ZNGA - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Zynga First Quarter 2020 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] Please be advised that today's conference is being recorded. [Operator Instructions]

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

Rebecca Lau

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

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

dialed our please in team understanding, work the and cover is an that time. we the your note call We staying this safe on remotely. harbor, is safe, appreciate as members through to and Before each the safe member keep hope during effort we healthy call everyone

course differ to our results expectations the forward-looking for today's plan materially make predicted. performance. well will statements our results Actual from as During future related the may call, and of we business strategy as

our review for SEC recently most filed factors Form clarification. our further risk Please as in filings as the elsewhere in well XX-Q

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

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

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

Frank Gibeau

everyone, games and has connect global mission cost afternoon, thank family, more us for this to QX colleagues, crisis, the has capabilities friends separate you Good massive Rebecca. vital. been to which Amidst and much COVID-XX been forcing founding so never global change. societal the of world human through you, done pandemic extraordinary, Zynga's call. and Thank The joining our had earnings straining from

are for operations. to see to employees sense and a Today, from experiences we executed material community entertainment millions to disruptions home, our humbled any game without all transition been and of Zynga continuity. working a deeply of turning social our people We've

long workforce increasing the strong global been pace bold this XX with and our are the been Together has Health and with the game necessary. to also Our to World business to on are through opportunity for confident stronger. grateful ability making our pipeline. more of serve on also Apart quickly companies is has campaign to progress new effectively content innovative as operate culture physical uncertain, keep is special and never for time shelter-in-place while the it distancing while game Zynga's our Play promote demand during community collaborating Organization And as events, collaborative our giveaways. rallied, rules in-game than the adapting duration for beats, in We've remotely we other

quarter. Zynga our up in which In million, million, XX% achieved the quarter year-over-year. up QX, live year-over-year first XX% we best We history, well revenue delivered $XXX throughout bookings driven by services, performed bookings of revenue and our and $XXX of

titles we contributors. top to line guidance, driven meaningful XXXX, Puzzles Additionally, from Game of the broad-based great and Thrones launched the & Our record Magic! especially in from year Merge were portfolio, Casino new a and and Empires our are a by by strength across doing performance start quarter Dragons! year-over-year well above Slots Merge was

XXXX in the beat we later raising discuss QX which and are our bookings year QX our strong Given guidance, will outlook, full and Ger call. revenue

majority by XXXX anchored forever our of the performance. to to continue We expect vast our franchises, drive live services,

is worldwide release of we pipeline on schedule, the year. the titles expect in game new second Our half to and new

Puzzle FarmVille in joined Combat Spells soft markets. & and three Puzzles and Potter: X Harry all launch, test in well games are March, In progressing

accelerate the our to talented acquire further and We world around teams also continue to see opportunities growth. to franchises

business. the uncertainty around the to strength several this of factors COVID-XX of duration pandemic, While there that are our speak full there is and and impact resiliency

family. connect games titles to socialize as for has friends mission entertainment and more to and through turning to the our with our more never people First, been are relevant, world

portfolio Second, for we diversified have highly forever franchises, services, has years. which of a live anchored our entertained players by

games on highly in operate the accessible are fastest-growing we gaming platform and and free-to-play our largest mobile. as the Third, world,

our built allowing development compelling to games continue in while create teams our Last, to mobile flexible new are a remotely. content, working environment,

a positioned we the remain our in and for result long to As sheet, growth and confident ability navigate of over balance well environment these strong factors current are the our term.

Ger the well turn to as discuss further like now for results the would our I to year. QX our to call that, detail With over as in outlook

Ger Griffin

XXXX, live our services and leverage. bookings revenue had Strength start a delivered Zynga a We strong delivering Frank. and better history. best resulting operating in QX you, than top to our Thank across expected

in operating times, year, performance our year are the half first raising for on our revenue the we anticipated full While for unprecedented are we based bookings. outlook of

of higher-than-expected million, But by $XXX of offset in revenue our was first, let's discuss Revenue QX of million $XX $XX partially increase booking by ahead million was Revenue a $XXX guidance, speed, in deferred increase revenue. million. by comprised results. $XX deferred million bookings a net driven $X a of million, offset

broad-based was start of Our our largely slots for with in line top Merge for source as a as the our a strength expectations. pay the beat, quarter and top our primary well Stronger advertising & Empires beat services, to portfolio, line especially with record performance social Dragons! line great user was our across live Puzzles driven by year

