and and Merge Casino, we as well as These Empires including live

year-over-year deferred in GAAP expect in gross The and profit, million income QX revenue year. $XX $XX net adjusted year-over-year $XX last in a represents a change increase revenue, of deferral We in million EBITDA. increase million versus of this

increase QX mix We year revenue XXXX of versus in a the the up impact quarter. expect lower prior offset QX the in XXXX versus be year year-over-year, in gross to to user due deferred net by dilutive partially primarily quarter, pay stronger prior to margins

new expect these offset primarily and marketing our G&A, lower of higher net our in also We increase the quarters. and our primarily services XXXX quarter. of for live particular, be increased the In a the investments more Thrones and factors, operating the year-over-year, due any titles games decrease in coming year additions GAAP high Finally, in as revenue Outside & not expense as and Magic! deferred expect which percentage as to we versus such of against year-over-year year-over-year to expenses R&D should improvement well QX the growth momentum consideration significantly release to investment in Game are Empires of Merge lower Puzzles in contingent modest Dragons! market leverage in we we Casino, operating continued in of by XXXX. maintain prior anticipating QX as worldwide Merge expenses, Slots revenue than

We expect in test titles soft to modest on marketing these launch. spend

multiyear In our making look XXXX, conclusion, of we in all another progress growth top-line the to of with strong strategy. aspects delivering profitability. year In pleased sustainable double-digits growth we're are and forward we

will that, With call Frank. I the turn back to

Frank Gibeau

Gerard. Thanks,

call largest and X.X questions, is the be games enable people take that distribution. platform and mobile games, XXX accessible of a open landscape more arrival highly serve wanted forms reach more devices platform the and the is today. rapidly to with growing the for Mobile across will It games In and anywhere. experiences new we billion in discuss more moment particular, and markets, countries. us innovative the technologies ubiquitous expected evolving strong people to higher growing for In also and games. than that than interactive Zynga’s XG I and to anytime enables XXXX, constantly to gaming fastest play will position is Before performance of most player streamline streaming will tailwinds new

leading a mobile to play first capitalize services As is positioned live Zynga on free company, to opportunity. uniquely this

XXXX through scale multiyear growth performance Zynga our strategy. demonstrates strong to our ability Our

live from grows X services our X XXXX, franchises. In to foundation forever

Potter. Combat, Puzzle FarmVille more have and product Harry robust a X new with We pipeline

also are and platforms opportunities more see to markets to We enhance in and growth through further continuing our invest acquisitions. new

open the we'll for that, your With call questions. up

Operator

with Sheridan [Operator Instructions] of Our first question Eric comes from line UBS.

Eric Sheridan

two Frank. coming of bigger you questions, end, just picture right the there, what out Maybe at said

distribution years and guys getting sort to as America North If plan you were geographic heavily ago, as better platform. back of Android skewed of very and you a a getting towards iOS, at had of and couple well more go

games for investments Now, versus a check the and up that company the still on, thinking couple Maybe you're market how of, some work to there of about being years that to on more are we're a types of and sort bringing the to is could addressable lot just broadening-out distribution? more open in that market? do made

of lot think part, topic have talked distribution calls, of you and over Snapchat, the next the like box, And earnings of others. those couple and some some testing when outside the a Facebook, second looking testing might there years? distribution last update newer couple Any you're we’ve the platforms out about from mechanisms, on of happened out a newer learning that what

Frank Gibeau

terrific we've by intellectual the our try appeal apps new I'll through take developing we North there. the in performance were you a And a cases, seen And you're we first and ago, a expand absolutely approach to opening few weighting when Android America iOS. on and at properties, our and very look right, to undertook on heavily methodical question. biased progress years Android better some

our well to We're if look international in with the that grow. Android Puzzles performance does at seeing XXXX same rates Puzzles of seeing and with And example. the good very of It that's a just & seeing in highest into internationally & are and think growth see ways, also from Android. know, And starting addressable then, Android really we're on as still on I some dynamic market Empires and you Puzzles, Gram. got results. But, to they're you iOS. room a mix. that in our And our think lot games platforms. internationally I we're tremendous wave the we're franchise for best Empires Empires bigger some We Asia, total has in & early growth

