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"The company achieved some significant milestones in the quarter including the launch of Bubble Safari, which is now the number one arcade game on Facebook, and the launch of The Ville, now the number two game behind Zynga Poker. Our advertising business continued to show strong growth with revenue up 170% year-over-year. Our games reached record audiences, achieving over 300 million monthly active users. We grew our mobile footprint five-fold in the year to 33 million daily active users making
Financial Highlights (in thousands, except per share data)
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Business Highlights
Second Quarter 2012 Financial Summary
2012 Outlook
We are lowering our outlook to reflect delays in launching new games, a faster decline in existing web games due in part to a more challenging environment on the Facebook web platform, and reduced expectations for Draw Something. As a result, our updated outlook for 2012 is as follows:
Conference Call Details:
About
The
Forward-Looking Statements
This press release contains forward-looking statements relating to, among other things, our outlook for full year 2012 bookings, adjusted EBITDA, stock-based expense, capital expenditures, effective tax rate for non-GAAP net income, non-GAAP weighted-average diluted shares, and non-GAAP EPS; our launch of new games, features and technologies; building and expanding the
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 registration statement on Form S-1, as amended, filed with the Securities and Exchange Commission on March 23, 2012 and our Quarterly Report on Form 10-Q for the three months ended
DAU, MAU, MUU, MUP and ABPU figures presented in this press release represent the average for each period presented. The figures presented in this press release represent the quarterly average of the three months within each quarter presented.
MUPs represent the aggregate number of unique players who made a payment at least once during the applicable month through a payment method for which we can quantify the number of unique payers. MUPs do not include payers who use certain payment methods for which we cannot quantify the number of unique payers. If a player made a payment in our games on two separate platforms (e.g. Facebook and Google+) in a month, the player would be counted as two unique payers in that month. Average MUP data in this press release includes MUPs from our top mobile games; certain smaller titles do not provide unique payer data.
Non-GAAP Financial Measures:
We have provided in this release non-GAAP financial information including bookings, adjusted EBITDA, free cash flow, non-GAAP net income and non-GAAP EPS, 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 non-GAAP financial measures to the most directly comparable GAAP financial measures. However, we have not provided reconciliation of bookings outlook to revenue, adjusted EBITDA outlook to net income (loss), non-GAAP effective tax rate outlook to GAAP effective tax rate or non-GAAP EPS outlook to GAAP EPS because certain reconciling items necessary to accurately project revenue (including the projected mix of virtual goods sold in our games, and the projected estimated average lives of durable virtual goods for our games) are not in our control and cannot be reasonably projected due to variability from period to period caused by changes in player behavior and other factors. As revenue and/or net income for the applicable future period is a necessary input to determine all of these comparable GAAP figures, we are not able to provide these reconciliations.
Some limitations of bookings, adjusted EBITDA, non-GAAP net income, free cash flow and non-GAAP EPS are:
Because of these limitations, you should consider bookings, adjusted EBITDA, non-GAAP net income, free cash flow and non-GAAP EPS along with other financial performance measures, including revenue, net income and our financial results presented in accordance with GAAP. See the GAAP to non-GAAP reconciliations below for further details.
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| CONSOLIDATED BALANCE SHEETS | ||
| (In thousands, unaudited) | ||
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| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 435,980 | $ 1,582,343 |
| Marketable securities | 780,964 | 225,165 |
| Accounts receivable | 115,910 | 135,633 |
| Income tax receivable | 6,503 | 18,583 |
| Deferred tax assets | 29,608 | 23,515 |
| Restricted cash | 28,593 | 3,846 |
| Other current assets | 52,714 | 34,824 |
| Total current assets | 1,450,272 | 2,023,909 |
| Long-term marketable securities | 426,243 | 110,098 |
| Goodwill | 202,010 | 91,765 |
| Other intangible assets, net | 139,135 | 32,112 |
| Property and equipment, net | 499,426 | 246,740 |
| Restricted cash | -- | 4,082 |
| Other long-term assets | 7,657 | 7,940 |
| Total assets | $ 2,724,743 | $ 2,516,646 |
| Current liabilities: | ||
| Accounts payable | $ 35,218 | $ 44,020 |
| Other current liabilities | 164,565 | 167,271 |
