SAN FRANCISCO, July 25, 2013 (GLOBE NEWSWIRE) -- Zynga Inc. (Nasdaq:ZNGA), a leading provider of social game services, today announced financial results for the quarter ended June 30, 2013.
"The next few years will be a time of phenomenal growth in our space and Zynga has incredible assets to take advantage of the market opportunity," said Don Mattrick, CEO, Zynga. "To do that, we need to get back to basics and take a longer term view on our products and business, develop more efficient processes and tighten up execution all across the company. We have a lot of hard work in front of us and as we reset, we expect to see more volatility in our business than we would like over the next two to four quarters. I'm privileged to lead Zynga and I look forward to spending more time with our players, employees and shareholders."
Financial Highlights (in thousands, except per share data) | ||||
Three months ended | Six months ended | |||
GAAP Results | June 30, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 |
Revenue | $ 230,735 | $ 332,493 | $ 494,324 | $ 653,465 |
Net loss | $ (15,805) | $ (22,811) | $ (11,672) | $ (108,162) |
Diluted net loss per share | $ (0.02) | $ (0.03) | $ (0.01) | $ (0.15) |
Non-GAAP Results | ||||
Bookings | $ 187,578 | $ 301,588 | $ 417,393 | $ 630,752 |
Adjusted EBITDA | $ 8,310 | $ 65,309 | $ 37,045 | $ 152,061 |
Non-GAAP net income (loss) | $ (6,129) | $ 4,555 | $ 2,976 | $ 51,604 |
Non-GAAP earnings per share | $ (0.01) | $ 0.01 | $ 0.00 | $ 0.06 |
Product Highlights
Business Highlights
Q2 2013 Financial Summary
Outlook
Zynga's outlook for the third quarter of 2013 is as follows:
For full year 2013:
Conference Call Details:
Zynga will host a conference call today, July 25, 2013, at 2:00 pm Pacific Time (5:00 pm Eastern Time) to discuss financial results. A live webcast of the conference call and supplemental slides will be accessible from the Investor Relations page of the company's website at http://investor.zynga.com and a replay will be archived and accessible at the same website after the call.
The Zynga Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=11743
About Zynga Inc.
Zynga Inc. is a leading provider of social game services, which include Zynga Poker, Words With Friends, Scramble With Friends, Gems with Friends, Draw Something, FarmVille, FarmVille2, ChefVille, CityVille, Bubble Safari and Ruby Blast. For the quarter ended June 30, 2013, Zynga had approximately 187 million monthly active users playing its games. Zynga's games are available on a number of global platforms, including Facebook, Zynga.com, Apple iOS and Google Android. Zynga is headquartered in San Francisco, Calif. Learn more about Zynga at http://blog.zynga.com or follow us on Twitter and Facebook.
Forward-Looking Statements
This press release contains forward-looking statements relating to, among other things, our outlook for third quarter 2013 revenue, net loss, EPS, weighted average diluted share count, bookings, adjusted EBITDA, non-GAAP net loss, non-GAAP EPS, non-GAAP weighted average diluted share count, our outlook for full year 2013 adjusted EBITDA margin; our estimated pre-tax savings from our cost reduction plans; our ability to take advantage of the social gaming market opportunity and developing more efficient business processes and improving execution across the company; our ability to unlock our full potential and our ability to remain profitable on an adjusted EBITDA basis; our future operational and strategic plans; expanding our network, including creating and building a mobile network and the success of that network; our ability to transition our web franchises to mobile and create new franchises on the web and mobile; our ability to launch successful games, including invest & express games, on mobile; our ability to launch successful new games and hit games for web and mobile generally; the success of our franchise games and our games and platform generally and the growth of the social games market, including the mobile market and the advertising market. Forward-looking statements often include words such as "outlook," "projected, " "intends," "will," "anticipate," "believe," "target," "expect," and statements in the future tense are generally forward-looking statements. The achievement or success of the matters covered by such forward-looking statements involves significant risks, uncertainties and assumptions. Our actual results could differ materially from those predicted or implied, and reported results should not be considered as an indication of our future performance. Factors that could cause or contribute to such differences include, but are not limited to, our relationship with Facebook or changes in the Facebook platform, attrition and declines in our existing games, our ability to launch new games in a timely manner and monetize these games effectively on the web and on mobile, our ability to control and reduce expenses, our exposure to illegitimate credit card activity and other security risks, sales or purchases of virtual goods used in Zynga Poker or our other games through unauthorized or fraudulent third-party websites, our ability to anticipate and address technical challenges that may arise, competition, changing interests of players, intellectual property disputes or other litigation, asset impairment charges, our ability to retain key employees, acquisitions by us and changes in corporate strategy or management.