expansive times I with of and think, to us games rate, we’ll feature games, one geos and and of less experiment get are total as into that see opening to new markets, the their games. of things to that new you'll terms do more iteration is potentially look we up market start start at in depth faster faster

example we It very of did cycle. I a year. think, to well so I Merge already good test from and with is like see last Magic! a shots launch, very did we've the quickly. development had what us, that was That game extremely working fast would titles to in you come communicated. able to publicly that addition more to expect in tent-pole market that

a casual, are to think, is and bit very We ad are letter I about. the they about excited market interest that can of also right which mass in casual These titles there that mix think addressable we're we market that studio globally. A in talked the little lot of here also driven our the not fans deeply mass in Zynga appeal brand, called hyper experiences, the Zynga casual. There's a execute in an we're now.

time. that we In in terms our We had for new Yes, learning chat of on of second very invested looking Facebook question trying the new distribution about some platforms. channels, the being Messenger. one occupied absolutely good most we

does by there last at learn. lunched and to Royale on titles. year These going looking well. Snap. very encouraged the and Tiny early development channels Friends And Words And our we're With continue long-term, iterate games to product develop we're and In very are we these fact, then,

of higher more acquisition, line come innovation then new think infrastructure, in XG impact mobile. So, funnel terms business think see in starts when a properties is the types very looking much be in and at terms And intellectual techniques, but player on in to any efficient continuing performance of I terms in to traffic of premature, of innovate committed the you'll games. terms more designs, I the patterns, distribution work, there'll on of we're what to

to channels, we're front going it. new I incremental think in -- open and stay of incrementally new that'll try distribution up

Operator

Giaimo comes question from Jefferies. next Our Alex with

Alex Giaimo

me. for two So,

I environment last First, ask the deals the broadly to wanted or weeks. M&A two mobile. take three on place within We've within seen few here

just up? are back, curious, timing which just just these step helpful. the the launch an around for are a then, you in out that games if out situation a creating And the assets of still competitive going be launch can is So, then, thoughts would environment there soft bids there? there feel some And provide attractive assets secondly, does and taking team around update,

the I think, clarify. to wanted but year, Gerard said second half just of

Frank Gibeau

Yes.

In of for a -- marketplace mobile overall a is up a of this the it's talent time. over global out terms franchises the lot new development There's environment, in M&A teams. there, popping categories and

of to I companies definitely environment look good opportunities a M&A there supply would There's active. So, say at. that for the is

the active over that. positioned to billion to go out to years, entering ourselves to and few market building and able at still generate and been committed we've to and mergers very by we the be know, very you opportunities We convert be We're acquisitions. to As selling through continue active there. grow Company last look $X.X the there,

Competition bit been past We in of the But, the huge the in because has is it's lot good been seen bids the base and in there haven't processes. market hasn't shifted inflation been of terms going -- prices There's overall you're really little just assets. so big a terms of a up. the from is how of in so in out the talent large. seeing who there, the deals a

platforms. But, looking lot anticipate of opportunities, at the of for we a overall think we consolidating and looking seeing that environment an that now you're categories also effect when different you're if and right So, there's marketplace if the in ample M&A, globally look the will we you're continue. supply across

a I to had. deals think, be there's

We're very grow going majority Company, our we Combat we product X the excited the services when Puzzle building pipeline. on about perspective, soft look where launch. our from are and see on focus in So, live our Farmville we're how of the at new to and

to our want to deliver at a able or years last know, more scale, is $XXX engagement. for long-term in more games goal to five or million you We be revenues. year As

just our making they're that so, a to good rigorous with featured we and take time fully and through sure And sense really the going how testing they're we perform. have of games putting that

like, have done really, well soft they where how did second communicating what titles feel titles. -- land. KPIs towards to so, what think go both do comes in launch. and and good Harry the terms we We of the is to has of very about here the forward in, look weight in year development QX. But And down Potter light will entering those we in are the launch And we half coming it its a green do cycle is

