ZNGA - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Zynga Third Quarter 2020 Results Conference Call. At this time, all participants 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] I would now like to hand the conference to your speaker today, Rebecca Lau, VP of Investor Relations and Corporate Finance. ma’am. ahead, go Please

Rebecca Lau

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

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

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

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

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

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

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

Frank Gibeau

our earnings Good everyone, for afternoon, us and call. Rebecca. you, on you Thank thank joining

live weighs of to in as our human pandemic aspects on continue We different COVID-XX times of many the cost unprecedented so the lives.

and social people months, game been community. turn deeply our see a several to of have more past the we sense Over experiences for entertainment to humbled

deliver Harry proud effectively teams for Puzzles work from of & also including In launch to the and continue as Potter: are we they new our players, our content Spells. QX, home successful of up exciting our bookings all XX% measures, revenue of guidance results key revenue million, and including $XXX XX% delivered bookings million, year-over-year. of with ever $XXX highest across quarterly of up financial year-over-year strong and ahead We our

best XX% flow across QX which our later our our momentum casual delivering year driven strategy our generated positive we We you up foundation by multi-year diversified XXXX operating Execution cards also are $XXX our million, of tell call. franchises, our a tremendous of growth the innovative will growth of and Today, services titles. about highly cash our more Ger our forever delivered has business. results to-date bold recurring steady social multi-year on cadence The are raising slots we our guidance, full year-over-year. strategy growth portfolio of beats, to of well as life drive across as able is and

Rich! bookings in Casino. in breakout social Slots and It marked slots led portfolio Specifically our Slots quarter by its QX, Thrones Hit revenue in Zynga by performances of Game history, best

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Zynga a in launch a off soft will have At well Play. coming Puzzles Building Harry become average are add to new Puzzles Store momentum, Harry end also the of Spells & forever X.X is over launch. we positive as player launched with years. & coming our the Apple its and of start new Giant as We which to progressing upon App to exciting FarmVille growth the expect Potter: potential the Combat XXXX in star feedback in an Puzzle driver Potter: Spells have beyond. worldwide, that also steadily the growth quarters ratings games on X we as and great Google Games’ pipeline QX, for Small to positive both and and well scale meaningful franchises

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genders, coming anywhere. plan the geographies devices from and new socialize with by ever-increasing of including towards are the shifting drawn games. release as and to additional Players two CityVille, is smart Over high-end titles, landscape Peak friends make connections the years Gram anytime games Universe, opportunities well and proliferation global the and Star mobile to entertainment as Games The a set in Studios. we generations projects across new new Wars our

continues industry categories total have and Zynga’s the the we will ability and to technologies in the addressable are accelerate growth markets, increase that and evolve, market investing further long-term. our expand to As over new

& Specifically, up Puzzles bookings and respectively. in year-over-year XX% drove Asia, year-over-year revenue Toon XX% QX, pay international respectively. and by revenue Empires In in user we XX% Blast investments addition grew bookings and XX% and our our and the of

For with development closed of connect the Harry in October game and to players and X, to acquisition of to as an drivers our and approach hyper-casual be of Puzzles Istanbul-based largest external to Spells, incredibly new Potter: game scale we on partnering and growth title a in Rollic’s community the robust developers the games social of Zynga. will in leading are mobile. Japan promote strong talented fastest-growing we team continue categories network portfolio one we popular prototyping Rollic, & On bringing LINE, game.

While will to grow. to valuable industry its games large the landscape as and continues be base audience advertising mobile and Zynga, diversified evolve and

years, we cross the new more as opportunities few advertising capabilities. Zynga’s unlock Over promotion will out which well also player build network as to potential see the next

see entry our to have we categories new into look our contributions franchises expanded more provided and continue forever new portfolio, on delivered to opportunities and acquisitions mobile. we to multiple acquire growth. talented ahead, services, As franchises strong game new accelerate pipeline added to to live our To-date, our our teams further

cultures scalable strategy are studio highly and on to In multi-year long-term Zynga’s towards Our proven platform while margin our operations, we unique integration progress business scale our and continue leveraging as together. maintain goals. well publishing grow can we network, model growth executing so their enables teams our advertising conclusion, development to faster we

in uniquely the years and positioned market M&A. ability mobile-first opportunities growth further services live be total have live and new a are strong in on fastest-growing platform. exciting we and for the our see we pipeline as company accelerate the largest To to meaningful investing to highly that more also upon expand Building are addressable drivers our Zynga’s to gaming our growth, continue initiatives ahead. diversified We game free-to-play services to-date, expect performance portfolio game

more these be and value. leader interactive us have beyond to positioned All ability combined entertainment factors us our gives of growth to generate and an in in shareholder confidence XXXX

Now the over our and outlook Ger for I as call XXXX our would to turn discuss results QX to well as to beyond. in detail like further