More information about factors that could affect our operating results is included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Quarterly Report on Form 10-Q for the three months ended March 31, 2013, in our registration statement on Form S-1, as amended, filed with the Securities and Exchange Commission on March 23, 2012 and in our Annual Report on Form 10-K for the year ended December 31, 2012, copies of which may be obtained by visiting our Investor Relations web site at http://investor.zynga.com or the SEC's web site at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to us on the date hereof. There is no guarantee that the circumstances described in our forward-looking statements will occur. We assume no obligation to update such statements. The results we report in our Quarterly Report on Form 10-Q for the three months ended June 30, 2013 could differ from the preliminary results we have announced in this press release.
Non-GAAP Financial Measures:
We have provided in this release non-GAAP financial information including bookings, adjusted EBITDA, non-GAAP net income, non-GAAP EPS, and free cash flow, as a supplement to the consolidated financial statements, which are prepared in accordance with generally accepted accounting principles ("GAAP"). Management uses these non-GAAP financial measures internally in analyzing our financial results to assess operational performance and liquidity. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key financial metrics we use in making operating decisions and because our investors and analysts use them to help assess the health of our business. We have provided reconciliations between our historical and third quarter 2013 outlook for non-GAAP financial measures to the most directly comparable GAAP financial measures. However, we have not provided reconciliation of our full year 2013 adjusted EBITDA margin (adjusted EBITDA as a percentage of bookings) outlook to a comparable operating income (loss) margin (operating income (loss) as a percentage of revenues) for full year 2013 because certain inputs necessary to accurately project revenue (including the projected mix of virtual goods sold in our games, the projected estimated average lives of durable virtual goods for our games and visibility into projected bookings) are not in our control and cannot be reasonably projected for the full year due to variability from period to period caused by changes in player behavior and other factors. As revenue is a necessary input to determine this comparable GAAP metric, we are not able to provide the reconciliation.
Some limitations of bookings, adjusted EBITDA, non-GAAP net income, non-GAAP EPS, and free cash flow are:
Because of these limitations, you should consider bookings, adjusted EBITDA, non-GAAP net income (loss), non-GAAP EPS and free cash flow, along with other financial performance measures, including revenue, net income (loss) and our other financial results presented in accordance with GAAP. See the GAAP to non-GAAP reconciliations below for further details.
ZYNGA INC. | ||
CONSOLIDATED BALANCE SHEETS | ||
(In thousands, unaudited) | ||
June 30, | December 31, | |
2013 | 2012 | |
Assets | ||
Current assets: | ||
Cash and cash equivalents | $ 217,332 | $ 385,949 |
Marketable securities | 897,935 | 898,821 |
Accounts receivable | 73,564 | 106,327 |
Income tax receivable | 5,835 | 5,607 |
Deferred tax assets | 18,981 | 30,122 |
Restricted cash | 3,549 | 28,152 |
Other current assets | 28,714 | 29,392 |
Total current assets | 1,245,910 | 1,484,370 |
