=Zynga (ZNGA) reported earnings on Wed 1 May 2019 (a/h)

Zynga reports Q1 (Mar) results, beats on revs; guides Q2 revs below consensus; raises FY19 revs and bookings

• Reports Q1 (Mar) GAAP loss of $0.14 per share, may not be comparable to the S&P Capital IQ Consensus of ($0.06); revenues rose 27.4% year/year to $265 mln vs the $255.45 mln S&P Capital IQ Consensus.
• Co issues guidance for Q2, sees GAAP EPS of ($0.07), may not be comparable to ($0.03) S&P Capital IQ Consensus; sees Q2 revs of $280 mln vs. $285.82 mln S&P Capital IQ Consensus. Net increase in deferred revenue of $80 million; Bookings of $360 million; Net loss of $70 million; Adjusted EBITDA loss of $18 million
• Co issues in-line guidance for FY19, sees FY19 revs of $1.2 bln vs. $1.2 bln S&P Capital IQ Consensus, an increase of $50 million versus prior guidance. "We have also raised our bookings guidance to $1.45 billion, up 50% year-over-year and an increase of $100 million versus our prior guidance. We expect a net increase in deferred revenue of $250 million, up $188 million or 301% year-over-year. Our performance in 2019 will be primarily driven by our live services portfolio anchored by growth collectively across our five forever franchises. We have an exciting pipeline of new games under development and currently have two new games in soft launch. Our raised guidance now puts us on track to deliver our strongest annual revenue since 2012 and highest annual bookings in Zynga history. We anticipate that our bookings growth in 2019 will outpace revenue as we defer bookings primarily from our recently acquired title Empires & Puzzles, Merge Dragons!, as well as from new game launches this year. We expect this to result in a $250 million net increase in deferred revenue, which represents our largest deferred revenue build. While the release of this GAAP deferral will have a positive impact on revenue and profitability in future years, it represents a $250 million reduction in revenue, net income and Adjusted EBITDA in 2019. In 2019, we continue to anticipate pressure on our gross margins due to a higher mix of user pay versus advertising and an increase in royalties on licensed IPs. In addition, we expect to ramp our development spend on our new game pipeline and to invest in launch marketing on titles releasing in 2019. These investments will modestly weigh on our overall operating margins in 2019 but should deliver returns in future years. We continue to expect operating cash flow to grow in 2019, excluding the impact of tenant improvement payments.
• "Execution against our 2019 plan should position the company for further growth in 2020. We continue to expect low double-digit revenue and bookings growth with greater operating leverage, as our live services growth in 2020 is further enhanced by full year contributions from our 2019 new game launches. Over the next few years, we expect to make meaningful progress towards achieving margins more in-line with our peers on a like-for-like basis.