Ger Griffin

games strong Frank. our the measures. you, QX revenue very live highest QX on flow. marking as and one, our best our team bookings into welcome operating entry as way. also all our of quarterly and key ahead driven achieved We October cash well a financial results Rollic delivered meaningful services in hyper-casual We happy Thank We joined our who by were guidance across to

drove was we a by first, in let's $XX offset increase Revenue in our or lower-than-expected Social net results. revenue continued driven a bookings $XXX $XX Rollic, $XXX Slots of million portfolio Broad-based from $XX of particular, driven beat our – million of by bookings outlook. or million of net increase strength a of in $XXX $X million stronger-than-expected line deferred year-over-year, million was bookings million. CSRX. ahead offset $XXX guidance, increase deferred growth an and and spend our million live top contribution our revenue. and services, in XX% quarter beat, broad-based was full excuse discuss Words XX% performances QX the $XXX Friends, live from Revenue our million up by Revenue net higher But our deferred me, strength by raising are services in year-over-year, full with revenue. Given across comprised XXXX our year million

in due a Blast mix recognition the to related Toon User driver and our was line to Toy year-over-year. portfolio. first in full Blast, in the $XXX quarter deferred Blast, in net deferral Our Blast and Zynga. was also increase of Toy Merge to was and variances of line Zynga in revenue growth Slots primary driven contributions growth Puzzles, their due pay across at deferred bookings Empires by Toon Toy The of up alongside million our in the and to from lower-than-expected increase initial Magic!, in bookings revenue top Toon our on The Social on Blast advertising year-over-year growth primarily primarily with Blast actual was portfolio. & the conservative top addition quarter revenue guidance primarily estimate

extent of the GAAP and quarter, up by year driven continuing up or million expenses, were our $XX year-over-year, perform expense $XXX acquisitions, consideration stock-based of earn-out. XX% of in guidance and Gram was $X full expectations first higher operating acquisition-related peak consideration million year-over-year. true We our quarter QX driven primarily to year-over-year final Turning expenses million contingent a which incurred the our than contingent up and to of compensation, the higher ahead million, the by $XX $XXX lesser expenses million operating and to

fully lower-than-expected to life operating from $XX the the $XX expenses and leverage a part long-term at for of the the year, operations XXXX. partially The including gain net final expenses the San bookings, $XX the a year down operating from of a of guidance million, with remain improved to the year-over-year. up full than XX% services. on driven in our reported earn-out million, million net compares better and actual by July year, $XXX expenses As XX% across million due stock-based in income agreed in which our prior of of offset acquired offset investments due set amortization prior was building. revenue, a were in – to primarily ago, Non-GAAP the and the of of updated Gram a of improved a million, leverage covenants excuse marketing San to strategic marketing in and increase us remove Francisco first we included by earn-out to from operating review intangibles the of investments performance. rest a to driven The stronger deferred $XXX in the operating $XXX plans, me, to decreased partially consideration by will of variance contingent primarily the of gain revenue to variance XXXX. GAAP integrate sale of earn-out was Francisco driven allowing loss expense. QX XX% The the to guidance incentive primarily higher $XXX on XX% increase operating our quarter by the sale million and broader operating prior lines. approximately offset operating year our in our $XX extent, final operating one-time by million peak, net deferred across operating studio partially excluding year-over-year, represented or R&D, all We payment higher year, to Gram, XX% stronger Non-GAAP expense shareholders net year increase building, prior higher revenue compensation, lesser primarily by million performance,

operating $XX operating our Our net cash On in $XXX XX% than basis, in million, primarily We improved best flow higher better adjusted generated at up our EBITDA by performance. increased the QX year-over-year. the net a was operating increase lower million to revenue increase performance, $XX stronger revenue. partially due on deferred deferred EBITDA the million, million and $XX year-over-year adjusted guidance, offset

As acquisition Rollic, cash of we million and we closed had approximately of September XX, $XXX of our before investments.

debt positive further expand options cash our we by supported a for XXXX financing to we use cash with strong future assessing While flow, are acquisitions. cash to including reserves, operating position end expect in

XXXX, we Turning today, developed the guidance quarters. years us – have to excuse using information on and prior QX year X, similar available full methodologies prior and to guidance, based me, to XXXX our November

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

in example, from engagement audience in highs shelter-in-place QX, return while For continue have levels see strong monetization cohorts. we QX, existing of from to and we pair seen new

$X to up said, guidance. net now XXXX million prior pandemic. the or or loss year. expect continued of of we of and decrease in may million $XX versus of this of QX in the million, influenced That and in as million adjusted prior to of million our and deferred EBITDA versus while $XXX $XX level by million QX is many in $XX that revenue million XX% follows; for related ahead, million up normalization, year; some million, the be year-over-year; factors revenue $XXX bookings let's year; Guidance ongoing Looking discuss XX% $XXX the year-over-year; $XXX million see $XXX prior versus $XX

consider to Blast, guidance vast as Toy line will factors include; from Toon a including Some growth, QX majority in of the quarter games drive our services Blast, Rollic’s full contributions assessing full contribution well from as portfolio. live top our hyper-casual quarter

our initial Spells, We from in we Puzzles titles. contributions by recently XXXX. web to be also momentum will will scale & QX offset have which expect in Harry launched steadily and declines and into This partially older mobile Potter:

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

revenue, due of be gross slightly acquired year-over-year down amortization pay increase user higher to We expect the and in margins to intangibles deferred net mix.

the these factors, in games revenue R&D deferred by significantly an portfolio. in leverage by expect across increase offset higher lower percentage a Blast, G&A operating Rollic’s as Toy Outside expect stock-based portfolio, our to Toon compensation, of and driven service to more year-over-year and and Blast we increase in revenue quarter contingent than expense. investments net full operating We marketing year-over-year, primarily improvements including partially in hyper-casual by offset consideration higher expenses increase live GAAP of be

title Potter: Harry XXXX. Puzzles building meaningful marketing scale dollars Additionally, steadily momentum, on plan in we invest launch this Spells & to into and QX successful to

operating revenue, compensation, increases net by function We increase offset our consideration change a our deferred intangibles is year-over-year taxes. decrease significantly in well acquired the the a of expect and will operating improved in drivers in performance, million income the adjusted deferred and amortization partially $XX by The net improved stock-based year-over-year partially lower expense, be revenue as key from growth in of our contingent as in the EBITDA increase benefit performance. of higher offset in net loss

XXX% prior prior prior loss million, follows: million, of versus year-over-year up our or increase to versus net guidance $XXX net in of down and guidance; net $X.XX XX% of up XXXX $XXX $XX a services $XX primary $XX revenue quarter guidance; million of as drivers or $XXX versus on million from $XXX income versus of billion, of year-over-year our million deferred adjusted in million $X.XX The or our continued increased XXXX, strength outlook up and million guidance; million Turning loss; $XX the our up bookings versus and $XXX guidance. as of year-over-year is our raise million million up $XXX million and are million up our of improvement EBITDA XX% of prior our net up live revenue $XXX million our $XXX and contribution guidance XX% full portfolio. million year-over-year well $XXX prior Rollic or $XX as billion, in a

XXXX, deliver margin annual goals. For history. best to bookings long-term meaningful in Zynga progress we our towards track expect on in were strong revenue operating leverage, demonstrating also year-over-year our We

Zynga line for and position are should as continued well continue where operating to XXXX In and games. we digit unprecedented our double focused in growth times, flow. for our players entertaining potential XXXX, the as cash remain expansion to expect top while further connecting we operating execution summary, we on margin strong in Our growth positive in

continue questions. call we’ll Our business as growth the strategy. for your we to open fundamentals are that, multi-year now execute With strong our

Operator

comes Jefferies. Alex from question first [Operator Our Instructions] Giaimo with

now line open. Your is

Alex Giaimo

was of saw one Ger. the Great. Frank another the Thanks for the first raise, of does question. than top Maybe line beat the for magnitude lighter Frank the what strong obviously seem in half it year. for but two, a taking and bit we and beat one

– just the not new you, no guidance. XQ towards your remarks? those then touched And new won’t pre-level said safer in to So Or starting interpret opening you see just as, opening can you just is say, see in if levels include that are that Thank about to you in Ger, that a guys. Should heard on it in the then Or what trends anything remarks normalized curious pre-COVID game back happens? games and you’re broadly engagement? your launch? guide we

Frank Gibeau

rates kind remain points beat longer, I were We was EBITDA think were growth overall the at normal discussion line in converting. we to and the consecutive data year-over-year scale of of kind saw seen of we’ve the summer, pattern unfold. XX%, as late What looking increase higher and business organically a $XX% top at elevated, going the spring, of a we how Those conversion, causing we engagement elevated, real really that on beat. quarter. were With see saw is in in are business And without stay with was XX% of strong why seeing kind factors continue other the larger. of at lot was to while Alex, going playing bottom has the choppy UA being kind XX%. out, it big why in monetizing quarter seeing on trends, terms of that’s percentages been how basis big the a DAU you I’ll non-GAAP the we topic the to up to a bookings. fact Look, the well as – return they quarter just it and drive opportunities because people market, was company. business, to in it of to We which And start a the leverage early a of second more are retention to our much COVID we audience monetization the having that growth. on ad as a spend had so