Revenue was year-over-year million growth increase and lower year-over-year, by or million million of deferred or revenue. bookings up $XXX in XX% driven $XX $XX a XX%

a Merge Our was and including full Dragons! by Puzzles Merge quarter Magic! from growth services, contribution Slots live year-over-year bookings of our Casino driven mobile Thrones Empires Game and & and

bookings of deferred & was from Empires Merge $XX and revenue Magic. The in Puzzles driven net primarily million increase by

on a deferred We this gross revenue, $XX and net a revenue future adjusted million release On a of income will have year-over-year the profit, While net represented in profitability of EBITDA. revenue, $XXX and year-over-year in GAAP EBITDA reduction a basis, ago. year balance versus in positive increase income $XXX impact deferral million periods, million a million $XX it profit, change adjusted it in represented revenue gross with QX. and QX a the in ended

expenses. operating GAAP QX primarily expense, year. $XXX consideration year-over-year. contingent were This million $XX million, up an higher versus or XX% marketing increase driven the to expenses prior by was Turning investments operating

up monetization a perform our in and Small in & strength Magic, and engagement million Dragons! the Gram $XX contingent resulting expectations, of in of $XXX Given million Merge consideration games Puzzles, ahead and Giant to our year-over-year guidance. acquisitions Empires and Games Merge continue million of expense, $XX our ahead

Casino in Year-over-year GAAP decreased of investments. services, against This lower The a to was from increase offset in XX% operating Merge in investments to in of partially Merge With marketing consideration function Thrones Magic, and the due XXX% revenue Dragons! expenses Slots net was live expense contingent deferred marketing Words by our particular, increases the increase Friends, primarily and revenue. of Game

million were from primarily to year-over-year, expenses was operating due marketing $XX due bookings, year. prior million, primarily XX% in leverage represented the in the of operating to or expenses $XXX investments. XX% Non-GAAP Non-GAAP R&D. operating bookings down This of up increase XX% in improved

by level better The We deferred million increase consideration by higher than improvement of guidance $XX million below year loss revenue, partially primarily the variance our reported expected ago. guidance performance. to our $XX operating versus of driven million of net in and a expense contingent the $XXX was offset $XXX net of higher and a an million, loss net

is the prior improved heavily by The increase operating increase variance consideration by the deferred in performance, in offset influenced in revenue, net contingent year lower partially our the expense.

prior of an $XX improvement million year. was million, better guidance Our than million $XX $XX adjusted negative our and our $XX of in EBITDA the adjusted EBITDA million versus

to driven offset net better prior as in by deferred than the lower in guidance by build as improved higher deferred variance driven The was revenue expected revenue. performance, operating net was by the well our year build operating variance to performance. The partially

cash of Giant a a net QX remaining executed as Small of million a prior of $XX flow activities. of acquire million paying investment had net in Games, cash $XX the In for XX% annual use million cash in X.X% operating additional million operating outflow year $XXX three operating was quarter. financing we inflow interest in used $X million the this classified interest, share the cash $XX We as installments an and to first XXXX, versus of cash net

ratably We and XXXX to QX acquire remaining in QX XXXX. in expect the shares

March XX, fund to approximately primarily had $X.XX acquisitions existing further use contingent future cash to expect As we billion our we of which growth of consideration accelerate and payment to of investments, obligations. the and

March We also credit available million outstanding no which our of XXst as had $XXX had amounts facility, under

to Turning guidance.

today, developed times year how similar on quarters. live, we are and as May with we XXXX methodologies impact available profound play. this environment, the and in based to already on our unprecedented information living the and to us a of QX X, having pandemic XXXX, In We work full using guidance have COVID-XX prior

range level the both outcomes, higher results. relates it and around there COVID-XX, to potential a uncertainty of the wider Given of the business our is ultimate for negative, positive as

deferred XXXX of or quarter. $X year million $XX $XXX million prior net million million a for discuss XX% Revenue increase million, That prior year-over-year, a QX said, let's the of million versus year in $XX $XX Guidance up QX $XX million, of $XXX in is Bookings year-over-year, Adjusted up as loss of of guidance. million. revenue million, $XX our or follows. XX% EBITDA net quarter. versus and in $XX the

the mobile line guidance in led titles. overall be our include: and services consider of our offset performance, as drive in momentum as will forever and QX partially Some web top by Game well by of Casino. factors older year-over-year to live assessing Slots franchise our Thrones our declines Magic! Merge additions This year-over-year will

on the be prior due network down expect with of yields. we year-over-year lap year We pressure advertising to will continue growth, that and as recent optimizations pay advertising user driver advertising the to

line the launch of in Our not any new top titles QX. guidance does assume

elevated it lifted, as hard levels the events live normalize. continue across how In of will but current shelter-in-place. unfold, portfolio, rules people begin we environment, be predict are expect to We to to shelter-in-place experiencing as service to engagement trends is

half begin Our in guidance this normalization assumes that of QX. the second will

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

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

we a growth percentage significantly of to Given as expect the operating our strong revenue, decrease year-over-year. GAAP expenses, anticipated in revenue,

expect Outside higher these should in marketing. sales leverage more we than and factors, of modest which G&A, in be operating R&D and improvements offset year-over-year by

we portfolio and service ramping are in acquire opportunities QX, seeing markets. in to across our live our are audiences our investments and Specifically games unique marketing test