But, standpoint when we look live at of new helps majority the games of reliant -- position the services. to being comes and on And gives us from time to the overall from year, the the mix that it in in development get successful derisk the too really Company revenue the And space teams our XXXX our vast guide the time releases. our releases. be

sometimes And they Merge Game go really of they Magic! can on can like fast Sometimes Slots like Thrones really did. go time

a it bit position. into with little more order game get a take time Sometimes to in it right the will

Operator

Sandler. question Piper from Olson Mike Our comes next with

Your now open. line is

Mike Olson

afternoon. Good

So, coming I title some year give upward titles an expect XXXX, be of drive been maybe reasonable XXXX, X think obviously, just than new may year? would following up the upward there's to pipeline Farmville us with goal Puzzle other it I you're a has not expect that not looking Potter? And any stall in to the probably margin multiyear titles that for now to Are potentially bit we wanting on unknown launches. and that could know the year? should But, those right other in ones pipeline and for in from profile, but so this it the margin guidance. a Harry Thanks. XXXX? other or then, unless a to trajectory reasonable at Is expect titles XXXX trajectory that Combat,

Gerard Griffin

This Gerard. Yes. is

from main launch that I What coming terms our In Zynga say mass you are genre. soft I of and that in will prototyping to out in are into sort casual, of are the see obviously launch I our additional prepared new in launch. games the is, games, soft three best games think, will or the coming soft materials would say into mentioned

games from some company seen in come Games Gram overall. seen out some You've out games land. come from the other you've that also And

EBITDA at As revenue, it guiding excluding a EBITDA for margin we're relates you effectively to XXXX. deferred the -- if look to looking the of impact profile, at XX%

games. you how be XXXX in will ‘XX, of services we the how our grow through about As a flow and scale EBITDA we think ultimately, live new XXXX, function the

now, it's sense we'll to we right through means. grow what into better But So, ambition of progress that year, have this as a our XXXX.

trajectory new the see of our As live coming you we services, games core know, out. the and

in Ultimately, done As past. and we've be beyond we it the ‘XX relates to with talked you ones a of slate we've have games we about won't games. beyond, the mentioned, them

So, games surprised you be in don't if 'XX. again new see

more get that get middle we'll of So, on into we as year. closer this color the

Operator

Ng Sachs. Our next question Goldman Michael comes with from

Michael Ng

little had are much just Could guess, can if they soft in bit saw Raid guidance last hoping just And about I We elaborate about a I those XX% XXXX new from, and potential the testing bookings just a phase? was could games I bit be new XXXX, Pirate Gram guess, two these the of to much launches, or very more for for a contribution Gerard, from Evolution! launch? Games? and assuming one. you're like you. Kingdom!. of the games some Thank how couple those you follow-up you I talk a

Gerard Griffin

of our In the vast bookings, terms to of year, the full similar majority said last in bookings majority past. is We the from the guide, live. very our coming this of year

obviously be guidance we guide. 'XX. this marketing; them games through year But to more flattered perspective, That We big be on a service and they into the new should From dependent turn the ultimately be it'll could launching and guide of you new not the sustaining importantly, invest games, also on in games. those guide of a on going launch level fundamentally by end the proceed are put to when of up. depending numbers live

game, yes, the we’re Pirates games, Raiders game, talking about game. smaller the Raiding of the the terms In

out our more had we've coming follow other a puzzle of got of games San in are Francisco. also games, games a here You studios Those word approach. -- prototyping

games, my what probably out, like them I and mainstream caveat, them would a see they more into testing different soft the games, are ones marketplace, are the testing you the we launch. taking pop we’ve those if like take games again, say, more to teams see those, that that in mentioned approach So,

So we from not a there can of if is perspective, put lot you it's lot our again, against adopted big of that those engage as But know, have in -- quickly, games. game become very bookings a and a marketplace, with players game a it. small

focused very a Whether to that XXXX. casual And we that function testing mass we're they sustain grow -- portfolio you'll turn so, of be definitely see you'll see audience. much in feel that of games games those on And up and appeal delivering a we the in the will will games. that do