And in a QX, continued key that up QX. guidance. We’ve that very to we’re And services we on to And hand but We’ve the started fall. our going think in is on start start kind top, second going going as year-over-year. then to things. So Peak into and to the on we of really as of interesting little start around the play the contribute strength into predicated really question live head the XX% strong I’ll see then QX, got got some $XXX we’re from for Rollic, you’re that philosophy million a forward Ger a stuff, to new to beat be game couple dynamics it’s role. the into we the while Harry really beat on anything to I we quarter, Potter going the the It off see didn’t momentum at bit guidance. forecasting end forward. integrated as has and of look

we Mobile One of to gives be the which is and games to years – want to portfolio how from strong it test test game, we and time with monetization, we flexibility multiple able X, as real that as there, we that retention, a but there, to and going philosophy engagement, want through of want deliver contributor luxury, that it hit There’s a a competitive competition to CityVille at as the Puzzle we future strong be and add a more we’re time is of games the well for see their engagement. your think we prove the the spent, at quality Gram market. a we on things start us forward. Wars, to of frankly, to to look Star to and it take able to spent be I very quality FarmVille services, Combat, the and maximum foundation long-term to that a and bring launch was with going to lot It’s have category. of live we games new it Peak. seeing well Zynga continue pipeline on we a develop time Potter launch, Harry in the market as really hold really lot be you When the

give off how that’s more games. Ger But detail. philosophy we’re now I’ll So behind new you to the management introducing to hand

Ger Griffin

Thanks, Frank.

marketing strong When the it. doubling title. we at had in we Potter and Harry look down you nailed of this you definitely some QX when momentum think back we’re in against really implied set QX, our our guide the the guide I for guidance launch we’re with seeing

some is think our QX in sort launch, because we’re What we’re through, $XXX just that why Harry a going of in in assumes deleverage the and see to million XX% on is So XX% if talking if QX the of bookings we is over down you investing to now zip you QX. back which focus at deleverage back – XX% are the call, of flow Potter. we’re set definitely on implied looked code obviously guidance that the somewhere against game. games that which And from you guidance title, implies

be the which of marketing we as know, you engagement Harry points. trend investing see ahead and obviously of a launch guys into metrics obviously game, the Potter. momentum, you case the monetization will As pinch is the And that where we’ll

And so down we’re there. doubling

– as coming is into when In Harry. addition primary to an EBITDA guidance services that against driver, we’re perspective tune – the guidance some more you end we from the year. basic is assumption a the the obviously, live of have there around so bit well. into we the little But coming holiday look season, fine the that’s at And as the the

Alex Giaimo

both. Thank you Great.

Operator

with comes Mario you. question from Thank The Lu Barclays. next

now is line Your open.

Mario Lu

IDFA. one questions, of have I and Harry Potter on on one a couple Great.

do So could think – opportunities that media the partnership the on in know some you similar you in came apps franchises if one of a similar provide wondering titles first within within here I’m about. on background exist Snapchat, how your Harry Japan have favorite the with but you Potter, I couple title West? just social

Frank Gibeau

last know, we Potter question, Asia to can Puzzles and the into IDFA. partners. Empires Yes. at year jump our I’ll directly without we & your Asia, as When we strategy take looked go-to-market for launched Harry you

success. can are Potter And a was promote approached the strong that each info integrate in partnership, ideas lot additional their And guilds we three within at the when there connect we look so collaboration drive, players the social find There's brand when lot Potter, and how Harry of you there to social we into of for and a And is of Potter Harry game. quite of of great game. you a potential Harry about title, Japan. it's DAU opportunities for line competitions. particularly could what a and play some network What match assets maximize

us line So that with a really in lot launch enabled of has tapping into momentum the to social network, Japan.

we or if & game And what direct brand in makes and contrast title, look Farmville, without As are compare you at was then jumped on. completely of other whether launches And then Potter, like us, Wars just take we'll Harry country-by-country, and Star partner. at social the something going available Empires the a a look the to Puzzles, types future, on direct partnerships the affinity, most possibility one with was the we collaboration sense.

a have kind games an that the remain is potential company inside and that longer see we of experiment are to the on as We launch if we term. believe opportunity bespoke of in for Snapchat network. fully launched operational interested That's games could social something

Mario Lu

IDFA, just Great. so the Thanks. the And from impact change sense on then you one year. can next potential bring hoping I'm the on help

quarter, strong iOS advertising versus going from maybe still may coming can average given like in-game bookings there impacted side be within versus period, coming that on of new percentage And users XX% the revenue for by user then the IDFA? Thanks. growth users a is acquisition is existing revenue advertising this Now in share percentage of Android? anything you with terms from pretty but the

Frank Gibeau

ecosystem their new are through and of think be enable Yes. the and understand approaches really a that I companies a introduction It's particularly systems assets ship the acquisition potentially in that ad networks. starting looked mobile lot to it, some be how as really might IDFA that us customer manage to and really run long-term. in and shape they going build unique have to And we’ll we've Zynga we good the at to

