Zynga Inc (ZNGA)

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YOU HAVE MADE A LOT OF PROGRESS

THE LAST 20 MONTHS HAVE BEEN AWESOME.

I AM REALLY EXCITED ABOUT WHERE WE ARE RIGHT NOW

AND I AM HAPPY TO REPORT THAT ON INTERNAL PROFIT METRICS, WE ARE UP OVER 600% BY THE END OF 2017 ON THAT FRONT.

WE ARE ALSO GOING TO START TO INTRODUCE NEW PRODUCTS IN THE SECOND HALF OF NEXT YEAR. AND IN FACT, IT STARTED LAST WEEK WITH THE INTRODUCTION OF THE SEQUELS TO WORDS WITH FRIENDS.
THE COMPANY HAD SO MUCH POTENTIAL, GREAT BRANDS, LOT OF REALLY TALENTED TEAMS, SOME FANTASTIC CAPABILITIES BUT IT WAS JUST NOT COMING OUT.







ZYNGA'S (ZNGA) CEO FRANK GIBEAU PRESENTS AT UBS GLOBAL TECHNOLOGY CONFERENCE (TRANSCRIPT)
NOV.15.17 | ABOUT: ZYNGA (ZNGA)


ZYNGA INC (NASDAQ:ZNGA)
UBS GLOBAL TECHNOLOGY CONFERENCE
NOVEMBER 14, 2017, 6:00 PM ET
EXECUTIVES
FRANK GIBEAU - CHIEF EXECUTIVE OFFICER, DIRECTOR
ANALYSTS
DAVID STRAUSS - UBS SECURITIES

David Strauss
(ABRUPT START)

But let's jump right into it. For the next conversation, it's my pleasure to introduce FRANK GIBEAU, THE CEO OF ZYNGA. Frank, I want to start by maybe actually taking a step back.

FRANK GIBEAU
Okay.
DAVID STRAUSS

You have been in the role now for a while. YOU HAVE MADE A LOT OF PROGRESS that I think investors have started to appreciate and understand, but walk us through the last year-plus, year-and-a-half. What were the big priorities? What did you set out to accomplish? And where are we sitting right now in terms of the business?

FRANK GIBEAU

Yes. Thank you for the opportunity, Dave, to talk to this group. THE LAST 20 MONTHS HAVE BEEN AWESOME. We have made a lot of progress and it's been a lot of hard work but we really like the momentum that we have in the company right now. When I joined Zynga 20 months ago, what was really apparent to me initially was, we had to unlock the value through better execution. THE COMPANY HAD SO MUCH POTENTIAL, GREAT BRANDS, LOT OF REALLY TALENTED TEAMS, SOME FANTASTIC CAPABILITIES BUT IT WAS JUST NOT COMING OUT.

We weren't able to actually bring products to market. We weren't able to grow. There was a lot of disarray in terms of the culture. And so first step was really to start to bring in a management team to really start to sharpen the operating model, focus on fewer things, do them better and really concentrate the talent on our biggest ideas. And that has really what has consumed us over the last 20 months, was really start to build a strong base of good fundamentals, predictable performance. And what was really important in that was, frankly, rebuilding our credibility and our reputation as well.
We were a company that had an interesting past. And from my perspective, WHAT WE HAD TO DO WAS REALLY REBUILD CREDIBILITY WITH NOT ONLY THE STREET BUT ALSO WITH OUR OWN TEAMS. And so from my perspective, it was about putting together a plan that people could believe in, that they could see and that we could start to unfold. And that really was about committing to live operations. We had a lot of great brands like Words With Friends, Poker and the CSR products. We had to fall back in love with the brands that got us there. And there was a big focus on new, new, new, new and we had spread the talent really thin across all these new games.

And so, there was a lot of reprioritization, refocus, restructuring that went underway there in those first few months. But what I am really pleased with is how the team has rallied. We have been able to grow the business. And when we took over, it was about $700 million business in bookings, flat to down over the previous years. And we grown to 20% since then where we have guided to the end of this year to be around $840 million in bookings. We have grown our audience in mobile. It had bottomed out around 15 million daily active users. We are happy to report we are up around 19 million daily active users is continuing to grow and we very excited about where we can take that.

Really one of the key things that I called out on the team [indiscernible] there was, we had good bookings but frankly the profitability wasn't there. And from my perspective, it was an indication that managements wasn't doing the right things with the resources in generating returns that it had to. AND I AM HAPPY TO REPORT THAT ON INTERNAL PROFIT METRICS, WE ARE UP OVER 600% BY THE END OF 2017 ON THAT FRONT. Operating cash flow was something that wasn't really talked about too much. It was minus $44 million in 2015. We flipped it to plus $16 million in 2016 and we are going to exit, through the first three quarter of this year we are at $68 million with our holiday quarter front of us. So again, it's not rocket science. It was getting back to the fundamentals of good game development, focusing on live operations and just running on an organization with a sharp operating model.