Turning to XXXX.

year-over-year XX% or $XXX million is follows: up or our versus Our as in a with and $XX increase down and billion, line $X.XX of in guidance or up million of an net net of guidance; million year-over-year guidance; revenue income XX% of up our deferred revised million prior prior $XX year-over-year and revenue XX% million $XXX our of $X.X loss versus versus bookings and in up XXXX our $XXX a prior $XX million of $XX $XXX guidance; billion, guidance. million prior net million $XXX versus million, increase

one-time XXXX Please building on a note included San that Francisco our sale $XXX our the of of net income million. in gain

guidance. $XXX EBITDA year-over-year XXX% our $XX prior million of million, or million and up Adjusted $XXX versus up

that contributions Our of that franchises initial year. second vast line throughout scale we from to of targeted majority collectively new performance drive top the the in as and forever expect assumes XXXX our half games services to anticipate launch the guidance will are live our

XXXX, pressure year-over-year recent the than more to expect on in advertising modest offset In growth due advertising also yields. pay declines user to we the

in revenue increase increase XXXX in $XXX million XXXX. We continue net $XXX to deferred versus of net a of in a expect million

of bookings will bookings year. launches of ultimate be this The contributions mix adjusted year-over-year from and well gross increase of as game services deferred our half and revenue the in increase in for profit, function new timing revenue, the a second in growth, represents the million The our net $XX net outcome GAAP change in XXXX income scale year-over-year a live of in deferral the EBITDA. as

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

offset influenced our we non-GAAP On by both in R&D to increase Operating operating the and leverage marketing on in expense. basis, services improvement investments leverage should highly by net a launches. be deferred revenue of consideration new game will GAAP G&A, than be level the see expect which a increased contingent and live modest from and more basis on

of of pay mix, Operating and invested our marketing new timing and live a services leverage services new function a advertising game will launches ultimately titles. of level live performance, our in be user versus scaling

it current the while the in is COVID-XX addition, of will uncertain first as will the how progress affect half XXXX, as In crisis remainder it strong well how our of for the performance anticipate business we year.

we expect consideration of than in which million revenue. deferred expense offset a $XXX $XXX these million In includes XXXX, strong and year-over-year. million, $XXX Collectively, operating the loss of improvement net in more will increase net performance contingent

The year prior net in of guidance. cumulative of our is for recent we increase the versus contingent in the the in our contingent further expense primary increase increases accrual. our expectations, expected consideration perform Should acquisitions continue to consideration ahead driver loss may see our the

versus year-over-year, a the million an our increase prior net million by guidance million, top-line increase of representing are EBITDA our increase lower and primarily operating and of revenue performance $XXX guidance. We the raising an flow-through our of deferred driven to increase due adjusted in $XX $XXX to guidance, year-over-year, stronger in

while summary, our our unprecedented times, entertaining and in operating through we we players focused on In remain are games. connecting

fundamentals business our execute are and are continuing strong, multiyear Our we strategy. to growth

With like that, we would open for to live questions. the call up now

Operator

[Operator from first with question Our Matthew Instructions] SunTrust. Thornton comes

open. Your line is

Matthew Thornton

investment the plays flows for you how And the about second bit guys that half the curious everyone. increase prepared guidance about question. some seeing opportunity I'm a the here. just and in afternoon, Thanks to could what and seeing invest then, and think Any impact? good sheltering remarks, about taking everyone. international, year? little the the any Thanks if the talked of you through terms acquisition in that investment in Hey, user comparing in quarter of kind for back talked you In I'm there's just there? balanced? of or on impact? impact business, are genres Is the place the Or or curious, more you you it could regions or just fairly titles contrasting when what do color differences U.S. are secondarily, seeing provide versus or

Frank Gibeau

question. will the hand for then your the Hi, is first This second I Frank, and for Matt. Ger and to Thanks question one. start with off first

quarter, really second the late. the to show in half was in normal In QX performance. us COVID fairly terms of dynamics started in change pretty of the terms to related a quarter up of The for shelter-in-place March

It's more carried our we're platform we've audience into and our tremendous longer come number a sessions, seeing and engagement, of seen reactivations. April, interestingly, while folks through we've broad-based games, new is, playing increase seen frankly, into sessions, growth, players a into what in are and

while So plus, place, Words positive you And Poker we've in very Words overall. social know. highly that brands that as old case have when brands a in they a game brands Zynga trusted as of go seeing nature. It's seen you're and With sheltering is in Friends, With folks, of trends Friends, years to lot audience they're or XX

well, and and really Small this casino Giant people do ones are friends we're Games. social that, to our CSR, the connecting we're with during also And grateful in and loved see how time. game addition to engaging But seeing with Gram

late portfolio has and the seen audience So really a entire where is March since engagement case the gain. it

to first part So hand through. off the now question of Ger your about U.S. I'll for flow

Ger Griffin

as in of remarks Matt, as and what in on letter, through given half we in is prepared first our our we've the said our Yes. see the predicated guidance guidance flow through performance -- we year. for our

that audiences engage will monetize obviously, in cohorts the and second in half. the monetize investing, first in of are half We --

to on it seen six the predicated is relates as But our months. the first guidance we've through what based guidance,

position see we a QX, we'll you second the on through more get guys we giving how obviously, informed As be half.

at business, my how through while and the in on half color give of in operating, remarks, our the better are we to And moment. going we're lot come core QX. confident variability noted there's our games I feel second as As prepared a we

Operator

you. Thank

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

Your line is open.