With franchises regards CSR have coming lived, years. XX Words long we is up eight with old. years is very they're is, Friends is to first The the on right? that

organic There's brands interest Star with you also Harry of a like Poker after and there others in a have the and strength games FarmVille the of the There's out out got demand where and way. go lot demand of Potter a that and lot awareness non-IDFA Zynga and brands organic there. latent You've really can Wars. they like

network Rollic. of we In portfolio. our very of acquisition asset and And into into have a network a costs we're games another a of able high other that addition rates extremely acquire IDFA, at to from not for Rollic be potentially to game those that of thing in player unique using shown it's MAU is moved can then leveraged of that, the players, if low we very us. any players convert, game,

are So we also playing. that about who come players we With our Words gather talking they they amount events, though think game with the to, regards who inside of about Friends, in information when are they

and us targeted to they're demographics the our So to interested do a advertisers can into we and about can allows that serve to translates lot talk how reaching ads. better network. them inference targeting have of that better, probabilistic that information to that allows We in us continue

to in loss in that us degrading maintain dozen the our by probably effectiveness our things that go-to-market allow a will there's So continue of capabilities to really can do our acquisition that without platforms platforms we attribution. and

model that's about we use acquire lot new also we're terms attribution up can to ad a believe that split advertising, it's And something market in terms working In and it. Apple players. of what about Android on to is their in they're iOS, XX% and the mainly standing of learning terms one iOS XX% of Android think that iOS, with way about in

think going some painful. companies, So it's I to for be

our of a great able our it. a think new privacy got still for I come of I'm for IDFA, to GDPR really able makes we've regulations through to is and really and services And services important California move to from growth like acquire requirements adapt way company, out, the good are And be when that in our like continued kind We strategy deliver still gameplay, place players Rules. great in or perspective, our the sorry, or players. Zynga.

Mario Lu

you. Thank helpful. very That's Great.

Operator

Thank you.

Baird. Colin next Our with comes from question Sebastian

Your line is open.

Colin Sebastian

and you it to integrate letter, deals taking for again for you're the more Great. still Thanks breather, to about now, that you clarify question. the wanted In as enroll ground? to users is for is that some talk Peak also so assume, acquisition, there just of which I the acquired means safe among engagement taking the player or potential is QX the QX, a Thanks. integration improvements a to And the existing then still related guess the and sequential all engagement increase portfolio? of from

Frank Gibeau

is Rollic. and underway with deal was The integration Colin. the of on QX the with for Thanks, closure peak Rollic well X, in October integration completed on

we right we're and of look launch our the to into that the out interest have of perspective is And I've we years the fantastic. the we franchises company that at portfolio, us. from services the Harry integration at live graham that looking great deals very worked But Potter continuing Peak, that and on like talked stuff the Christmas, scaling our Ger a looking Rollic now, focused As few and also the The talent growing studios delivering about. performance future, and out are selective been and joined pursue about portfolio. really us. M&A The the over into that added we liked the last has

to strategy long-term. for that. companies shape. really I think look And we add want to to beyond, think as position pretty in pursue continue with could in to that's but growth. important to But for never, we say about we XXXX never able a we the good and us the you we're be fall, that So And partner being will globally as

the just In the existing engagement, franchises. elevated that's studio, from from acquired not the that's of terms actually

they record longer. game come five, If mobile and And of doing games QX. at, Casino, as terrific. you They're as in they they're that's years seven playing seeing playing way. went those seeing place Words old. mobile they're playing CSRX and And With in games Slots because out, in look we're Friends, they social socializing. shelter to are retaining They're particular, in people value very the had games six, two and more a positive they're The

So they're monetizing.

Peak. an actually addition wide. So portfolio it's just not It's from a

Colin Sebastian

Great. Thanks, Frank.

Operator

Thank you.

question comes Securities. Thornton Truist from next Our from Matthew

open. now is line Your

Matthew Thornton

couple past the on every as feel like time a arms opportunity, change said three good couple good kind do the just years, more idea, little to and months, you’ve M&A the obviously Hey, conversations Gerard. table A to around that differently, subscale if get there. and a changes. curious, seen next industry of IDFA had over you I’m players just want and the its there’s out the Frank, to change many curious because maybe, come of afternoon, perhaps has of curious I over or more could. you afternoon follow-up I’m if think A have the

the industry, color a to exiting or to make rate, do kind still helpful as back you of be like guys. still about, And Thanks XQ kind in the run feel normalized yet, hard, of secondly, there’s are any again, Gerard, think talked really maybe COVID I say about home number question bit when just that’s So versus you of last in is XQ then visibility but much it’d don’t sheltered little you a lift one. the that kind we’re quarter, willing for well? how call not you it’s

Frank Gibeau

Yes.

on the large if audience, really having these very a be going going overall with information, decisions, the really question a is industry, terms of lot critical. network And is efficiency post-IDFA difficult to having impact is be a going in relationships world, your painful. the MAU, of of a to to lack a scale player, to make starting going So, IDFA having companies and matter to some more for of be subscale inside subscale UA it’s you’re and of lot the and

from we to have that, At Zynga audience games about, high that opportunities and plentiful of bringing services more XXXX as excited my those we’re into from and be are beyond. into trend move standpoint, think network. and counts so a going them the the time, same you And perspective, very types line

So, I an industry going think of on there’s Gerard? years. new both over opportunities sides last of the it, be couple were as where we versus, to

Ger Griffin

Yes.

