Zynga (ZNGA) 11 Feb 212020 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Zynga's Fourth Quarter and Full Year 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker 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, Vice President of Investor Relations and Corporate Finance. ma’am. ahead, go Please

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

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

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

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

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

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

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

games call. players. has global QX when to proud and community. before focused Rebecca. thank delivering was a strong for to pandemic, of Good change. teamwork our quality year to the also for earnings I challenges entertainment, unprecedented XXXX how was could not sense the our than more and services be live of the social you, year Thank high afternoon, and execution, ever with and uncertainty, It everyone, an turned of more responded joining Zynga people of loss you connection

on our to in history. seamlessly world the Zynga mission one March, through to and in achieving to games, performances deliver from work early home strongest transitioned while connect team Our continued the of

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GAAP $XXX million, expenses were or Turning $XXX to year-over-year. up operating expenses. XX% million our operating QX

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marketing by operating non-GAAP year-over-year. expenses, delivered GAAP from stronger we higher both offset and For operating leverage R&D largely G&A, investments and

guidance. expected the deferred net adjusted we net of driver net $XXX of in issued $XX cash We cash better million million lower cost better of $XX proceeds of than the EBITDA delivered than million and investor quarterly Our $XX increase of call flow a associated primary where $XXX and a than strong capped operating demand, our fees. to $XX we notes million In of loss our up generate issuance our better performance strong than million, the $XXX year-over-year. expected the providing was operating XXX% of after December, revenue guidance convertible million, and profitability, million transactions record

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XX, Turning have to developed methodology information based we February to a similar the to XXXX quarters. us year and today on on QX guidance available guidance, our prior full 'XX

both of is as $X.X XX% in the as year-over-year. XX% net net wider range $XXX of down Revenue XXXX. to Adjusted negative, net a our higher $XXX XX% or and million it year-over-year. up revenue million EBITDA results. Bookings deferred relates of pandemic, of billion, $X.X million, said, million uncertainty or positive the $XXX or level guidance XX% volatility there in billion, or That is around outcomes Given for potential versus $XXX and XXXX COVID-XX the a loss $XX business ultimate follows. up and A loss of $XXX million, increase year-over-year up $XXX million, $XXX of million of million, year-over-year. of

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year-over-year. include double from plan XX% improved will new assumes In in year, growth line position we operating XXXX, where of us expect top also our will higher a expect stronger year full guidance or up will services, scale from million, half that we of in a absolute $XXX $XXX year the also launches. with $XXX another improvement digit XXXX well line the our to see we year growth. profitability, of operating million deliver than ago EBITDA second million, as leverage double net margins game for as live as Execution greater provide growth, in our top organic contributions loss It significant deliver $XXX million low Our better adjusted digit will of leverage. XXXX which continued and operating terms, of

achieving expect years, to stronger cash progressing towards our operating continue longer margin operating Over generating goals, while term the next several flow. we

million, $XXX XX% of ago. of million $XX $XXX $XX million of is increase in up guidance, net versus or QX million versus a $XX XX% as million a $XXX million million, year-over-year. a XX% year of net prior EBITDA $XXX for Adjusted revenue loss Bookings revenue million year-over-year, year of $XX year-over-year, to follows: or or loss a deferred up $XXX quarter. in net million million Now which of the $XXX up

across Our Potter: continued be from as year-over-year These well hyper-casual top offset mobile as strength Toon be well collectively games games by performance driven Toy titles. & services, and in partially new existing as older additions live as Harry will Puzzles Spells, line will declines web our Rollic. Blast, by of and Blast,

our phones. from cell guidance meaningful top not in currently does line Our contribution any assume games

We expect year-over-year offset increase the amortization revenue, a due the acquired to expense and gross intangible net for margins deferred higher to assets be advertising down in of primarily mix. impact by partially higher