| Current deferred revenue | 447,790 | 457,394 |
| Total current liabilities | 647,573 | 668,685 |
| Long-term debt | 100,000 | -- |
| Deferred revenue | 10,142 | 23,251 |
| Deferred tax liabilities | 55,162 | 13,950 |
| Other non-current liabilities | 48,866 | 61,221 |
| Total liabilities | 861,743 | 767,107 |
| Stockholders' equity: | ||
| Common stock and additional paid in capital | 2,648,400 | 2,426,168 |
| Treasury stock | (283,258) | (282,897) |
| Accumulated other comprehensive income | 114 | 362 |
| Accumulated deficit | (502,256) | (394,094) |
| Total stockholders' equity | 1,863,000 | 1,749,539 |
| Total liabilities and stockholders' equity | $ 2,724,743 | $ 2,516,646 |
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| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In thousands, except per share data, unaudited) | ||||
| Three Months Ended | Six Months Ended | |||
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| 2012 | 2011 | 2012 | 2011 | |
| Revenue: | ||||
| Online game | $ 291,548 | $ 263,974 | $ 584,328 | $ 493,872 |
| Advertising | 40,945 | 15,170 | 69,137 | 28,162 |
| Total revenue | 332,493 | 279,144 | 653,465 | 522,034 |
| Costs and expenses: | ||||
| Cost of revenue | 94,841 | 78,076 | 184,963 | 145,738 |
| Research and development | 171,316 | 95,747 | 358,192 | 167,507 |
| Sales and marketing | 56,055 | 38,098 | 112,892 | 78,254 |
| General and administrative | 48,730 | 54,218 | 121,445 | 81,328 |
| Total costs and expenses | 370,942 | 266,139 | 777,492 | 472,827 |
| Income (loss) from operations | (38,449) | 13,005 | (124,027) | 49,207 |
| Interest income | 1,084 | 443 | 2,375 | 961 |
| Other income (expense), net | 21,250 | 200 | 20,108 | (536) |
| Income (loss) before income taxes | (16,115) | 13,648 | (101,544) | 49,632 |
| Provision for income taxes | (6,696) | (12,257) | (6,618) | (31,483) |
| Net income (loss) | $ (22,811) | $ 1,391 | $ (108,162) | $ 18,149 |
| Net income attributable to participating securities | -- | 1,391 | -- | 18,149 |
| Net income (loss) attributable to common stockholders | $ (22,811) | $ -- | $ (108,162) | $ -- |
| Net income (loss) per share attributable to common stockholders: | ||||
| Basic | $ (0.03) | $ 0.00 | $ (0.15) | $ 0.00 |
| Diluted (1) | $ (0.03) | $ 0.00 | $ (0.15) | $ 0.00 |
| Weighted-average common shares used to compute net income (loss) | ||||
| per share attributable to common stockholders: | ||||
| Basic | 730,510 | 262,661 | 718,554 | 260,414 |
| Diluted | 730,510 | 262,661 | 718,554 | 260,414 |
| Stock-based expense included in the above line items: | ||||
| Cost of revenue |
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$ 536 | $ 10,018 | $ 1,087 |
| Research and development | 65,246 | 14,608 | 143,392 | 23,941 |
| Sales and marketing | 12,218 | 5,331 | 25,133 | 7,771 |
| General and administrative | 14,792 | 12,636 | 50,764 | 14,818 |
| Total stock-based expense |
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| (1) For periods when we have net income, diluted earnings per share results cannot be recalculated using the numbers above due to reallocation of net income as required by the two-class method. Refer to the Net income (loss) per share footnote in the Company's filings for further details. | ||||
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| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
| (In thousands, unaudited) | ||||
| Three Months Ended | Six Months Ended | |||
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| 2012 | 2011 | 2012 | 2011 | |
| Operating activities | ||||
| Net income (loss) | $ (22,811) | $ 1,391 | $ (108,162) |
$ |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||
| Depreciation and amortization | 39,207 | 23,365 | 68,605 | 41,212 |
| Stock-based expense | 95,456 | 33,111 | 229,307 | 47,617 |
| Gains from sales of investments, assets and other, net | (410) | -- | (398) | -- |
| Gain on termination of lease and purchase of building, net | (19,886) | -- | (19,886) | -- |
| Tax benefits from stock-based awards | 5,210 | -- | 5,210 | -- |
| Excess tax benefits from stock-based awards | (5,210) | -- | (5,210) | -- |
| Accretion and amortization on marketable securities | 4,293 | 658 | 7,129 | 1,526 |
| Deferred income taxes | (6,254) | -- | (7,540) | -- |
| Changes in operating assets and liabilities: | ||||
| Accounts receivable, net | 30,371 | 34 | 24,754 | (21,757) |
| Income tax receivable | (73) | 6,011 | 14,169 | 20,672 |
| Other assets | (4,727) | (34,441) | (9,545) | (30,095) |
| Accounts payable | (9,106) | 21,927 | (9,389) | 27,001 |
| Deferred revenue | (30,905) | (4,401) | (22,713) | 39,307 |
| Other liabilities | (8,131) | 26,406 | (20,490) | 34,086 |
| Net cash provided by operating activities | 67,024 | 74,061 | 145,841 | 177,718 |
| Investing activities | ||||
| Purchases of marketable securities | (273,374) | (218,413) | (1,238,115) | (490,831) |
| Sales of marketable securities | 63,351 | 635 | 80,098 | 2,136 |
| Maturities of marketable securities | 157,950 | 322,012 | 274,076 | 607,711 |