The Europe you’re right Brits In you the complete lockdown. suit. following terms of about in COVID, now, that is if Ireland mother sense country are going Matt, right think into my

shelter-in-place some But So, but it relates is terms quarter, we’re continue. as lot to going on assumption a of was in again, to in the going level it’s our a TBD. and we it’s there the see puts the but normalization start terms back what’s of one there’s takes. of and volatility the of too in world base of – a guidance more would of of engagement against characterized be that at a games, lot intuitive lockdown, say, the full world, in to early reasons there that In where we’re

there So, the it’s but really something not forecast. is there, something we that into built

Operator

Thank you.

Sheridan comes UBS. question next Our Eric with from

is open. now line Your

Eric Sheridan

IDFA are at been externally question usual working Maybe, guys and science? in also like what monetization, but think to the fuller do question of and key make science your to and that for from be back unusual of teams, partners times, you in-game or dustbins ROI Thanks. for data data how the broadly positioning investments sort about monetization are making look same either might opportunity there acquisition, we that’s product coming internally a maximize with should within, and/or asked the acquisition either to a usual trying couple prepare might the the to acquisition away

Frank Gibeau

we of answer Hey, opportunities well to yes, like, of science, is in as in? the benefits look have. in are and the data ecosystem terms product what where as available? Eric. we shift where What the investments look and going of the is diagnose to works our to are of information is studios it company making the new at One going of is really diversity are the types management that attribution how

inventing at really right How but new on it upstream works? have the X some October we’re speaking dynamic from they studios they on markets standpoint? services ad that it And our frankly, to working, ours. How now, to we of they long-term our in casual in getting our impact and terms on in how we of things the more understand on a in and and and had harness how advertising only diversity amount joined learning the is about building ones and perspective management sciences of and improves our acquire? advantage. the investing are Rollic, and that that product monetize and more their that peak, starts they’ve Harry look testing they from be and terms look of and Same with able finished. data to Potter, hyper lot Just engagement that as thing That an market right are strength capabilities new not a out modeling big now, of how

So, out it’s one again, we or of because to advantages capabilities product are and recruit data diverse of it’s things information great science, we studios leverage there. our management, competitive techniques will continue the new one building is of talent superiority, core

Eric Sheridan

broader ecosystem much. Maybe, one possible, inorganically? monetization? addressing deployment about for out I in-game inorganic capabilities, the against broadly just about the opportunity thinking could how analytic data guess think of and if you ever situation follow-up about or if looking acquiring Do into think digital advertising you do the Thanks thinking about capital so

Frank Gibeau

and on if done at marketplace. deals and opportunities in we’re Yes. super-important looking something build science look as opportunities we is, base new of The the figure longer-term studios, that those is versus continue We But considering we at terms at, look there as We yet. those have do but not in and talent buy. in rule that our to consider. maintaining out strength try think types yes. we about are find that embark product out. any It’s data don’t only our or answer and haven’t been out management. network, platform And Zynga as a there’s game a just we we something of like to and capabilities, them

Eric Sheridan

much. so Thanks

Operator

you. Thank

David with Our next comes Karnovsky JPMorgan. question from

line now is Your open.

David Karnovsky

can for would being as of thanks games, in the a potential forever would the this maybe strategy? Should letter, rapid bit quarter? on what the explain be games into you smaller we fall higher these highlighted of think question. the or of type prototyping Hi, approach but Frank, you having them franchise

Frank Gibeau

of Yes. prototyping areas, there’s couple see where rapid you Zynga. a from David,

first that proceed Rollic, where adjustments. that a prototypes the they’ll games in and some some into The The the releasing month they’re that a dozen proceed games is at. terms they’ll almost with. testing, won’t in looking of shoot make they are they bringing they’re with,

just we like very games starting we on that’s we core the So on we of be soft that example, a back start sometimes places it; day and it going areas we drive inform from portfolio, something heat, as we’re studios nimble area is other ideas to into ad on like continue things we double there, large you there’s can product high we a velocity Rollic to call part new in have pull times how them and that’s more Gram, be we put back can prototype loop our we and a think to licenses, there’s, it see the of or lot are into ideas, that see very for of pretty proven So, launch if build if one to don’t see few the look also And type if see driven think for learn and Potters larger companies we that in ideas down applicability our do big quickly. and more engagement we at the instant we’re the a of across if Harry an for thing. the business a audiences? Wars, them well evolution heat, as be that to good rapid have from that launching as and has and that And curve. hyper the back can these testing going with Star games testing and see games help development a is main but pull model successful In casual prototyping. to of and and not, lot that

David Karnovsky

near-term initiative that for does or to create Merge testing some Maybe, mentioned headwind into monetization we’re letter new to the of the the much, features of then it enhance experience. Magic! just driving too driving And player kind what’s the engagement? and long-term and Okay. wondering any reading but