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marketing plan of your with of to and with we're another our year million, open absolute forward top growth our We and or will look continuing call EBITDA titles we and million, momentum we growth of to XX% spend against $XXX on questions. a that, line digit modest growth, strategy. in with multiyear improvement than making double loss also strong profitability the XXXX, in better of With million progress are $XX test ago, expect we soft very And to conclusion, aspects all up to a adjusted and In pleased $XX year-over-year. the net year profitability. million terms, launch. significant $XX deliver In year-over-year that

from Sebastian [Operator Instructions] comes question Thank Our Colin with you. Baird. first

question. proceed with You may your

for and me, afternoon, Thanks, Two good everyone. please. questions

on will it Harry strong Potter, the meaningful to the be talked off about a start contributor in First to XXXX. you game that growth

monetization meantime, on to the gives confidence perhaps a usage acquire impact tech Ger, Or Thanks. in apple services those and could you from you And how and expand And If changes of that way outlook? in embedding that solutions. initiatives? are QX the some in internally on Are what's infrastructure? both driving do much secondly, need of the advertising, that you in then developed live full an investments and outlook? and a in you the year bit pending

point up Hey, Frank. questions. this two Colin, is can add first the And finish the impact about take think I'll I Ger with. third the

conversion Potter, the of service and we're strong inside engagement game terms and In metrics, Harry is is retention good what and seeing very monetization. very

really, strong very interaction planned features calendar have the very have several of of players for we And excited competition. beats of have that in a and bold We high driven year. and levels product the rest the really

and KPIs, We're acquiring sustainability for seeing, the the on in a good certainly cohorts the Harry are we the on it but way the based of trend we're the that feel forever Potter. trends calling yet retaining, that So, very not franchise, and about that start start it's direction. that

inside In engagement. for be from second Right attribution. and our layer obviously supply out as look components the an to we at build exchange, build going very going inventory looking technology set demand network. related key the at side side, also our we're looking to out to of question of terms how there, and of a optimization advertising of we're now, games have about robust to we But

to these going technologies be are And build some of that internally. we

to are scale opportunity But growth to going existing powerful a 'XX them for and this additional think we're also acquisition also incorporation that a will off of areas, potential accelerate in be shelf, of Ger? us potentially to add be technologies. looking at and as we Some initiative the key beyond. driver in

Apple of terms from planning is out. changes Yes, the impact to roll in

isn't In of terms that there in impact quarter. QX, much

modest we're year, our or Rollic. relates without do advertising it we pressure, rest expect expecting to grow the with the business, to but As of

of we have and levers call. of our cover we at going there's our point a beck But positive believe we of business, in that and dynamics other on something negative. we one that from believe it's both all So it's modest with pressure, the of number can view, but

Thanks, Okay. guys.

you. Thank

Lu with Barclays. comes question next from Mario Our

You with question. your proceed may

on thanks cross-platform I one Great, subscription. one have questions. the on and taking for

cross-platform, you So for into guys the first are it. investing one on mentioned, guys you

your they So subscription, any games? creating more and And cross-platform? completely particular Zynga be made will pure those companies on games, And you Crew, models, subscription existing are are like more like and think overall? new or studio like see as implementing then Zynga subscription Roblox do titles, And thoughts titles are and implemented? on Fortnite Zynga, What Puzzles Premium. that this can Empires that are it something

like Frank, on it looks mute. you're

in be development And at we'll console of games from starting rolling is out Hi, are community Zynga. we're that is are Unity, end contemplating up the The question the PC new percentage lead titles a to worked there. published we Mario. cross-platform. of more driving as our titles having of titles on projects. NaturalMotion past. undertake towards high here the a This in studio games, lot they number on for They and these their that then effort. very and development look to the have They've Unreal, those a scaling of 'XX

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Great. Thanks, Frank.

Thank you.

Drew Crum question next Stifel. comes from Our with

with proceed your question. may You

guys, afternoon. Hey, good thanks. Okay,

Frank, new listed separate are five So I working on think that you studios, games.

forever then And So suggests and you're plan. rate that digit you forecasting, be stage Because of double digits are on the Thanks. And for to just separately making of what early you're for that will notional the hence model Ger, business? very then low any growth in all game? Wars XXXX term haven't part reasonable are these new given Is double top willing eight new you're low rate detail any the longer Star of investments on the not more provide revealed initiatives are. franchises. those XXXX

Thanks, Drew.