Michael Ng

EBITDA And XX%. XXXX about your ex margin the for is deferred if just to have one could point, follow-up, quick I

you. to is there there performing So of that's X you a maybe else? a that Is bit call so of were about. or better Thank points lot people percentage game you little margin a confidence see launch about margins, think whether X better, that's gives less thinking something you something that than is more need the, it I marketing, that contraction

Frank Gibeau

year. Well, is I think, we services our with over happy the we're the live see scale ramping of and what very that how

given year, margins to as year, in half to And, due in saw I I second again, we 'XX. the of guided we the the our we remarks, few scale. that XX% through to particularly live points of in see when strength prepared do obviously, in we expect of think improvement the last in started year, end indicated performance deliver we services, the pressure, a about and As we the our in last advertising,

operate the ahead base up see as good live -- how lot and this a through year. the versus the year, I'm is for XX% And end the we'd depending XXXX profile, thought going the of shape they those start thought not advertising a services worried given and also, through in as pay 'XX. we’ll how the bookings help say, me the the So, P&L than arrive, mix grow about we the Company from they the year. see it's service games ultimately is that's where ultimately I new to feel at our games user on better games, from that evolves. We'll of to we new what of the live we progress then when end of how -- And are

Operator

question from comes next Our Baird. with Colin Sebastian

Colin Sebastian

experience And what trends on follow-up what there, in of is in are CSR, my across adverting other Can terms How that well? you Words utilize you and talk franchises? seeing the of to your terms XXXX? Friends much from was that plans you saw what and worked in that With you're Poker generate growth revenue those specifically about of in one-time, strength whether in can franchises

Frank Gibeau

our -- definitely saw uptick seasonality in Yes. We in we the quarter. in the as remarks, prepared said saw we

So, QX driving to function seen drop our from we what had to we've do that's business. off But, QX. see QX, the we after, QX a guide implies. to a Traditionally, and track advertising a strong go more yields lot as in that of

factors. for with seasonal bonuses I the of call, obviously more the one-time uplift we Difficulty] the number quarter. yield the uplift. renegotiate QX, would mid-single-digit through and the what in the in in That the balance of got There lift roughly traditional got but millions coming upside, terms I was would were In we [Technical say we what there that the of had was quarter, contracts also, to

the games audience of obviously advertising level partners. and evolve the with you also this seeing think function the obviously about a we drop negotiate ad you're As addressable engagement through year why with guide, we can that will that's the How be see QX off perspective. yields our from within a our

progressing. growth significant games how but quarter-on-quarter, As to those performing within QX. sustain nicely and well it both And they're expecting portfolio. a are Poker, with them happy We're relates to we're not expect in CSR we the

Operator

question Lu Barclays. with Mario comes next Our from

Mario Lu

the Empires & two Puzzles, have I specifically So, Pass. Valor on

ago. understand currently, new And each manually think days Valor begins. shareholder have letter you to couple subscription. their the But, as as I Pass seasonal of I time So, mentioned season is players was that a Valor Pass it released the in a renew

a current, potentially there is it Pass’s Apple reason from help I companies see gaming do would and So, Google? potentially their why mobile lower the platform at on think you and subscription not model? would make with least Valor

other you day on I the potentially of revenues buy a unlike major from Valor Thanks. do pass the don't And offer QX then one? expect in incentives seasons, And seasons there secondly, that just more see start is an multiplier Therefore, loaded? asked to I through front-end experienced Passes could in any the couple reason one QX? pass to be versus be the

Frank Gibeau

cans We to want XX-day the and Thanks for methodical subscription want testing And quick reacts understand we a test We're to transaction. franchises. very a onetime is we're question, test other the to And a current something to going we're in Yes. Pass to you also applicability how this to witch into looking that it honestly, whether innovating. at Valor its offering. to way. Mario. as recurring opposed model The

in to with game. games and value the benefits has overall players So, we're disagree make moving the you engagement that is of you see with all by fees play we we don't that well platform into highlighted the the we fairness And received altering revenue. models just providing recurring want the with subscription the that without sure

roll to player on out it doing understanding based the we're we so, one offer, then tuning that these start of it and player reaction. out things is putting and carefully And an we're feedback as that's

how for in we And we'll so, complementary tied would we can the bold positive way. against sequence time how beats. as it season we those X have that for -- other operate long look Puzzles, players think a Empires this time for to against games very We expansion at they we see as a & Zynga. two and in, But, term

understand we're we're mistake. fast, even in for a it it we just to that up the -- work we dynamics bigger. where with way scaling so, too quickly treat to it And We go don't make how going a want

Mario Lu

Great. Thanks.