Frank Gibeau

game. they Well, compete and benefits from that Merge need I have Dragons! are performance any things think is demonstrate systems, have one that for of Merge that collaborative and are games elder systems older more and we scaled the levels deeper that social to are, Magic! a that of than lot the

and Potter. & features Friends, the an obviously of Harry hold some that are from we’re that learning those With Words some So, of taking Empires see you Puzzles in

we parts playing features different is themselves. quarters cooperating, set that ideas Merge our we Merge competing games, more content, next game right on the we’d season, So, and of in like for for see that together, what prizes, a four passes Dragons! of we we’ve and in really And roadmaps season holiday those introduced play got that those drive each have systems game, and the elder really really work long-term that where lots as the players businesses. There’s their lend from with are invest Gram that think to games Magic! is we launching of we’re inject of like new cool really for now, and universe and the the have events the the we near-term Dragons games. features

We have strengthens. some

think for better areas engagement So, this new inside you’re titles. do you just part development we’re constantly services features focused for of them where particular ongoing the year-after-year, where as is on and looking this those and you is in grow case, can live games, you adding player long-term service,

David Karnovsky

Okay. Thank you.

Operator

you. Thank

Ng Sachs. with Goldman Mike next question Our comes from

now line is open. Your

Mike Ng

question. much you Thank for very the Great.

First, just I the game advertisement. just mobile ask want broader about to

still talked heightened pacing about, advertising bit I or a towards in broadly? more games came quarter worse annualized engagement there? given What expected. And with better are all million this than you that I had it little or seeing is better there originally that certainly think $XXX is Thanks. you

Ger Griffin

Yes. improvement that for quarter. obviously shown an I’ll Gerard. up definitely is one. It broadly. We our And sequentially. This performance demands obviously, with was in of QX we through and grew in take terms the advertising in saw that in year-on-year advertising

on their implied that of for estimate the terms is is in $XXX million still still in Rollic Rollic, bookings. range guidance of terms In pace,

expect engaged QX our itself point in Zynga, speaking our view, so of data teams, we as see off part that full as great do they’re advertising of teams. excluding start what QX. perspective, guidance Rollic, terms to are Rollic into from growth a advertising generally implied seasonal of we sort from in they’re moderate And a growth is is science our And from Obviously, contribution. the quarter QX of

well. So, the I is from perspective, going integration our of Zynga Rollic very think into

Mike Ng

a spend from point, which sufficient letting to you. terms see generating do users flow how of and new it Thank that profitability; just separate loss some to at for in say have start Potter you number in a line. of question profitability us, a on and remind typically Harry profitability. takes to go to Harry bookings just new long And you Potter marketing Great. and we’re Could game a we good bottom place the through game

Frank Gibeau

doesn’t metrics on In actual particular, quarter speaking, of generally than less the really see engagement the it’s out, games you the margin heat and from are if got point gross it they – quarter and depending adoption. Yes. showing turn journey, an is view matter, when a the whenever first up the that’s you marketing. flow-through right in game see

next to second will to seeing is going which its Harry start of we’re game now key happen the and the over engagement to now right not building game. just what’s layers hook, to games, a have is happen quarter game. is investing we’re lifetime really right what And engaged into Harry expectation what’s going we’re what a when our is the Potter that in long-term bottom here those players becoming flow of into The in third our Potter quarter. you or have quarter, So, the in any line going like the that through

of the positive We’re feedback a on game. lot seeing

against is QX obvious horse you and obviously see invest is of both. and impact of engagement monetization to reasons, in going be for us a ahead that that to you ahead definitely because marketing dilutive it’s when So

dilutive. whether on to one coming our be from game was QX, XX%. like games, that more will in QX it’s margins perspective, pressure going guidance It we the original QX, implied So out way, implied were for in two see

see should year. from and margin the absolutely from a Harry perspective So, full are but QX next you still in hurdle, in QX XXXX, fiscal our of above XX% starting but contributions

Mike Ng

you. Excellent. Thank

Operator

Thank you.

Handler comes Our Partners. with MKM question next from Eric

now is line open. Your

Eric Handler

touched you’re next curious, a look any if couple debt to how acquisition With regards Yes. the to now, and about and Apologize are think are and thanks Good this debt you to multiples? at you possible, for changes what question. the I’m about, right willing and the seeing evening are has leverage M&A on. as thinking already raise, extent, you as over add of in there big you that years out deals been

Ger Griffin

Gerard. Eric, this Yes. is

leverage, As thinking your speaking, the it EBITDA. somewhere from relates performing times, to to debt broadly two three I’m in

picture. about big a So that’s how we think

at. record for generate on versa we of where terms and the grow to the they you in again, leverage our opportunity multiples asset studio apply that win-win in Zynga come we that can the and track beyond obvious if to today, there’s companies, acquisitions, know at join an look In multiple targeting on we are whatever vice capabilities, our

while, there’s particular, there’s in while for ask always there’s always, potential they when multiples. involved, a banks for So higher

shareholder multiples deliver been We Zynga would haven’t us driven to that ever to feel value make worried shareholders. ability for

So, from that perspective, I think we’re feeling uncomfortable.