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are familiar people would be with. of that brands Some them

And what the and feel to be they're coming. about some of explicit get we about titles releasing those as are, closer So, soft good more very launch to mix. test and we titles will from where these

title, there'll we of we're going first as Star Wars into the at part about Star on but progress terms be In news more disclose. this year, this that's the to of what Wars, time

over Drew, out in and terms terms based into live time, of in years, is space in layer said, the new Frank our games what service live service on the thinking ambition just that about pipeline. of game to new our year grow every

international. to double-digit growth and the future. would start organic also the year you cross the So ambition an And particularly foreseeable when for in be layering each platform perspective, an yes, from from potential deliver your hyper-casual

driving into about think ultimately levers to exciting lean a way we So is, margins business of our expand the we as and fairly line have top terms growth, well. variety in of

that's more game have some to the over time. obviously do use balance talent the design bring plan. sheet We to to opportunity to go teams So the

Great. guys. Thanks,

Thank you.

next Our Cost Stanley. Matthew comes Morgan with question from

You may proceed with your question.

Hey, the Two, on I guys, question. taking congrats the could. quarter. Thanks if for

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terms the Thinking XXX to being that of in build developers out in I to that a think edge a Americas, as where give the opportunities we will performance beauty mobile We in part are of have networks. further this long-term is even see Africa, almost able markets in us us. high as East, is budding Middle these the afield. of India well in do business contribute will India long-term in

getting performance, going out. smart You're devices high inexpensive,

increased seeing our maximizing and there. And right And long-term and it's think that matter market creating succeed strategies local You're we a products really brands power. conditions. purchasing will the of go-to

further opportunity the to about grow we're excited there. So very

thanks. Great,

you. Thank

Our from comes Sachs. Mike next question with Ng Goldman

proceed your question. may You with

just in this about quarter the cited particularly a which growth want learned additional this you either Hi. relates you as pacing user just update And an hyper-casual that Is hyper-casual, the about strategic in to merits Could about about out much Thank category, a much as what is gets about afternoon. annualized it? to the Thank question. that, you for last Good you follow-up for acquisition the building Rollic then it you very category excited network something I that is investment? talk or revenue? to as there opportunity. ask transformational advertising there how terms of you.

Ger can take first question Yes. the Mike, the take and second. I'll

their about and like an of the deal They great even to grow Rollic spectacular. In is of what terms team the them and a hyper-casual, fantastic a that leveraging really We've is culture, absolutely and been leadership technologies we categories have knowledge learned we faster. lot the have systems at from they've phenomenal. about great

the players that them of of to that, we've first learned things is that we about hyper-casual about mobile. players are Some excited are time really many

or like introducing being able Runner our into a Blob High network players to we to is then games So over through Zynga acquire opportunity. real other game Heels and time them think a XD,

mobile is is, thing a they lot these and hyper-casual different I'm -- of just they play regular games playing lot segment not also a about titles, talking games. play Second also play players that they're players, of

consumers high able relationship acquisition long-term titles. Zynga. think brought the of user target And and tend to arbitrage for funnel, that for acquired pennies nature be you are positive not be that the we the are as than into about as in our being a to we're you thing to about these are with of like typical as that they're They at that And them, sensitive well. we kind younger that there growth So are build the players very company have think going incremental our the network. to it's overall. IDFA if And of

for maybe honestly so they free have. on a they're So the a games, we've of dominate that phones. play. folks so simple games, the expand form entertainment They'll IP. evolve years fun work time, and was charts this play of lot They a on, to been thought fad more bigger advertising, internationally They ideas. on, many think games and it's very think I new looking than I hyper-casual of at to accessible. early they're of instantly category in like they're Over into they'll off They're terms

at indications start early expansion when here. of We our like We profiles the them the seeing. for having like advantage like we we're network, you bring advertising not our a significant able And think and versus player I part to top having hyper-casual the Ger? the to us So behaviors. our of think It's through of portfolio. funnel being this is incremental. about the

Yes.