Ray Stochel

way there think way look any running Thanks to how that advertising XQ On might question. sort quarter? or to impact I you margin for my could second advertising there like any bookings one, any about in of on, advertising date, love can Is headwinds? from give quantify you're details the is Great. number what gross if incremental we taking the would bookings,

the last advertising or would your that are is home portion then any there what be, bookings positioned well stay other products way Thanks. of one at is games from environment? And quantify in third-party to fairly this

Ger Griffin

Ray. Thanks for your question.

last at terms mix what In the of the down about it perspective, time and if our most which profile and gross this see user of point now -- and you margin is pay I gross a gross there's it pressure, think would -- I from margin think to advertising. look of about a is that in a margin perspective, is margin of year from essentially gross

As indicated notes modestly. to in we it down that relates to we advertising advertising our see overall, expect

of, So digits. on say, that's but there a sort space, the to gaming, low gamers would other in advertising -- you terms in strong profile, obviously, I entertainment companies where in in And in expect, particular, we are. gaming is weighting mid-single the given companies the, that's as comment the mobile and of is would there our overall profile, of, don't

challenging part brand where seen we've weakness, we've which business a the is and continuing to with actually as side where that but side business, is. on opportunities, our world acquisition a one seen the the side. too, stronger QX company, area obviously reasons advertisers unique are the perform gaming of why It's yields to in seeing of moment it user What we, invest in the it's at is given are a smaller on of the other definitely is

Ray Stochel

much. Great. Thanks so

Ger Griffin

You're welcome.

Operator

question Stanley. Cost comes Matthew from next Morgan Our with

open. Your line is

Matthew Cost

everyone Hope well. question. the guys. Hi, for is Thanks taking

are of in you're bit Empires of a Puzzles COVID-XX. a mentioned regions seeing ahead little you & results the U.S. games. couple Asia. terms in of Obviously, release have from You like that timeline the in of positive Those press the

some So or are and portfolio States the thinking that the that are your there U.S. that's games in forecasting about whether ahead overseas any for learnings into United where Asia factoring the from Europe, of or seen broadly? you've when countries you're you're

the games in And seem side, just With example, downloads in those what you it Words or second, two. follow-up then When discussing. a revenue month ad modest think have about Friends, seen just on for like just a does pickup declines, quick past were to big the like you

by takes but driven growth, -- puts So impression much. are Thanks so there? CPMs are and declines is it the really what or going there's down, the

Ger Griffin

Matt. you, Thank

that are On internationally of perhaps dynamic in with North Europe the some see quicker we Western than out countries America. countries that coming of shelter-in-place and the

We have been our observing trends portfolio. there across

I'd right now conditions definitive. something say local as dynamics. out early or it the There's it's a in in really some noise particular data to of little trend terms

So you've engagement fact, a held, seen in and And some, increase. there's some levels have bit been countries a in where dip. of

watching I is to to that countries are but So early indicative it's that shelter-in-place of we if too think potentially in just of closely might are occur coming in that currently see are what tell, some other out. it still the

decline more into engagement the advertise And, game therefore, as early been is in question Words in down in games. there inside late one at stages look the than rates your With of inside here Friends, higher, March, because audience offset that why and more of you the able some is reasons in less the of dynamic games impressions advertising generated. headed terms CPM that In of of engagement because about when CPMs create the seen we're rest in ad we've opportunities revenue, category April. second the terms to the we've you've and starting We've the are to compression

Matthew Cost

Okay. Thanks Great. Thanks.