is bring strengths. to here there's and the you what landscape Zynga We’re earlier that at Zynga help looking casual is, you still on to creative change the when IDFA, forever strengths teams destination And that accelerate minute our it pitch. vast. challenges us Zynga. a asked for the out you the leverage about can look growth in of of join, independent this next studios, franchises, our opportunities science terms to to – for very capabilities years. portfolio the talented And portfolio, continue capabilities sales was our to there IP, et our that have that's leveraging acquisitions the ability here no the to an in of shortage are And cetera, we're of you call we're and independence cards, studios social not to slots mobile publishing and We're amplify aggregation the talented bring data that our table, that's few

Eric Handler

And this there like helpful. at to that fill? at any particular That's point are portfolio, you'd holes looking in

Ger Griffin

of in We specific a on focus don't game. genre type or

within Rollic, capabilities was are capabilities, earlier. the that additional referred we science extensions build long-term investment advertising our capabilities vertical data portfolio, to engagement well. can earlier, find franchises as looking either at to continue bring mentioned or enhance hyper-casual it in we're As our build games talented at Frank us we or on teams integrations, they in as that If true opportunities give interested or that obviously or technology can to

have opportunity be expand a it to the mobile from said, in our to on platform, Beyond see the to, we on the we platforms, perspective mobile. games future other free-to-play

where for we focus that's capabilities enhance do our there. in So another of terms can that teams looking area talented

Eric Handler

Thank you.

Operator

Thank you.

comes question next from Our Fitzgerald Fargo. Brian with Wells

Your line is open.

Brian Fitzgerald

you Thanks sounds like are returning business quarter And up ad guys. there? pricing in goes some and for with your a pricing that calls channel, We've business heard showing respect you're Gerard your it about to Is getting brand customer both to the it the ad inside that seeing but well. ad your budgets in as acquisition seeing competitive What well. of date. this more also is other

Ger Griffin

– general In better brand terms in of yields. the advertising is

performance-based perspective than better get that you it's advertising. from the So pure – from

But is a seeing we lot. there industry, the in across yields the in advertising the which in QX, we market optimization has in performance-based did we more improvement an or are to anything that relates see it As is doing yields, than obviously the we strong feel a we've capabilities got where pretty in area. trend been from past a were view, of improvement which point

we relates side, we're to seems long-term – would know channels say, it and user Irish but obviously seeing that but deliver acquisition you very will it optimize of got we've it what the very some acquisition level return. a pressure – large the feel a I to We're in if diversified portfolio, over the it think looking so other, to and is. opportunities user answer, channels, flip continually like investment right I some As into

us point profitability the saw from very and overall quarter QX, deliver our we were within engagement a in happy of you optimize acquisition and portfolio, that spend helped As view. obviously with user a our stronger

with see As to and the opportunity life Harry in you QX, our invest we services Potter. both see

right a a for drive our of as growth out see QX to the of ambition on come going you're XXXX. we the little pressure margins in bit stronger into – to but QX, So

Brian Fitzgerald

Thanks, Gerard. it. Got

Operator

you. comes question we have Stanley. Matthew And that for Morgan last from one question Cost with Thank time and

open. line is now Your

Matthew Cost

question. for guys, taking thanks Hey two. have the I

the deeper little gross So kind reiterated expectations double-digit of the you're was if line on growth the quarter. kind gave in into you mentioned XXXX, of last it’s the number portfolio secondly, of that I portfolio. actually just you the Rollic. that Social between the think drivers number, you I the bit than you that on then quarter portfolio, with with could Peak And Slots and expecting bigger it top a existing wondering and record for the new for guys guys obviously dive that quarter, Slots was then last games not

has Thanks. So expect normalization driving data wondering and when that of subsegment specific you I'm been what just that, in see of the portfolio? do to sort

Ger Griffin

. Yes take first. I'll Slots

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deal like-for-like, is that as use be – get old call a terms year-over-year. same-store sales is what in a – to services, the coming Harry would of major us, that. we half part as of challenges or The expect bookings our But XXXX. overall QX COVID other still we as terms But out expect Potter still so obviously be there into live of obviously we And did have think the games see service full say on of of from the on I we your and In overall of from amplified your year, would growth, about – the to to well. of Rollic growth. the the live us still do impact contribution just we collectively portfolio for will pipeline. thing XXXX double-digit back going year the grow expectations, portfolio, that of – the year expect given of you is And including and from thing to terms some size in see believe to earnings full development that driver of Peak we the a to services, second question say we're that in our is QX also live in obvious I if it grow you

the clarify, to it just obviously is we expectation the normalization COVID through biggest COVID, see one out. We've thing additional will the rest relates seen come from games as So was And to the of bang year. QX.

the live still look we launched what games comfortable that pipeline today, full recently plus grow the we the sit feel of ones that Potter, year haven't mean, the but that the cell contribution phones, you at of if Peak from services, Harry as will Rollic, business year-on-year. we can the acquisition we fundamental in here including TBD So developed, new the

Matthew Cost

you. Thank Great.

Operator

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

Zynga (ZNGA) 4 Nov 202020 Q3 Earnings call transcript