Operator

comes Stanley. Our Brian next with from question Nowak Morgan

Your line now is open.

Brian Nowak

have I for two. taking Thanks questions. my

next I'd and to you talked new across where look and and back you about talking getting sort earlier Frank your player into expectations, address, about years? of you consumer to global as mass be Talk and first the are change in, capitalize whole on you M&A see of the about XG Zynga through the about the opportunities either the one were underaddressed to curious, may how of invest at Just step portfolio the in funnel. more of sort similar distribution behavior go kind of you think sort way of you the casual. sort which you or to for -- the really and few through kind players R&D what have genres globalization mobile and biggest

the with more comment strength, to And go Gerard, seasonal the why on advertising have from that quarter, again back XQ? your approach current the see a typically in you pragmatic us to drop the seen off just why and one, Thanks. to you're second the And is taking guide? to talk through you XQ that already

Frank Gibeau

Yes, Brian. I'll start.

total market, women. They're to our busy the want out fun to addressable We of the little gaming lot there want to lengths minutes than global a who accessible where as be to We possible. majority as players possible. the our aren't as XX a of we want as are couch. adults be session have a that want people different on companies of is terms Company In

we to is see see of positive in be to evolution mass property, of have the opportunities can our We've a at Android Asia, that feels albeit of really work, The portfolio it when we when And So, in everyone do intellectual development platform in it terms opportunity areas that casual, session where iOS, length played appeal casual when of hyper business. we turns can on us tremendous think early to place; our we comes how our investment we any look going. and do on style inside Asia. in our of opportunities our an and the grow and opportunity. comes seen when designs, to amount short games it brands good mix the still comes to our to

feel invest like and there live current the portfolio. pipeline IP we more in we the brands So, that services there's and in can

heavy see are mobile. our we experiences Zynga more received With PDP PDP, on addition in well And being Friends is And our that Empires product to game, Words Poker Puzzles. do so &

about the elder a we game appeal and And or most, And works as CSR Wars so, IP look have at look we game. designs. Star designs expertise title, PDP in how it's at we core with looking PDP we could where to some market at are whether new regards

as game progress even into we market elder to systems lever bigger that more in more as start globally. PDP an get the years investing to are We

our the multiple from So, -- for company's it's positioned well perspective, takes.

Gerard Griffin

Yes.

seen QX a from front, advertising with coming demand in partners. network basically, we've our pickup the historically QX On and

you more We You've advertising start QX. also see index in but bit is that which got earlier. space, verticals a gaming into traditional category, saw in our the little

I a traditional anticipated. think, than function demand definitely games. quarter into infected whether It traditional it's retail, the it's for quicker we of

own what's off and see guide, you generally We implied going our yield as based and of at optimizations, in and QX on double-digit the last to based it -- if profile network drop the over deals very when years, that the some We've then purely network the see we've is in our overall look our had we're grown And this two also performance on understanding for demand. profile business. significantly years. strong at both our of year-on-year, and growth advertising you look

just last there base. And of the some so, is in versus deals, we're terms the QX playing there yields very off compare year. QX of When a in weakness we year-on-year strong

weaknesses bit yield the as every have with. been the in And the I'm teams So, we're during data we pick looking I at terms. the One traditional, would to seasonality here which it these the just and dealing to you've science up then more on new I've of quarter relates deals drop-offs looked since we we've QX, to that expect got the some is double little secondly, say profile at a year seen negotiate it. that what as

Operator

with Our Creutz Cowen. Doug comes question next from

Doug Creutz

helped your go there? would that? more to just from benefit. the self-publish could letter, In Puzzles What Empires you thought on How was process in I detail & have And you? you that. wondering if was decision mentioned a what it the has learned that in you Asia and how