Long-term marketable securities | 417,655 | 367,543 |
Goodwill | 228,079 | 208,955 |
Other intangible assets, net | 33,807 | 33,663 |
Property and equipment, net | 413,344 | 466,074 |
Other long-term assets | 17,064 | 15,715 |
Total assets | $ 2,355,859 | $ 2,576,320 |
Liabilities and stockholders' equity | ||
Current liabilities: | ||
Accounts payable | $ 21,654 | $ 23,298 |
Other current liabilities | 89,321 | 146,883 |
Deferred revenue | 262,213 | 338,964 |
Total current liabilities | 373,188 | 509,145 |
Long-term debt | -- | 100,000 |
Deferred revenue | 7,861 | 8,041 |
Deferred tax liabilities | -- | 24,584 |
Other non-current liabilities | 112,810 | 109,047 |
Total liabilities | 493,859 | 750,817 |
Stockholders' equity: | ||
Common stock and additional paid in capital | 2,776,854 | 2,725,605 |
Treasury stock | -- | (295,113) |
Accumulated other comprehensive income (loss) | (1,911) | (1,447) |
Accumulated deficit | (912,943) | (603,542) |
Total stockholders' equity | 1,862,000 | 1,825,503 |
Total liabilities and stockholders' equity | $ 2,355,859 | $ 2,576,320 |
ZYNGA INC. | ||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
(In thousands, except per share data, unaudited) | ||||
Three Months Ended | Six Months Ended | |||
June 30, | June 30, | |||
2013 | 2012 | 2013 | 2012 | |
Revenue: | ||||
Online game | $ 203,326 | $ 291,548 | $ 432,892 | $ 584,328 |
Advertising | 27,409 | 40,945 | 61,432 | 69,137 |
Total revenue | 230,735 | 332,493 | 494,324 | 653,465 |
Costs and expenses: | ||||
Cost of revenue | 61,077 | 94,841 | 130,471 | 184,963 |
Research and development | 124,322 | 171,316 | 253,503 | 358,192 |
Sales and marketing | 31,163 | 56,055 | 58,470 | 112,892 |
General and administrative | 44,541 | 48,730 | 87,181 | 121,445 |
Total costs and expenses | 261,103 | 370,942 | 529,625 | 777,492 |
Income (loss) from operations | (30,368) | (38,449) | (35,301) | (124,027) |
Interest income | 1,105 | 1,084 | 2,268 | 2,375 |
Other income (expense), net | (4,531) | 21,250 | (5,394) | 20,108 |
Income (loss) before income taxes | (33,794) | (16,115) | (38,427) | (101,544) |
(Provision for) benefit from income taxes | 17,989 | (6,696) | 26,755 | (6,618) |
Net loss | $ (15,805) | $ (22,811) | $ (11,672) | $ (108,162) |
Net loss per share: | ||||
Basic and diluted | $ (0.02) | $ (0.03) | $ (0.01) | $ (0.15) |
Weighted average common shares used to compute net loss per share: | ||||
Basic and diluted | 793,541 | 730,510 | 786,784 | 718,554 |
Stock-based expense included in the above line items: | ||||
Cost of revenue | $ (1,639) | $ 3,200 | $ 294 | $ 10,018 |
Research and development | 15,888 | 65,246 | 36,788 | 143,392 |
Sales and marketing | 3,973 | 12,218 | 5,386 | 25,133 |
General and administrative | 7,666 | 14,792 | 13,342 | 50,764 |
Total stock-based expense | $ 25,888 | $ 95,456 | $ 55,810 | $ 229,307 |
ZYNGA INC. | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
(In thousands, unaudited) | ||||
Three Months Ended | Six Months Ended | |||
June 30, | June 30, | |||
2013 | 2012 | 2013 | 2012 | |
Operating activities | ||||
Net loss | $ (15,805) | $ (22,811) | $ (11,672) | $ (108,162) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||
Depreciation and amortization | 30,858 | 39,207 | 62,919 | 68,605 |
Stock-based expense | 25,888 | 95,456 | 55,810 | 229,307 |
Accretion and amortization on marketable securities | 4,729 | 4,293 | 9,585 | 7,129 |
Net gain on termination of lease and purchase of building | -- | (19,886) | -- | (19,886) |
