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"The biggest highlight of the quarter was seeing our team deliver a successful sequel in FarmVille2, a next generation social game that offers cutting edge 3-D experiences loved by millions of FarmVille fans," said
Financial Highlights (in thousands, except per share data)
| Quarter ended | Year ended | |||
| GAAP Results | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2012 | Dec 31, 2011 |
| Revenue | $ 311,165 | $ 311,237 | $ 1,281,267 | $ 1,140,100 |
| Net loss | $ (48,561) | $ (435,005) | $ (209,448) | $ (404,316) |
| Diluted net loss per share | $ (0.06) | $ (1.22) | $ (0.28) | $ (1.40) |
| Non-GAAP Results | ||||
| Bookings | $ 261,269 | $ 306,507 | $ 1,147,627 | $ 1,155,509 |
| Adjusted EBITDA | $ 45,018 | $ 67,801 | $ 213,233 | $ 303,274 |
| Non-GAAP net income | $ 6,935 | $ 37,153 | $ 58,178 | $ 182,483 |
| Non-GAAP earnings per share | $ 0.01 | $ 0.05 | $ 0.07 | $ 0.24 |
Fourth Quarter 2012 Business Highlights
"Our team executed well in the fourth quarter and made important progress in building sustainable new revenue streams and further aligning our company around our best growth opportunities," said
2012 Annual Financial Summary
Fourth Quarter 2012 Financial Summary
Outlook
For full year 2013:
Conference Call Details:
About
The
Forward-Looking Statements
This press release contains forward-looking statements relating to, among other things, our outlook for first 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, stock-based expense and taxes; our outlook for full year 2013 capital expenditures, targeted adjusted EBITDA margin and taxes; our estimated pre-tax savings from our restructuring plans; 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, 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 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
DAU, MAU, MUU, MUP and ABPU figures presented in this press release represent the average for each period presented. The figures in this press release above represent the quarterly average of the three months within each quarter presented.
MUPs represents 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.
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 first 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.
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| CONSOLIDATED BALANCE SHEETS | ||
| (In thousands, unaudited) | ||
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| 2012 | 2011 | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 385,949 |
|
| Marketable securities | 898,821 | 225,165 |
| Accounts receivable | 106,327 | 135,633 |
| Income tax receivable | 5,607 | 18,583 |
| Deferred tax assets | 30,122 | 23,515 |
| Restricted cash | 28,152 | 3,846 |
| Other current assets | 29,392 | 34,824 |
| Total current assets | 1,484,370 | 2,023,909 |
| Long-term marketable securities | 367,543 | 110,098 |
| Goodwill | 208,955 | 91,765 |
| Other intangible assets, net | 33,663 | 32,112 |
| Property and equipment, net | 466,074 | 246,740 |
| Restricted cash | -- | 4,082 |
| Other long-term assets | 15,715 | 7,940 |
| Total assets |
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| Liabilities and stockholders' equity | ||
| Current liabilities: | ||
| Accounts payable |
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|
| Other current liabilities | 146,883 | 167,271 |
| Deferred revenue | 338,964 | 457,394 |
| Total current liabilities | 509,145 | 668,685 |
| Long-term debt | 100,000 | -- |
| Deferred revenue | 8,041 | 23,251 |
| Deferred tax liabilities | 24,584 | 13,950 |
| Other non-current liabilities | 109,047 | 61,221 |
| Total liabilities | 750,817 | 767,107 |
| Stockholders' equity: | ||
| Common stock and additional paid-in capital | 2,725,605 | 2,426,168 |
| Treasury stock | (295,113) | (282,897) |
| Accumulated other comprehensive income (loss) | (1,447) | 362 |
| Accumulated deficit | (603,542) | (394,094) |
| Total stockholders' equity | 1,825,503 | 1,749,539 |
| Total liabilities and stockholders' equity |
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| ZYNGA INC. | ||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In thousands, except per share data, unaudited) | ||||
| Three Months Ended | Twelve Months Ended | |||
| December 31, | December 31, | |||
| 2012 | 2011 | 2012 | 2011 | |
| Revenue: | ||||
| Online game | $ 274,337 | $ 283,910 | $ 1,144,252 | $ 1,065,648 |
| Advertising | 36,828 | 27,327 | 137,015 | 74,452 |
| Total revenue | 311,165 | 311,237 | 1,281,267 | 1,140,100 |
| Costs and expenses: | ||||
| Cost of revenue | 77,056 | 104,135 | 352,169 | 330,043 |
| Research and development | 131,847 | 444,702 | 645,648 | 727,018 |
| Sales and marketing | 32,446 | 112,228 | 181,924 | 234,199 |