Frank Gibeau

they're direct acquisition seen That much programs was we us. to it generation. moves organic operate some from directly promoted. between and the looked needle with the feedback western that a audience Empires you initially teams tied could market, & Puzzles, put on through felt Korea we more and Japan in And Korea sites we starting its interpret and lowered understand channel in What of to felt to Doug, how is the get without behavior in is you trying the as is, lot partner. see where becoming paid to really increasingly a time. element at impact the player in the we terms go that we found at they're what degree, it markets to player looked an even without be line wanted the over we’ve marketing. our player really Yes. There to distribution and And having to performance-based and game data have a into science were power used we what for we like to China a

is is a Helsinki at and risk, is And in really Small things. but a these sharp the understanding games of Giant team so, there looking up their -- bit and

we And And so, we that's like the proceeded with. what results.

feed continue the keep in to We make from so the then game do we've the there. and then going game. out well altered country country and the we out telemetry And Kong, the And to continue and direct to market so, within back the we performance performance some Korea Hong changes to looked Taiwan, marketing went for Japan, difficulty]. we've use roll position, definitely things as by been [Technical slowly to adjustments as right at we're to will Macau, rolling it and chart

Operator

Our David Morgan. next JP Klonowski from question comes with

is line now open. Your

David Klonowski

Thanks looks my under Merge for question. [ph] decelerated taking quarter. Dragons! slightly

Merge much Just is point future? in you sometime does as up. when the or run Magic! to Merge you clarify, this that mean And ramping you franchise, wondering it annually, a how of then -- would lift for game currently the at you the rate game forever $XXX this say feel now stay is when attribute just Thanks. now million bookings that will of certain out or Magic!

Frank Gibeau

Yes. The is on franchise rate status. forever Magic! to a Merge reach run

bold to it's really largely little quarter, Merge their softness. well. had holiday holiday soft QX related So, In their the a launches. Dragons! It of was beat bit -- doing launch

a to that, franchises, was it dynamics, of at manageable. when a we'd actually Magic!, see the combination we was certainly but Some two of Merge from them the crossover did look expectations. well bit the as positive. of we perform didn't in little cannibalization as addition line in hoped. the rate you And at When And it's with cannibalization certainly look

see So, sets more little QX, as bit bases. even games But feature start of and terms a of think will those player to that. their QX, I you in diverged their

as strong it. So, in coming we're bold is the Merge very where beat front going quarters plan in a encouraged of very Dragons!

Operator

question next from comes Thornton with Our SunTrust. Matthew

now Your line is open.

Matthew Thornton

guys. Two if taking afternoon. Good could. acquisition. user for questions Thanks the Hey. first I I guess, on

versus as just on here quarter. maybe into XXXX non-launch of quarter about give and think kind percent you're And then can a little the XQ just of talked and us you bit we here. a how maybe if maybe trends you just as revenue, secondly, seeing Just pipeline, update you a an user a about wondering the us exit acquisition XXXX. launch costs obviously, And for remind

titles in bit you've past, little think, of some the a I other talked further the out. about

a willing Star be guys. exited provide you'd the the pipeline? Thanks, joined titles there of to of would anything helpful. Thrones, that or maybe any Just color has couple CityVille, So, Wars Game maybe be -- there pipeline

Frank Gibeau

Yes.

is evolving execution. roll and UA, important it's that into insight gain Small -- an Gram we Giant LTV overall the our see terms from of to constantly how develop to install launch games and the UA to in We we're process how CPI, terms And versus out. of of games the deep learn lot game. a the part the of strategy soft cost In they and