the give year-on-year And majority portfolio, individual advertising. going portfolio to majority good very 'XX In growth is, obviously rate the very the the pacing, happy do it don't the for answer terms a come XX% from XX% rest give expect the that growth you advertising of of, I quarter its growth company. Rollic We you're Rollic user can the come we're be had or growth and how is with the from we the Rollic. expect to pacing, specific rates. We is But to see with of to good of pay is a first to going year. your indicator how shape title will see bookings but from the going some overall of of question out

Thank Thank Great. Frank. you, Ger. you,

Cheers.

you. Thank

Our from question Mike next Company. comes Hickey with Benchmark

proceed question. may with You your

for guys Great job. congrats questions Rebecca, Ger, on quarter. me. Frank, the Hey, Two

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casual you I games, GL, seems a portfolio really team did out like well, know think cost Frank, they've good Nick like great synergies. his culture, same of and built games,

for make you just So lot guys. which asset compete sense. curious a of why that Thanks, wouldn't

the the and for Hey, Mike. comments. Thanks questions

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might more it's So, game gambling traditional you seen site, online for behavior what an than from have example.

an So, we think that enduring is that thing.

has for gaming continued look in other successful. social side play of real of the you example, to be regions, had categories it, have and side significant where it to free money in If very the at Europe, vibrant

ways, teams and very strategic We're with the portfolio. and as With looking of can of very Zynga regard pleased are, we performance proud social the do think they coexist, to there. they somewhat alternatives, at So, some of casino in I our that part complimentary. work and we're the poker

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with franchises. at we're time, to them competing the to going to but sad go, continue see their same So keep

the that a chased. that two our executed something in of with and of going we combination the with we're goes, strategically. at our that business advertising, It an we so when hyper-casual, initiatives The where is far assets, that play, acquisitions was way As make, of about Zynga asset wasn't cross-platform we where just building as configured really happened growth It we Peak. that companies thinking we're all kinds look something was just were and our lot the timing going Rollic the and inorganically.

Glu. at well gang the and Nick wishing again, So

Thanks, guys. luck. Good

you. Thank

Our comes Berenberg David next with from question Capital. Beckel

with proceed question. may your You

much questions. thanks the of two pertaining advertising have Hey, side for business. the to so I the

get don't to wants consider you made expect Would being on IDFA you business, optimization ad dive the not strategies. what and for secondly, If comment implementation? in partners? better your And the side, term of yield apart organic separate these little on whoever significant inventory organically inventory? do it. you you little bit? a what you that Frank, take of mention impact your presuming curious, did to but you can expand your or you mind to do was of own into it I'll I'm a portion sort the just network that Thanks. has have total hoping word, they Ger why ad workarounds First, through I should Apple what with envision on developed your type use on are network. you lack you've for savings a sold? then of to bit portion about necessarily, that just strategies a of a And Or envision

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part say, most our so with a What to have been been grow discussions operate of in more it's our and as view, usual there's us businesses. and lot And post terms to world. of we the point for looking I in how can IDFA from optimize business a that definitely partners

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Great. Thanks so much.

you. Thank

Thornton Securities. with comes Our next Truist question Matthew from

with You your may proceed question.

of a Hey, titles a in I there? questions is one provide 'XX, quick couple that just but afternoon, or margin apologize color my and little missed the or of if could been box less of Good to that have for bookings Similarly, wise, long-term then means one I what Maybe just you maybe good operating contribution this, X% are housekeeping quantify any picture target. Ger. answered, than you able afternoon, maybe Frank. in but maybe bigger housekeeping Most new from just the Frank. Ger, further

still deal into about probably out out these I of M&A more ceiling talked XX% about that's there broadly, a see of kind but an guys. we you attractive how landscape you're little just feeling opportunities curious days, landscape any then any XX% why color come. about just be curious as Thanks, of got I'm color or a great? you there come go obviously, just the Do couple there don't Just a new kind out more opportunity to 'XX? week there's We've specs there would earlier there? Frank bit. thinking whether you're the how that see this And

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know are about but you you're that Frank, how target. margin, just I this thinking long-term is operating just