DAVID STRAUSS

Just maybe one follow-up before we get into live services more broadly. But in terms of realigning the resources inside the company, is the work done? And now it's down to execution? Or are we still sort of fine-tuning, having the right resources against the right opportunities internally?

FRANK GIBEAU

I think most of the work is done, but it is a continuous process. We are going to constantly should really be focused on getting the most out of what we have got. And my perspective, we still have a ways to go to prove ourselves. We have set a goal for 20% EBITDA off bookings next year and we remain committed to that. And that's going to require us continue to keep a very sharp focus on how we manage expenses, generate the yield and manage R&D as well as our marketing and sales.

I think I AM REALLY EXCITED ABOUT WHERE WE ARE RIGHT NOW is that we are starting to transition out of fix-the-company mode into grow-the-company mode. And we talked a little bit on our last earnings call about some different ideas we have for how we are going to do that. And it all starts with live operations. That's the life blood. I am sure we will get more into that in a minute but it starts with live operations. We think we have more growth to go there. We have seen some really nice results in Poker and some other franchises. But I think we are just getting started there.

But WE ARE ALSO GOING TO START TO INTRODUCE NEW PRODUCTS IN THE SECOND HALF OF NEXT YEAR. AND IN FACT, IT STARTED LAST WEEK WITH THE INTRODUCTION OF THE SEQUELS TO WORDS WITH FRIENDS. We are starting to put new games back into the marketplace. And we think that as you layer those on top of the strong operating base we are starting to build and the predictable recurring live operations that we have, we think that that can be a powerful part of our growth story.
And then also mobile is such a fantastic platform. YOU SEE THINGS LIKE AUGMENTED REALITY, CHAT AS A GAMING PLATFORM, 5G SORT OF OUT ON THE HORIZON. BUT MOBILE IS GOING TO CONSTANTLY INNOVATE AND CREATE NEW WAYS TO ENTERTAIN PEOPLE THROUGH GAMES. And we are starting to invest in some of those new ideas that we are pretty excited about, certainly in chat.
And then finally, WITH POSITIVE OPERATING CASH FLOW AS WELL AS A PRETTY STRONG BALANCE SHEET, WE HAVE THE OPPORTUNITY TO PARTICIPATE IN HOW DYNAMIC THE MOBILE BUSINESS IS. WE ARE ALWAYS LOOKING FOR GREAT TEAMS AND FRANCHISES. We recently brought on a company called Peak that brought in a card business. So we are going to look and be opportunistic with that. But at the same time, we are spending most of our time on the organic growth part.

DAVID STRAUSS

So sticking with your organic growth, it's fairly consistent, the message from the company that it's really this continuation of developing live services against your big brands, the big bets you already have that are in the marketplace. Maybe give us just a sense of how far along you are internally and user facing in terms of turning some of the key products into live services at this point?

FRANK GIBEAU

I think it starts by looking at the mobile business and understanding that you HAVE AN OPPORTUNITY TO ENTERTAIN PEOPLE FOR VERY LONG PERIODS OF TIME IF YOU ARE ABLE TO BUILD A FRANCHISE AND KEEP THAT FRESH. If you look at Zynga Poker, for example, it hit its tenth year this year. Words With Friends hit its eighth year this year. And CSR is on its sixth. And in each one of those cases, they are seeing fantastic years. Right now, I think we are up 80% in bookings on Poker this year. AND IT'S BECAUSE WE TREAT IT LIKE IT'S A NEW PRODUCT EVERY DAY.

We put our talent and our teams on the idea that through what we call bold beats, these are new features, new ways to play, we can reengage players that have lapsed. We can get players that are currently playing, play more and we can attract new players. MOBILE IS SUCH A VAST MARKET. It's very difficult to reach market saturation on a game. You can always find new audiences in new markets to bring people in. AND IF YOU PUT THE RIGHT FEATURES INTO A GAME, LIKE IN THE CASE OF POKER WE PUT LEAGUES, WE PUT IN TOURNAMENTS, WE JUST INTRODUCED JACKPOTS, WE ARE ABLE TO ACTIVATE EACH ONE OF THOSE CUSTOMER SEGMENTS IN NEW WAYS…

Source:

https://seekingalpha.com/article/4124992-zyngas-znga-ceo-frank-gibeau-presents-ubs-global-technology-conference-transcript



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