Operator

you. Thank

with question Our Mario next Barclays. comes Lu from

open. is line Your

Mario Lu

first Great. congrats on record taking Thanks question the quarter. for and the

follow-up. & So a Empires I question have a Puzzles and on

can the regarding but change you launch by how X I had reporting on provide understand sequential Path bookings regarding any So franchise, impactful of the the Valor growth? season bookings of has color in

Ger Griffin

coming very, very introduction which particularly The of record calendar strong terrific Mario. was in product We Thank a of holiday, well X off has It a as was quarter a the by been beat for you, had a the Wardrobes. of aggressive long quarter. quarter, that us. quarter season -- bold this it as to release related and we the -- then events Valor and Pass the last anticipated then this run the driven different

multiple benefited record So happening things and quarter had we another that quarter the product the for drove really E&P. in

out other. contributed all In really terms element of and was impactful, which each fed they of teasing most off the honestly,

And when beat perspective, bold forward rest look the E&P, so we from the calendar of our the into year. for

ambitious of in Helsinki team season into calendar. obviously The has the very Valor a really developed the second Pass. We're

back starting some to this Grade [ph] see come of Maker heroes You're like week. the

we're we're seeing to results And the in very QX. still continuing -- head as good we so, see product into

Mario Lu

new just Is the such Facebook shelter-in-place a high And a leverage to gaming most platforms Instant of given in to to as and being still it. as partner-develop With games effective Zynga's Zynga's Games? level opportunity an and follow-up. Got willingness such there expertise world develop Zoom? Snapchat and for social platform teleconferencing

Frank Gibeau

definitely Thank at beyond new the We're terms in for platforms of looking just Snap. you question. development

We active game now. right are new very development in

benefits of strong. we were flexible. a the is once and was our redeploy development extremely that, into setting to everybody work-from-home able productivity very safe, was One And of it's mobile

We are places chat developing platforms, in considering We're build video-based us made areas in actually at mobile. looking for where and as general, of to in saw well, we're some challenges. we we terms games social actively some of for games. couple a But platforms adjustments

mission Our social -- game company. first we're is the

we've the agnostic is been go where Our be is at trying the of connect the one world recently platform through to great be a mission to audience to a and have what lot benefit there. we pillars Zynga games. key of believe of brands is, that could do we And to really

Operator

Thank you.

Doug Cowen. Creutz from comes with Our next question

line Your open. is

Doug Creutz

Yes.

uniquely Thank place, across across noticing if have if from a I'm positive variances portfolio. seen you. the you've that interesting any are game any or there wondering in strongly? sort genre impact of demographics, exceptionally you're performing guys if broad You shelter are

Ger Griffin

Part seeing seeing bit away where back have franchise reactivations or And what's the in With call, the the games the it's that fact updating lot year emphasize a continually since is we're -- franchise or made a but earlier and the The benefit both new to Doug. it's Friends a and There's in have little And a it. into improved. of based, demographic years game. Words which a features of players lapsed. games It's putting really in. Hey, see the lot that of now, potentially of a have we're you a changed lot point left a is is lot two ago engage they and cool from the lot came for into game I'll I evolved. not the much if of is might a out of new content been really more again, beats to come

so compelled or Friends, definitely the game been women. it's most which thing which we've oriented interesting that With whether CSR the are Words more majority of We're is And a by. and of element is seeing players that has X, male a been reactivation

business the games. decision. players, we'll for is when from diminished be acquire believe we're grow that's talked new curves coming additionally games going we or the opportunity are overall our see, opportunities good that that been people into engagement the slightly acquire to little the to about in to had -- a And bit we definitely investing. audiences long-term, for starting the hold, very And to if that, to environment, unique And this look even things this where at, we see period first mobile we're some of for do of to a the We time, the time. able audiences earlier

Doug Creutz

Okay. Thank you.

Operator

Mike Hickey Company. next with Benchmark comes Our question from

Your line is open.

Mike Hickey

Frank, Ger, hopefully Hey, you are guys good.

of obviously, I performance on the How boost been big virus, metrics on and probably evaluate I games here you look beta? just at. you guess, influence, a your you engagement, do unpack lot question, First of that the, a guess, has other when the

the sort your productivity question, games like for like second new you doesn't of, market to issue. like home half an successfully the It some and looking of had seems motivated, the experiences. working sooner, sort should from games for you captive of, everybody here or is be got you've you planned have or And accelerate second new sound audience, looks

have a you also, as You said, UA. low

So getting about games just maybe out little the bit faster? you of think how sort a

Frank Gibeau

make Hi, potential it test might something the is definitely pre at that understand and they a we shelter-in-place, the wrong where to situation market they're in post as so novel home, Mike, because games question we're play reads data, people are and it that that any more ability often. looking if relates have at there's you to

it's we're considering. launch The March something that definitely So been in have highlighted. I time before test that late period games

before we after whether looking not looking and and at impact. and the So data at are normalizing or an that's

So far, Potter with very we Farm on coming. see also puzzle do positive on test continue X, results to and Harry

for many and constantly games iterating forever for data can the franchises years. positive, adjusting get engagement and So so to us we're and is long-term the into position, that be deliver they

situation don't great trying we're games, in games a into sooner. we positive. it the it's are where pay is bring won't about out if engagement the believe and It to that we've looked rush staying to something worldwide acceleration systems also very place, patient but a point long-term where is the we It the at, and

We're now, points. we right adjustments good considering and feel great stance them, accordingly, definitely making but So and about we're our our timelines.