| General and administrative | 32,206 | 136,733 | 189,004 | 254,456 |
| Impairment of intangible assets | -- | -- | 95,493 | -- |
| Total costs and expenses | 273,555 | 797,798 | 1,464,238 | 1,545,716 |
| Income (loss) from operations | 37,610 | (486,561) | (182,971) | (405,616) |
| Interest income | 1,230 | 457 | 4,749 | 1,680 |
| Other income (expense), net | (1,111) | (1,933) | 18,647 | (2,206) |
| Income (loss) before income taxes | 37,729 | (488,037) | (159,575) | (406,142) |
| (Provision for) benefit from income taxes | (86,290) | 53,032 | (49,873) | 1,826 |
| Net loss | $ (48,561) | $ (435,005) | $ (209,448) | $ (404,316) |
|
Net loss per share: |
||||
| Basic and diluted | $ (0.06) | $ (1.22) | $ (0.28) | $ (1.40) |
| Weighted average common shares used to compute net loss per share: | ||||
| Basic and diluted | 771,533 | 356,305 | 741,177 | 288,599 |
| Stock-based expense included in the above line items: | ||||
| Cost of revenue | $ 1,018 | $ 16,058 | $ 12,116 | $ 17,660 |
| Research and development | 15,395 | 334,227 | 200,640 | 374,920 |
| Sales and marketing | 3,528 | 71,225 | 24,684 | 81,326 |
| General and administrative | (5,079) | 108,461 | 44,546 | 126,306 |
| Total stock-based expense |
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$ 529,971 | $ 281,986 | $ 600,212 |
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| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
| (In thousands, unaudited) | ||||
| Three Months Ended | Twelve Months Ended | |||
| December 31, | December 31, | |||
| 2012 | 2011 | 2012 | 2011 | |
| Operating activities | ||||
| Net loss | $ (48,561) | $ (435,005) | $ (209,448) | $ (404,316) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||
| Depreciation and amortization | 33,430 | 31,266 | 141,479 | 95,414 |
| Stock-based expense | 14,862 | 529,971 | 281,986 | 600,212 |
| Accretion and amortization on marketable securities | 5,165 | 646 | 17,223 | 2,873 |
| Net gain on termination of lease and purchase of building | -- | -- | (19,886) | -- |
| (Gain) loss from sales of investments, assets and other, net | 724 | 830 | 563 | (550) |
| Tax benefits from stock-based awards | 15,972 | -- | 21,652 | -- |
| Excess tax benefits from stock-based awards | (15,972) | 11,720 | (21,652) | 13,750 |
| Deferred income taxes | 14,550 | 4,367 | (43,841) | 4,367 |
| Impairment of intangible assets | -- | -- | 95,493 | -- |
| Changes in operating assets and liabilities: | ||||
| Accounts receivable, net | (726) | (16,156) | 34,338 | (55,432) |
| Income tax receivable | 1,157 | (14,626) | 12,976 | 17,994 |
| Other assets | 10,988 | 7,555 | 19,908 | (14,559) |
| Accounts payable | (14,272) | (8,466) | (21,312) | 10,373 |
| Deferred revenue | (49,896) | (4,730) | (133,640) | 15,409 |
| Other liabilities | 52,358 | 56,587 | 19,928 | 103,637 |
| Net cash provided by operating activities | 19,779 | 163,959 | 195,767 | 389,172 |
| Investing activities | ||||
| Purchase of marketable securities | (298,815) | (137,408) | (1,826,137) | (649,972) |
| Sales of marketable securities | 73,711 | 6,586 | 223,828 | 19,206 |
| Maturities of marketable securities | 206,218 | 116,245 | 647,916 | 841,560 |
| Acquisition of property and equipment | (6,250) | (50,355) | (98,054) | (238,091) |
| Purchase of building | -- | -- | (233,700) | -- |
| Business acquisitions, net of cash acquired | -- | (4,823) | (205,510) | (42,774) |
| Equity method investment | (10,000) | -- | (10,000) | -- |
| Restricted cash | 443 | 16,878 | 6,979 | 9,194 |
| Other investing activities, net | -- | 1 | (2,256) | (2,578) |
| Net cash used in investing activities | (34,693) | (52,876) | (1,496,934) | (63,455) |
| Financing activities | ||||
| Proceeds from initial public offering, net of offering costs | -- | 961,402 | -- | 961,402 |
| Repurchase of common stock | (11,756) | -- | (11,756) | (283,770) |
| Proceeds from debt, net of issuance costs | -- | -- | 99,780 | -- |
| Taxes paid related to net share settlement of equity awards | (238) | (83,232) | (26,307) | (83,232) |
| Proceeds from exercise of stock options and warrants | 2,670 | 663 | 16,960 | 2,894 |
| Proceeds from employee stock purchase plan | -- | -- | 4,489 | -- |
| Excess tax benefits from stock-based awards | 15,972 | (11,720) | 21,652 | (13,750) |
| Net proceeds from issuance of preferred stock | -- | -- | -- | 485,300 |
| Net cash provided by financing activities | 6,648 | 867,113 | 104,818 | 1,068,844 |
| Effect of exchange rate changes on cash and cash equivalents | (144) | (68) | (45) | (49) |
| Net increase (decrease) in cash and cash equivalents | (8,410) | 978,128 | (1,196,394) | 1,394,512 |
| Cash and cash equivalents, beginning of period | 394,359 | 604,215 | 1,582,343 | 187,831 |
| Cash and cash equivalents, end of period |