CPI So, time we spend scale that can multiple a making through sure actually increases. we bands of lot of

quarter, of terms like about interesting up. in Game mode little in EBITDA did got -- were for mode. into jump of in a we an of how folks is be that into think against QX had soft to you new because going item. and place that much And out might We and growth particular sustain bit in slots Merge that's the launch launch we the that of saw so, time a was It Magic! where margin marketing and our felt we moving thing Thrones

there. So, you start the gain see to efficiency

But techniques as positive we're new we're in as we're business, to performance it launches. the overall where with audience like organically to relates to There's don't end our new coming of But along. at the spend, we tools global live in some still going a -- if emerge result spend. as invest We perspective. scale, a paid. well always have we looking on And ROI I at not starting acquisition we're the do seeing in a as XXXX. services UA have daily. of and this as the we day, And get

the U.S. South really in but money. iOS returns Asia see like Android Android if so, or And little market or America, we’ll Europe one positive expensive someplace in we a gets Android in Eastern on move

global of view in we very very capital. terms a and how deploy our flexible of have marketing point We

the lot plan XXXX, you terms not updates a there's beyond of new title In I’d of give there.

Star the in including Wars still. We titles active development are on number of a product

Gram, mass starting I the really Giant the with, the set that just that years. over lean look we learned as couple developed for of delivered we've think think tent-pole to time that's to these Company us more. last and we've see area our we’ve opportunities is that something is Small from to to to an beyond those of us studios think, start kind casual games at news grow we in We Gram, to the those that opportunities Puzzlescapes. games -- We're titles piece you're from the some development much increasing the -- that experiment for cycle like faster going as new

Operator

[Operator the America. Ryan of Instructions] question comes from Our of line Bank next with Gee

line open. Your is now

Ryan Gee

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

opportunity. quickly Asia real that just on So, and

market that feel that in there. now? you look in casino that think less, kind data do that. guys for you've XX% you genre probably sure go XX% to, about of the and China, But, mobile mentioned how I'm great. that opportunity you a revenue casual forward about focus digits. countries, really pipeline Do not shows come do Anything you you in your the really it's if the you of that’s in? with still know think maybe think agree genre, past our are other the Do should Korea, Asia? Japan, those we and of tackle to and whereas way room RPG much that. markets, acquisitions you you single probably probably or acquisitions when existing I in out in So, really for so it's have attention XX% games not that on there's much when Asia left, would out be titles, you

Frank Gibeau

I fail. for overinvesting look seen market big a bunch that personally enter market or strategy with mobile, titles massive and a rushing it's we market, is is an career that Zynga Asia we to at deal our to how think do too in Look, And term. long a in a as of for quickly important

experiences disagree pipeline. you Asia. it you the that have that in about the think I we very in the core there's we properties that for do RPGs ones standpoint so, said And of we when from guys perform valuable know ones with are Asia, to opportunity intellectual both that and Zynga, existing in our don't and

you design Magic! and at degree. to a and RPG Puzzles, it Empires elements & Merge if think, also Dragons! inside look I has Merge the

a could CSR as car one RPG. argue So,

think systems mechanics portfolio, go-to-market to the So, will proper testing some our those the proper translate plans. with of Asia within and and with I

doesn't do with to agree growing So, what trying and work a in take we're to Asia. very business careful Asia. methodical Casino Totally is our approach you, in

Harry Star that learning does the Potter, that’s Asia. east. is And going at of well not think think slots, Small Wars Farmville has we brand see look do think work. when Gram, of look that's any I markets you Asia. markets, to well. you at historically those in I can a in You're a with games brand that incorporation products done some done NaturalMotion, from or if going Giant, our they well in right But poker

to chip to committed really going away that term, perform continue can't we're we're So, that that to opportunities long assets we that any but look the is But, now. forecasting if at. to it. that we're know acquire the things and right part in certainly We is of success overnight to of those not forecast it there at Asia,

Ryan Gee

of their if just seen part And specifically. I them Is some delivered China publishers some follow partner competitors a it's in partnering have IP We’ve in one something big to that convert success. a game? of local big of great any console market, big publishers early one up And Okay. looked that your you over with into, some your --- maybe then, guys leveraging and could. knowledge their some the knowhow into with

Frank Gibeau

Yes.

attractive. is option the away us. what take in the those profit certainly we remember, an mix. us we of that's The we some have think look I down large same Because to don't actually as for don't And in guys. after as partner at from revenue the not as It's you console scale rule for that have out. challenge you though a

about rule now, we're doing put you what our type But faster the better there. out fact, actually in publishing that more reward -- risk current you might such with of you feel have don't And we games by self of much generation that second so, is out that lose we the route. get might for going you prepared strategy. wouldn't you to And But, arrangement. to right learn good

Operator

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

is Your line now open.