Mike Hickey

Thanks guys. of Best luck.

Frank Gibeau

Thank you.

Operator

you. Thank

with Our next question Cohen comes from Stephens Jeff Inc.

open. is line Your

Jeff Cohen

I person, Zynga half for Private impacting the might portfolio. Hey, is companies year the environment economic imagine hard you a the accelerate but second strategic taking in get in the deals talk can't within ability you to for do looking meet current the it's of when the the Obviously, the number. people stable Can home M&A to guys. operating on side? Thanks environment done about your questions. something how

that? thoughts any on So

Frank Gibeau

M&A The Frank. is This dynamic. still environment is very

Zynga have that look And think done since and build you the a pretty at, early at number deals relationships about types try deals and the coming January, of when been active on looks it's been we that them. very we again, If marketplace. of to keep back

earlier moved in as the or Zoom no more really that do to benefited via we had has actually fact environment shelter-in-place the time folks we So where a together Hangouts, spent we've us. into things or earlier industry that

activity. We We're very in half active to point the the we M&A activity but that continue this a forecasting any and potential the year as not deals in there's good feel company we to will be and discussions balance be And that inside time, that for believe continue grow industry shape. evaluations. continue. to we M&A through confident -- able at The unfolds, second in sheet's obviously to in the

I is fit. that And great And teams, we'll for there Zynga continue great appealing franchises, and strategic opportunities continues for join. teams a think, to to be place, out look to

it's where and stay about So to our we'll continue feel a good kind situation to of very we active. we'll stay continue position,

Operator

Thank you.

comes question Stifel. next with Drew Our Crum from

Your open. line is

Drew Crum

Hey, guys. Thanks. Okay. Good afternoon.

competitors of XXXX developing impact discussed various you does remotely. of with pipeline have If Some Curious new production Thanks. on the presume described the as is way, XXXX your In to been? slate? in it has preamble, games this, impact that's schedule. How your I bold delivery experience and the game any challenges only. your what could prolonged, the beats.

Frank Gibeau

question. the for Thanks

to out. coming in on China for the development the terms benefits game of not going is of what tools, We're supplies well One be. We're processes, very hardware they're the component to flows the new are in looking come from of the that mobile not waiting engines, understood.

in understood. our very We're and own we working already or had unreal. on engines. built on We're are tools that in -- very We're well using much working working off-the-shelf We're unity.

home. and well translated use process that very we systems production the to Our have

in of remote some data and at If they some important that effectively in they of commute look that jobs that games example. have satisfaction, managers, job time can building, that our those like scientists, lack their has in the of the of artists, are a the very commute setting. is bold studios, because in the environmental driven things a some disciplines we're things one really And of fact, beats that two-hour we do for build folks London, higher product have in the modelers, you don't

right So are our teams effectively able collaborate to now.

have you look for at are that good are of month, we've ones are again, the together Combat And experienced, the last beats been we well. X, these feel couple very in bold that QX that very Puzzle if FarmVille very schedule. The or teams about. worked in Our months, delivering next on

So the from collaborate part honestly. to of the it. challenge, a We a were very paranoid home watched being been to process. production hasn't We collaborative every space from about in transition having

where ran we the could were a to related our made challenges a service, to do adjustments increasing and didn't as fix. one into time sure be it of very was quickly to at example, customer a want as we things hard coverage because you into induce QA bug that on, make an to Early it some service but QA live we very

to So in take areas extra care where QA, in the want code. we customer checking-in service,

the of Our in of known’s of that teams terms environment, the us off platforms, transition. unknowns to has than challenge. development in fact have operating we're really more this And of risen the processes terms allowed in terms the to our make

in ideas schedules, testing tech. as doing, well well-understood. titles experimentation their they're and we're XXXX, the on they're thing they the on working of And that properties cases, in intellectual very teams They're on assets. terms Those the being are beyond actually, where working terms the game as In known development given that very, in productive are core of of some are that same holds. production

it's a as feels I like Zynga's can remarks, our very deployment work-from-home well. gone that sustain. we said has in something this where situation into So It is

team back one. in of offices, terms we're in the And to number careful going is very going safety employee safety be into and

we of to in honestly, So in shape take pretty because this time of configuration. to that able continue back terms being to operate terms good get how our our we're going in is business in

Operator

[Operator Thank comes Alex Our with question Instructions] next Jefferies. from Giaimo you.

is line open. Your

Alex Giaimo

Combat. can that a question. Frank, in on detailed scientific it update a taking just maybe more as know launch, how is taking to game well. is longer everyone for no Thanks you provide seems one doing the Puzzle remains Hope I a than but bit Okay. long approach soft if there's others?

increased you else in Thank guide And how that through beat. profitability the looks year guys. there? EBITDA the there magnitude the ad it guidance, less the of Is by then, than and Ger, Or to mainly was anything out on like standpoint? driven call revenue, by that full headwinds the from XQ flows a just