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| RECONCILIATION OF GAAP TO NON-GAAP RESULTS | ||||
| (In thousands, except per share data, unaudited) | ||||
| Three months ended | Twelve months ended | |||
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| 2012 | 2011 | 2012 | 2011 | |
| Reconciliation of Revenue to Bookings | ||||
| Revenue |
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| Change in deferred revenue | (49,896) | (4,730) | (133,640) | 15,409 |
| Bookings |
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| Reconciliation of Net Loss to Adjusted EBITDA | ||||
| Net loss | $ (48,561) | $ (435,005) | $ (209,448) | $ (404,316) |
| (Provision for) benefit from income taxes | 86,290 | (53,032) | 49,873 | (1,826) |
| Other income (expense), net | 1,111 | 1,933 | (18,647) | 2,206 |
| Interest income | (1,230) | (457) | (4,749) | (1,680) |
| Restructuring expense | 7,862 | -- | 7,862 | -- |
| Legal settlements | 1,150 | (2,145) | 3,024 | (2,145) |
| Depreciation and amortization | 33,430 | 31,266 | 141,479 | 95,414 |
| Impairment of intangible assets | -- | -- | 95,493 | -- |
| Stock-based expense | 14,862 | 529,971 | 281,986 | 600,212 |
| Change in deferred revenue | (49,896) | (4,730) | (133,640) | 15,409 |
| Adjusted EBITDA |
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| Reconciliation of Net Loss to Non-GAAP Net Income | ||||
| Net loss | $ (48,561) | $ (435,005) | $ (209,448) | $ (404,316) |
| Impairment of intangible assets | -- | -- | 95,493 | -- |
| Stock-based expense | 14,862 | 529,971 | 281,986 | 600,212 |
| Amortization of intangible assets from acquisitions | 4,845 | 7,151 | 39,843 | 26,282 |
| Change in deferred revenue | (49,896) | (4,730) | (133,640) | 15,409 |
| Restructuring expense | 7,862 | -- | 7,862 | -- |
| Legal settlements | 1,150 | (2,145) | 3,024 | (2,145) |
| Gain on termination of lease and purchase of building | -- | -- | (19,886) | -- |
| Tax effect of non-GAAP adjustments to net loss | 76,673 | (58,089) | (7,056) | (52,959) |
| Non-GAAP net income |
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| Reconciliation of GAAP Diluted Shares to Non-GAAP | ||||
| Diluted Shares | ||||
| GAAP diluted shares | 771,533 | 356,305 | 741,177 | 288,599 |
| Assumed preferred stock conversion(1) | -- | 252,428 | -- | 288,833 |
| Other dilutive equity awards(2) | 49,964 | 173,374 | 88,155 | 183,034 |
| Non-GAAP diluted shares | 821,497 | 782,107 | 829,332 | 760,466 |
| Non-GAAP earnings per share |
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| Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | ||||
| Net cash provided by operating activities |
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| Acquisition of property and equipment | (6,250) | (50,355) | (98,054) | (238,091) |
| Purchase of building | -- | -- | (233,700) | -- |
| Excess tax benefits from stock-based awards | 15,972 | (11,720) | 21,652 | (13,750) |
| Free cash flow | $ 29,501 | $ 101,884 | $ (114,335) | $ 137,331 |
| (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. | ||||
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| RECONCILIATION OF GAAP TO NON-GAAP FIRST QUARTER 2013 OUTLOOK | |
| (In thousands, except per share data, unaudited) | |
| First Quarter 2013 | |
| Reconciliation of Revenue to Bookings | |
| Revenue range |
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| Change in deferred revenue | (55,000) |
| Bookings range |
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| Reconciliation of Net Loss to Adjusted EBITDA | |
| Net loss range |
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| Benefit from income taxes | (3,000) |
| Other expense, net | 1,000 |
| Interest income | (1,000) |
| Restructuring expense | 2,000 |
| Depreciation and amortization | 33,000 |
| Stock-based expense range | 45,000 — 35,000 |
| Change in deferred revenue | (55,000) |
| Adjusted EBITDA range |
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| Reconciliation of Net Loss to Non-GAAP Net | |
| Loss | |
| Net loss range |
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| Stock-based expense range | 45,000 — 35,000 |
| Amortization of intangible assets from acquisitions | 3,500 |
| Change in deferred revenue | (55,000) |
| Restructuring expense | 2,000 |
| Tax effect of non-GAAP adjustments to net loss | (4,000) |
| Non-GAAP net loss range |
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| GAAP and Non-GAAP diluted shares | 780,000 — 790,000 |
| Net loss per share range |
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| Non-GAAP net loss per share range |
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CONTACT: Investors -Krista Bessinger 415-339-5266 investors@zynga.com Press -Stephanie Hess 415-503-0303 press@zynga.com
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