I'm and curious the to referred target. given kind You of whether just about to at all target kind making how that's towards progress scale of that that you're changed thinking that? is, what

XX%. head where taken $X us But whether range, XX%. in think or from but million, invest XX% incrementally flow XX%. plan our last word. all scaling this about started came the new new games, into scale expanding exciting seen, operative delivering up last sets we've It's or the very think They we year, if How about year, that, to we whether either base showing with business, next continuing $XXX through all compression, that somewhere the to XXXX. into around towards you expanding get footprint, our close year nicely had to XX% extending about mix. mentioned, target we in It And, live market to some north also and growth, as X% you've And hyper-casual used addressable Yes, We still looking services, XX% as the sort your do Frank to core for do least areas. a that of with into XXXX, of and came into really to some then the and the strong which is which profitable this it then it's areas in full whether the year, core company and of are year games to advertising a and our And billion you code i.e. And be actually, it's new more growth obviously we delivered fiscal, quarters if XX%, year. organic is additional levers. And where internationally. some is we us launch against execute to We that fundamentally that? we're beyond. XX% deliver I And off it's you ended at for zip very we that launching, the bring XX%. we're 'XX we're for of operating in up execution. to into new some plan we cross-platform, ultimately,

the that's So game plan.

platform. young, attention. further category the a capabilities can an into afield compatible opportunity to like find successful to to a position are are out autonomy, brought live the yet services Zynga. part about also of consolidator And that tools in There's cross-platform think for position it's environment, well. that of to really I hyper-casual We related the Matt, like Zynga's part really still been the many lot think in advertising. growth independence, are terms we've of obviously, it there. expansion for there a in certainly expands. few place last companies leverage in terms ways. in of The that We looking context, developers can growing. company comes think in M&A has going those And us the company of there's lot they really is capital for companies are has that we interesting over that a down of We then interactive to in cultures being question that is where the years. as interested in about look of XXXX, still faster of There's small, that a your the saw a be companies grow the look lot have that entertainment to one We play, as markets great When factor. opportunities it's our think overall as And

private, They it. we we that great. So we When welcome companies go we in companies we've public. public, it's These think were were typically against. believe competition, are competed

public. Now, everybody's

category. for think good investors, for the in companies good it's it's I think the I

innovation activity, it legitimize M&A entertainment. think think that it's come but to create overall. you're dynamic the space, greater at interactive really And more companies of growth a very these more of within will public, and same time, the growth I have I organic a strategy. degree we a seeing feel strong like think And I as we a lot

that culture, And we And that out, is growth, means from team execution. really great it. at a so of go a continue can a find what to right of if we'll It's our company. be inorganic that right dynamic we function with We about a focusing for fear on selective missing at not go great the and after, not we an time. standpoint, do make deals the do pretty we sure have

Thank more you. with MKM Partners. And we time Handler one Eric have for question,

your You may with proceed question.

please. here. so Thanks fitting questions Two for in much me

driven follow-up. online think or more And have by or a key spending do at the about your year in game being the I mobile this on the you see DAUs least player? line, more revenue you by drivers, First, players as per increase bookings

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seeing lot clearly, are players an from in A We audience, you are those that saw of numbers. our expansion hyper-casual. in

lower, in to nature. they their games advertising be the they So and tend base are monetize shorter

or to our you very boost and to conversion Puzzles in Potter actually a or tied and If Words economy Harry increases good Friends, opt has with Empires games like IP, we're out. now seeing go an which

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good in sort Okay. now also too for maybe we of are PC take that mobile the game or thinking investing just company a that's a at in maybe to space? able look at ability and the game Would to and powder you're cross-platform the mobile be you myopically about a console looking take dry then opportunities, that companies got your reloaded And to you sort M&A of platform?

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a games are I be PC itself. environment. by really win. game if opportunities to on That's console to live able seamless, with just different think platform a more find that mobile, So we that that's in partner a a with organization that that investigate. where doing working to we we're or together we might think see can game and that don't and CS development opportunity that console We're combine a to are mobile cross itself the play, interested services in by play PC a that synchronous free all big are rich

Great. Thank you.

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

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