Frank Gibeau

Yes.

standard kind getting launch. we're we're an expanded accordingly. So on now. is The position would test that We're say. that in informative, data stuff the soft market of and That's in Combat, Puzzle we right very we're iterating

coming a Puzzles very extraordinarily and high-performance for have thing has think about very game. created has to high top you that & Empires if think I Small expectations the so done that Giant. about Small Giant of do we And in the think It's out, is game Puzzle and title well. It's a Combat the charts.

title to to much and and so going high how live systems different polish lots cohorts Puzzles and follow-on the there, taking have game, quality, there, over engages how there's that very level because of the very to that Empires we're are that want it it's understand scales time with to And that a a make it we alongside engagement of is long-term time. our sure & wants to

want period And game over lot are markets. experiments so mile see lot it game. Helsinki the tests we're that guys Empires We're terms is to game, extensively at America. responds, on have where springtime terrific through that that the North to other of a different do in we of running to expectations title in to how of fact such but in the the going with follow-on meet Android We're a looking a be Puzzles extra putting the a will able those & lot

Ger Griffin

it's Hey, Ger.

guide, is of the we it basically it full million year flowing how it at year. $XX of XX%. binary full was the terms in just upgrading sort through That's taking In the of and terms as thought through

the through and saying on flow how we get that, in some held to as of that QX. we'll correct we we EBITDA, you're through So see

Alex Giaimo

Thank Okay. both. you,

Operator

you. Thank

Ng Sachs. question with from next Our comes Michael Goldman

Your line open. now is

Michael Ng

the well. remarks Great. I Thank letter. some made is the two. is you I question question. much prepared that very everybody hope in you for just My first have on

second returned And You the assuming is a Are you or in does of the some seeing clarify that guys just conservatism? half that would in titles just Could today you about XQ. suggest anything assuming normalization the what mean? simply of that is normalization that levels? you're talked that to there marketplace February bookings

second on the new is, guidance. my games just question And and then

game if launched XXXX soft games guidance. And in the you How You the new launch quantify are second from of the half? to some contribution guys just said the Thank could what you many get contributions three there assuming were you. is? new

Ger Griffin

fairly with speaking, Ger. it's first, of it's X%. it's our the still, second said, deal overall Mike, roughly broadly and part I'll around X% we've straightforward. Historically, guide, Hey, because

indication to really past, hold our the live give the and when new up. that said up. tell delivery, turn guide an about second the you set does I've As said we're the I've many second in games starting half doesn't of it for in is, you a primarily how in continuing that games will or second What the half up be what to service previously given guide, half turn year, with to we

continued we the It's lot of level. was Yes, to of to terms into normalizing quarter. the letter, games it's actually to through peers, guidance we go month the it to debatable back that coming and second your our of normalize, of in like In guide our we've in as a going that's our going April on uptick see QX but predicated March, And half in to engagement May. and pre-cohort said point, into in normalization. the we the of sort started the just as see when

time sort frame. talking February you're So of the

thing perspective. also, acquisition watching said normalization, other the from we've it cohorts as of in data got we've over know, and a The UA the how are that. depending to -- also value how obviously, you and audiences, And team against unique operating user evolve we're obviously, course our seen quarter, on opportunities the a around our monitor past, to we've as invest channels but science channels we'll correct as of value terms the coming talented lifetime very continually those that strategy and CPIs the in, in relates

Michael Ng

you Ger. color, Great. for Thank Much the appreciated.

Ger Griffin

Sure.

Operator

Thank you.

Our America. with next Ryan Gee comes Bank of from question

line Your open. is

Ryan Gee

taking follow-up Good a guess Yes, I Thanks for hi. for Frank. afternoon. the question.

couple quarter-over-quarter, You call, up the I were reactivation. times only was looking $X at I those about the mentioned on DAUs, believe. mobile million strong a of

reactivation? about whole metric does the in to the another is tell should the So see gauge not how million $XX maybe story there metric better audience your uplift of in the base? looking player Is maybe as a be DAU we April tracking at

Frank Gibeau

said Yes. March. of last is million reflect before, really in to it that Thanks the days terms for of quarter-over-quarter the at I Again, lift doesn't In of shelter-in-place question. much two all. $XX DAU XX the QX, MAUs, and weeks like

this to QX really summer. more So going impact in see so later in results you're that momentum our

anticipate So that lift as the that the about April. hold really starts broad-based taking portfolio, think you impact across in

Operator

Thank you.

from Capital. comes question next with Berenberg Beckel Our David

line Your is open.