Ray Stochel

Thanks for taking my question.

some to as data. new mode as within or Friends, new to can about any the could you on we titles, advertising there theory product. those that, give? of building introducing within titles? So, do With launching far Puzzlescapes, And your as relative modes around that as least in-app and some think things these or data like the Words an efforts titles the focus not see as titles existing you There's scale in at purchase example, as how them to relative good a casual So, then, second developing those is and of out Puzzlescapes mass sense

could So can a titles ad you give us these an Thanks. from of achieve dollar some the of sense perspective? scale that

Frank Gibeau

the Friends, Wheel we We Yes. that kind with games, people of between as a engages inside innovate mechanic product games. introduced in do between of recently Worlds example, a Word light in for

full short we market, casual So, this feature that game? of a fast mass or look they're shorter session length, is hyper and what to inexpensive, in And is users we they're engagement they generate can as very this benefit also is right in products. also very constantly at find a they’re Zynga the And terms but they're if of can they and Games, those a would organic hit other bring we give but There paid the there's because the is element, into overall an audiences a chord. to you element. network lifespans, massive

was look Friends. And games. be mass the benefits we Words a we able we these to wheel, appeal we that Word a at lot that that full for With So, we build when the casual, out puzzle interesting session see of being short when that of felt product. feature for had at to a good looked decided enough And mass case game,

make we'll so, along on And way decisions creative that. the

feel overall that like the installs volume successful. a from right at a user continue engagement, place coming look you And be If in of can there's it's to ecosystem mobile we tremendous we this category. dynamics, now,

so, that's embarking And what on. we're

is at, think also as of towards of definitely weighted ad model But, will majority look In we’ll to emerge IP model. But have in bit. it that currently of games you'll start revenue, games. a I elements will of But terms IP think you an see you'll think the in be the to it. see engagement it the time, And curves I these these over in start the see driven. advertising some elongate I

at IP, doesn't sense of position which is the charts you how So, relates don't don't if up top look sizeable of the included Words the there have give one kind they show it we of but the chart we contributors. track the revenue, charts advertising, and the at you rule to a ads. -- it the generates know advertising think can what of very because you be of -- With you with it if of but challenges doing, game, as good Friends, to help are these thumb I that

Ray Stochel

what for conversation about for sustainability much And do with there's to than casual? always different that. a so about of hyper the bigger view talking casual, as as back sort picture as hyper of casual. you Thanks stepping And Great. far mass you're that the

are You have now the that to the opinion from different or you market? tweaks within maybe it of there the model sustainable, hyper applying last make guys is year the casual

Frank Gibeau

Hyper it's will the a think there's And to continue very Words a when casual casual, you constantly what think in like casual I in where -- space. between hyper in of examples titles internally, mass With it'll number successful at coin But, casual, is that are between evolving. we the hyper looking we see term I And Friends. of game space evolve.

just to years. just for percentages hard and sustain it's volume large, of last showed audience because up year. that like overnight, sustained think not it it's generation the of disappears I are And it’s the and imagine many it'll so that

casual a few game to pop is is that in So, for around, and experiences one, people's that later. think lives a they get in, out screw time have then space there's next what I and weeks two market jump hyper good the a can teaching minute short, the

them of player taking playing introductions there's tap they design if playing a might of rewarding product these types And shift of So, do I product products. that. note games see perspective, these new they've but we're that we change, think now. people for from potential been globally, think behavior in and lot changes -- many our and years and that's general, I And into

Ray Stochel

Great. Thanks again.

Operator

further back Lau remarks. no I'd call at questions for closing like this showing turn to time. the I'm Rebecca to in queue

Rebecca Lau

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

Operator

participating. conference concludes Thank gentlemen, you this and for today's Ladies call.

now may You disconnect.

Zynga (ZNGA) 5 Feb 202019 Q4 Earnings call transcript