| Purchase of corporate headquarters building | (233,700) | -- | (233,700) | -- |
| Acquisition of property and equipment | (42,921) | (74,493) | (77,915) | (124,715) |
| Acquisition of purchased technology and other intangible assets | (54) | (2,069) | (3,193) | (3,709) |
| Business acquisitions, net of cash acquired | (10,600) | (8,110) | (192,764) | (18,548) |
| Changes in restricted cash | 231,488 | 537 | 6,536 | (7,483) |
| Proceeds from sales of investments, assets and other, net | 975 | (583) | 937 | (583) |
| Net cash provided by (used in) investing activities | (106,885) | 19,516 | (1,384,040) | (36,022) |
| Financing activities | ||||
| Proceeds from issuance of debt, net of issuance costs | 99,780 | -- | 99,780 | -- |
| Taxes paid related to net share settlement of ZSUs | (1,590) | -- | (25,090) | -- |
| Repurchases of common stock | -- | (20,000) | -- | (281,270) |
| Exercise of stock options and warrants | 11,496 | 524 | 12,029 | 1,729 |
| Excess tax benefits from stock-based awards | 5,210 | -- | 5,210 | -- |
| Net proceeds from issuance of preferred stock | -- | (14) | -- | 485,300 |
| Net cash provided by (used in) financing activities | 114,896 | (19,490) | 91,929 | 205,759 |
| Effect of exchange rate changes on cash and cash equivalents | (129) | 6 | (93) | 27 |
| Net increase (decrease) in cash and cash equivalents | 74,906 | 74,093 | (1,146,363) | 347,482 |
| Cash and cash equivalents, beginning of period | 361,074 | 461,220 | 1,582,343 | 187,831 |
| Cash and cash equivalents, end of period |
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$ 435,980 |
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| RECONCILIATION OF GAAP TO NON-GAAP RESULTS | ||||
| (In thousands, except per share data, unaudited) | ||||
| Three months ended | Six months ended | |||
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| 2012 | 2011 | 2012 | 2011 | |
| Reconciliation of Revenue to Bookings | ||||
| Revenue |
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| Change in deferred revenue | (30,905) | (4,401) | (22,713) | 39,307 |
| Bookings |
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| Reconciliation of Net income (loss) to Adjusted EBITDA | ||||
| Net income (loss) | $ (22,811) |
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$ (108,162) |
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| Provision for income taxes | 6,696 | 12,257 | 6,618 | 31,483 |
| Other income (expense), net | (21,250) | (200) | (20,108) | 536 |
| Interest income | (1,084) | (443) | (2,375) | (961) |
| Legal settlement | -- | -- | 889 | -- |
| Depreciation and amortization | 39,207 | 23,365 | 68,605 | 41,212 |
| Stock-based expense | 95,456 | 33,111 | 229,307 | 47,617 |
| Change in deferred revenue | (30,905) | (4,401) | (22,713) | 39,307 |
| Adjusted EBITDA |
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| Reconciliation of Net income (loss) to Non-GAAP net income | ||||
| Net income (loss) | $ (22,811) |
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$ (108,162) |
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| Stock-based expense | 95,456 | 33,111 | 229,307 | 47,617 |
| Amortization of intangible assets from acquisitions | 14,537 | 6,375 | 21,488 | 12,258 |
| Change in deferred revenue | (30,905) | (4,401) | (22,713) | 39,307 |
| Legal settlements | -- | -- | 889 | -- |
| Gain on termination of lease and purchase of building | (19,886) | -- | (19,886) | -- |
| Tax effect of non-GAAP adjustments to net income (loss) | (31,836) | 1,690 | (49,319) | (3,750) |
| Non-GAAP net income |
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| Reconciliation of GAAP diluted shares to Non-GAAP | ||||
| diluted shares | ||||
| GAAP diluted shares | 730,510 | 262,661 | 718,554 | 260,414 |
| Add back: assumed preferred stock conversion (1) | -- | 303,566 | -- | 299,019 |
| Add back: other dilutive equity awards (2) | 101,368 | 162,356 | 119,329 | 158,472 |
| Non-GAAP diluted shares | 831,878 | 728,583 | 837,883 | 717,905 |
| Non-GAAP net income per share: |
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| Reconciliation of cash provided by operating activities | ||||
| to free cash flow | ||||
| Net cash provided by operating activities |
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| Purchase of corporate headquarters building | (233,700) | -- | (233,700) | -- |
| Acquisition of property and equipment | (42,921) | (74,493) | (77,915) | (124,715) |
| Excess tax benefits from stock-based awards | 5,210 | -- | 5,210 | -- |
| Free cash flow | $ (204,387) |
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$ (160,564) |
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| (1) Gives effect to the conversion of convertible preferred stock into common stock as though the conversion had occurred at the beginning of the period. | ||||
| (2) Gives effect to all dilutive awards based on the treasury stock method. | ||||
CONTACT: Investors -Krista Bessinger 415-339-5266 investors@zynga.com Press -Stephanie Hess 415-503-0303 press@zynga.com
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