(Gain) loss from sales of investments, assets and other, net | 3,725 | (410) | 4,932 | (398) |
Tax benefits from stock based awards | (12,274) | 5,210 | (10,617) | 5,210 |
Excess tax benefits from stock-based awards | 12,274 | (5,210) | 10,617 | (5,210) |
Deferred income taxes | (7,909) | (6,254) | (16,500) | (7,540) |
Changes in operating assets and liabilities: | ||||
Accounts receivable, net | 19,100 | 30,371 | 32,909 | 24,754 |
Income tax receivable | (185) | (73) | (228) | 14,169 |
Other assets | 3,679 | (4,727) | 4,527 | (9,545) |
Accounts payable | (4,114) | (9,106) | (1,644) | (9,389) |
Deferred revenue | (43,157) | (30,905) | (76,931) | (22,713) |
Other liabilities | (17,454) | (8,131) | (37,907) | (20,490) |
Net cash provided by operating activities | (645) | 67,024 | 25,800 | 145,841 |
Investing activities | ||||
Purchase of marketable securities | (344,998) | (273,374) | (623,717) | (1,238,115) |
Sales of marketable securities | 47,508 | 63,351 | 146,123 | 80,098 |
Maturities of marketable securities | 220,093 | 157,950 | 415,161 | 274,076 |
Acquisition of property and equipment | (1,366) | (42,921) | (6,290) | (77,915) |
Purchase of building | -- | (233,700) | -- | (233,700) |
Business acquisitions, net of cash acquired | (18,054) | (10,600) | (18,054) | (192,764) |
Restricted cash | 60 | 231,488 | 227 | 6,536 |
Other investing activities, net | 142 | 921 | (661) | (2,256) |
Net cash used in investing activities | (96,615) | (106,885) | (87,211) | (1,384,040) |
Financing activities | ||||
Repurchase of common stock | -- | -- | (2,432) | -- |
Proceeds from debt, net of issuance costs | -- | 99,780 | -- | 99,780 |
Taxes paid related to net share settlement of equity awards | (323) | (1,590) | (667) | (25,090) |
Proceeds from exercise of stock options and warrants | 1,225 | 11,496 | 3,618 | 12,029 |
Proceeds from employee stock purchase plan | -- | -- | 3,506 | -- |
Excess tax benefits from stock-based awards | (12,274) | 5,210 | (10,617) | 5,210 |
Repayment of debt | (100,000) | -- | (100,000) | -- |
Net cash provided by financing activities | (111,372) | 114,896 | (106,592) | 91,929 |
Effect of exchange rate changes on cash and cash equivalents | (287) | (129) | (614) | (93) |
Net increase (decrease) in cash and cash equivalents | (208,919) | 74,906 | (168,617) | (1,146,363) |
Cash and cash equivalents, beginning of period | 426,251 | 361,074 | 385,949 | 1,582,343 |
Cash and cash equivalents, end of period | $ 217,332 | $ 435,980 | $ 217,332 | $ 435,980 |
ZYNGA INC. | ||||
RECONCILIATION OF GAAP TO NON-GAAP RESULTS | ||||
(In thousands, except per share data, unaudited) | ||||
Three months ended | Six months ended | |||
June 30, | June 30, | |||
2013 | 2012 | 2013 | 2012 | |
Reconciliation of Revenue to Bookings | ||||
Revenue | $ 230,735 | $ 332,493 | $ 494,324 | $ 653,465 |
Change in deferred revenue | (43,157) | (30,905) | (76,931) | (22,713) |
Bookings | $ 187,578 | $ 301,588 | $ 417,393 | $ 630,752 |
Reconciliation of Net Loss to Adjusted EBITDA | ||||
Net loss | $ (15,805) | $ (22,811) | $ (11,672) | $ (108,162) |
(Provision for) benefit from income taxes | (17,989) | 6,696 | (26,755) | 6,618 |
Other income (expense), net | 4,531 | (21,250) | 5,394 | (20,108) |
Interest income | (1,105) | (1,084) | (2,268) | (2,375) |
Restructuring expense | 25,089 | -- | 30,548 | -- |
Legal settlements | -- | -- | -- | 889 |
Depreciation and amortization | 30,858 | 39,207 | 62,919 | 68,605 |
Stock-based expense | 25,888 | 95,456 | 55,810 | 229,307 |
Change in deferred revenue | (43,157) | (30,905) | (76,931) | (22,713) |