David Beckel

for have questions, question. Thanks the I Appreciate could. so it. much two I if

new seen maybe use perhaps one any a First that end being, retention bit payer it's to have you're about your and conversion little the a but normally of what player? March? signals users early, differ are you they than around a from rates that be that relatedly, new reactivations to since any more reason wouldn't believe there typical stick to since lot And likely is of

comment activity of, but there of could the but a if hoping is just you I recession. kind question, down, are a secondly, effects then broad-based on Obviously, economic And was potential sharply spend that expect when market of to customer payments lot hitting you recede business meaningful affect to in sort if were that way? a of your any the and stimulus Thanks. do

Frank Gibeau

David. you, Thank

our conversion of -- lot new in. of a and that again, we of are rates, mentioned that probably and the players terms that reactivations we're we the player a current have playing fact retention understates all come seeing of players been more, In players lot there

think of retention earliest late is you effect now we're a situation see weeks, the a in really, shelter-in-place data retention we'll where occur couple is if getting measured to just in March. about -- starting the It's

over think I time, we'll a the retention get So data. read better much on

into that a a about games is lot were since time that The have the lot reactivations of in. we're improved about is part coming they optimistic that are the last

to to lot content there's a a And consume. for new new of so them for things do of lot them and

So we're component. about that optimistic

And been in encouraging. conversions some terms or conversions. seen of very player in -- improvements We've and payer opt hours that's franchises,

bold releases. related it's of Some to beat

we're again, level a revert later portfolio, trying to dynamics but shift little guidance. our if structural back looking this we've across basis now forward entire the it trend will a in quarter data to at player like So see the and daily or noisy if a right things included look the it's to normal in to on seen we've a in

to of understand time are exciting being performing. an these how to it's So through able go segments kind and

the very free-to-play predates of and question, terms economic mobile, game video a second In the of a in downturn. go when at yourself appealing but efficient video times time of entertain entertainment look very games, in some back this and is industry, interactive recessionary to you way

relatively discretionary you income, to of money that other to the amount find as some even to look position XXXX resilient, and you to be going you recessions. movies, like yourself If then out things, would ballgame of relative play, you a can those in types back times XXXX, the or look of games spend, periods at smaller proved where other of a you country that going hours at number at level or

is, and now free-to-play ubiquitous mobile model, that platform IP. dynamic is interesting accessible The a as with a with highly business

be If mobile way a and and themselves a you're have to an are efficient times for free-to-play tough. to entertain extended economy family the pretty friends games with person downturn if going engage in are when a does to --

I in a think And games, reach a audiences space, that see that could dynamic. entertainment so period are to be in ones other -- ad-driven, of items higher-priced are versus especially free-to-play that position to categories ticket of the entertainment able or that inside type mobile

David Beckel

Great. Thanks so much.

Operator

Thank you.

comes at Our Fargo. Brian from Fitzgerald question Wells last

Your line is open.

Brian Fitzgerald

substitution my console, of or They have not figure offset and by them demos and question. gamer? gamers. the back of Thanks, those try out evidence that expecting to to forward impact, was get terms first Maybe bounce or the back just cannibalization, PC offsetting so of from hardcore Appreciate from a in acceleration there. do that's to of of expansion lot answered. substitution guys. I'll of hardcore experience -- leaning trend whether A norm, questions I'm as an general a there's the we trying So couple. a when a and away robust front that. not in but they're Any are

the the or maybe then lengthening a the guys any you -- the use, but I'm And not because impacts new it's potential question And of handset, answered, a Frank. squeezed. ecosystem follow-up stuff from hey, delaying you lengthening handsets, the not buying or hardware to that last or I'm on

maybe I'm And not gaming to endeavors. as so expand my my prone over games

So questions. two those the are Thanks.

Frank Gibeau

Great.

identify terms themselves. in who for play games In your entertain of who gamers first question, looking of many ways. Zynga to as They're most don't the people busy ways adults are

it's can social. highly can You anytime, -- play anywhere, you

here. from really So PC switching the substitution standpoint of and don't at see that cost play we from or impact console,

We demographic an and is audience have a that that. to somewhat counter

play, of players some a our have titles. that especially lot do some motion cross-platform natural in We of

but less You see E&P, general, console the and a to impact in little bit back than PC. is with us going bounce to normalization probably

device of games, or near driving console new marketplace, nowhere nice it's release a games. a of a inside of or as new impactful inside additional set a PC GPUs with but volume release or effect Google terms iPhone mobile or new is as the of a generating Android new the for the from In base, handset

phones pretty right Your high-performance are now.

their or doesn't XXs difference they a that make their if few a to longer on overall it really so carry Pixels, And big on on months our business.

big it's perspective, -- refresh There hardware a headwind kind business not you when in and all. is a new nice but promotional certainly, a do of our window tailwind come a West, see the at replacement out in or a from

Brian Fitzgerald

it. Appreciate it. Got

Operator

and this participating. no Thank concludes Ladies questions Thank this gentlemen, you. showing at conference And today's I'm time. you call. further for

now disconnect. may You

Zynga (ZNGA) 6 May 202020 Q1 Earnings call transcript