Adjusted EBITDA | $ 8,310 | $ 65,309 | $ 37,045 | $ 152,061 |
Reconciliation of Net Loss to Non-GAAP Net Income (Loss) | ||||
Net loss | $ (15,805) | $ (22,811) | $ (11,672) | $ (108,162) |
Stock-based expense | 25,888 | 95,456 | 55,810 | 229,307 |
Amortization of intangible assets from acquisitions | 2,912 | 14,537 | 6,570 | 21,488 |
Change in deferred revenue | (43,157) | (30,905) | (76,931) | (22,713) |
Restructuring expense | 25,089 | -- | 30,548 | -- |
Legal settlements | -- | -- | -- | 889 |
Net gain on termination of lease and purchase of building | -- | (19,886) | -- | (19,886) |
Tax effect of non-GAAP adjustments to net loss | (1,056) | (31,836) | (1,349) | (49,319) |
Non-GAAP net income (loss) | $ (6,129) | $ 4,555 | $ 2,976 | $ 51,604 |
Reconciliation of GAAP Diluted Shares to Non-GAAP Diluted Shares | ||||
GAAP diluted shares | 793,541 | 730,510 | 786,784 | 718,554 |
Other dilutive equity awards(1) | -- | 101,368 | 45,496 | 119,329 |
Non-GAAP diluted shares | 793,541 | 831,878 | 832,280 | 837,883 |
Non-GAAP earnings per share | $ (0.01) | $ 0.01 | $ 0.00 | $ 0.06 |
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | ||||
Net cash provided by (used in) operating activities | $ (645) | $ 67,024 | $ 25,800 | $ 145,841 |
Acquisition of property and equipment | (1,366) | (42,921) | (6,290) | (77,915) |
Purchase of building | -- | (233,700) | -- | (233,700) |
Excess tax benefits from stock-based awards | (12,274) | 5,210 | (10,617) | 5,210 |
Free cash flow | $ (14,285) | $ (204,387) | $ 8,893 | $ (160,564) |
Reconciliation of GAAP to Non-GAAP (Provision for) Benefit from Income Taxes | ||||
GAAP (provision for) benefit from income taxes | $ 17,989 | $ (6,696) | $ 26,755 | $ (6,618) |
Net gain on termination of lease and purchase of building | -- | 10,679 | -- | 10,679 |
Stock-based expense | (2,720) | (51,314) | (4,389) | (66,926) |
Amortization of intangible assets from acquisitions | (313) | (7,814) | (517) | (8,625) |
Change in deferred revenue | 4,075 | 16,613 | 5,960 | 15,658 |
Restructuring expense | (2,098) | -- | (2,403) | -- |
Legal settlements | -- | -- | -- | (105) |
Non-GAAP (provision for) benefit from income taxes | $ 16,933 | $ (38,532) | $ 25,406 | $ (55,937) |
(1) Gives effect to all dilutive awards based on the treasury stock method. |
ZYNGA INC. | |
RECONCILIATION OF GAAP TO NON-GAAP THIRD QUARTER 2013 OUTLOOK | |
(In thousands, except per share data, unaudited) | |
Third Quarter 2013 | |
Reconciliation of Revenue to Bookings | |
Revenue range | $ 175,000 – 200,000 |
Change in deferred revenue | (50,000) |
Bookings range | $ 125,000 – 150,000 |
Reconciliation of Net Loss to Adjusted EBITDA | |
Net loss range | $ (43,000) – (14,000) |
Benefit from income taxes | 1,000 – 2,000 |
Other expense, net | 1,000 |
Interest income | (1,000) |
Restructuring expense | 500 |
Depreciation and amortization | 30,000 |
Stock-based expense range | 31,500 |
Change in deferred revenue | (50,000) |
Adjusted EBITDA range | $ (30,000) – 0 |
Reconciliation of Net Loss to Non-GAAP Net Loss | |
Net loss range | $ (43,000) – (14,000) |
Stock-based expense range | 31,500 |
Amortization of intangible assets from acquisitions | 3,000 |
Change in deferred revenue | (50,000) |
Restructuring expense | 500 |
Tax effect of non-GAAP adjustments to net loss | (14,000) – (9,000) |
Non-GAAP net loss range | $ (72,000) – (38,000) |
803,000 – 813,000 | |
GAAP and Non-GAAP diluted shares | |
Net loss per share range | $ (0.05) – (0.02) |
Non-GAAP net loss per share range | $ (0.09) – (0.05) |