Zynga Acquires Leading Global Mobile Game Developer Gram Games; Team Behind Hit Titles Merge Dragons! and 1010!
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Founded in 2012, Gram Games is an innovative mobile game developer with
“We’ve been impressed by the unique culture that Gram Games has created,
as well as their innovative approach to game making,” said Frank Gibeau,
“We are proud to join
“Gram Games helped define the hyper-Casual genre with games like 1010! and Six!, and we continued to grow our footprint with Merge Dragons!,” said Kaan Karamanci, Co-founder of Gram Games. “We look forward to marrying our unique approach to game making with Zynga’s live services expertise to grow our games and continue to delight millions of players around the world.”
The acquisition of Gram Games aligns with Zynga’s strategic priorities
to grow its live services, create new forever franchises and build out
its capabilities on emerging platforms. Looking ahead,
Q2 Guidance Update
Following the close of this acquisition on
Some additional context on Zynga’s updated guidance is as follows:
Zyngaremains on track to deliver results, excluding the contribution from Gram Games, in line with its original Q2 guidance as communicated during Zynga’s Q1 2018 earnings call.
For GAAP purposes,
Zyngadoes not expect any significant revenue impact from Gram Games, as the expected bookings generated in Q2 of $10 millionwill be accounted for as an increase in deferred revenue and recognized as revenue in future quarters. Zyngaexpects a reduction to its Adjusted EBITDA of $8 million, as a result of the $10 millionincrease in deferred revenue partially offset by $2 millionof expected operating contribution.
Excluding the impact of deferred revenue,
Zyngaexpects Gram Games to deliver margins in Q2 that meet their near-term margin goals.
A summary walk of Zynga’s updated Q2 guidance is as follows:
|(in thousands, except per share data)||Guidance||
|Net increase in deferred revenue||$||(10,000||)||$||(10,000||)||$||(20,000||)|
|Net (loss) income||$||1,000||$||(16,000||)||$||(15,000||)|
|Diluted share count(1)||900,000||(25,000||)||875,000|
|Diluted net (loss) income per share||$||0.00||$||(0.02||)||$||(0.02||)|
|Management Reporting = (A) - (B)|
The decrease in diluted share count is due to our net earnings shifting to a loss position. This results in certain anti-dilutive shares being excluded from the calculation of EPS.
About Zynga Inc.
Since its founding in 2007, Zynga's mission has been to connect the
world through games. To-date, more than 1 billion people have
played Zynga's games across Web and mobile, including FarmVille, Zynga Poker, Words
With Friends, Hit it Rich! Slots and
About Gram Games
Gram Games is a mobile game development studio, committed to delivering
high quality social games that create real bonds through play. Founded
in 2012 with studios in
Forward Looking Statement
This release contains forward-looking statements, including those
statements relating to our outlook for the second quarter under the
heading "Q2 Guidance Update" and statements relating to, among other
things: our ability to successfully integrate Gram Games’ operations
with our own and achieve the intended benefits of the acquisition; our
belief that Gram Games will be an additional catalyst for growth; our
expectations in the future operations and profitability of the Gram
Games business unit, including our belief that Merge Dragons! has
the potential to be a forever franchise for
Forward-looking statements often include words such as "guidance,"
"outlook," "projected," "intends," "will," "anticipate," "believe,"
"target," "expect," and statements in the future tense are generally
forward-looking. 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. Undue
reliance should not be placed on such forward-looking statements, which
are based on information available to us on the date hereof. Although we
are updating our previously given guidance, we assume no obligation to
further update such statements. More information about factors that
could affect our operating results are described in greater detail in
our public filings with the
Non-GAAP Financial Measures
We have provided in this release certain non-GAAP financial measures to supplement our consolidated financial statements prepared in accordance with U.S. GAAP (our “GAAP financial statements”). Management uses non-GAAP financial measures internally in analyzing our financial results to assess operational performance and liquidity. Our non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.
The presentation of our non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, our GAAP financial statements. We believe that both management and investors benefit from referring to our non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. We believe our non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key financial measures 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 of our non-GAAP financial measures used in this release to the most directly comparable GAAP financial measures in the following tables. Because of the following limitations of our non-GAAP financial measures, you should consider the non-GAAP financial measures presented in this release with our GAAP financial statements.
Key limitations of our non-GAAP financial measures include:
- Bookings does not reflect that we defer and recognize online game revenue and revenue from certain advertising transactions over the estimated average playing period of payers for durable virtual items or as consumed for consumable virtual items;
- Adjusted EBITDA does not include the impact of stock-based expense, acquisition-related transaction expenses, contingent consideration fair value adjustments, impairment of intangible assets, legal settlements and restructuring expense;
- Adjusted EBITDA does not reflect provisions for or benefits from income taxes and does not include other income (expense) net, which includes foreign exchange gains and losses, and interest income; and
- Adjusted EBITDA excludes depreciation and amortization of tangible and intangible assets. Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future.
|RECONCILIATION OF GAAP TO NON-GAAP SECOND QUARTER 2018 GUIDANCE (UPDATED)|
(In thousands, except per share data, unaudited)
|Second Quarter 2018|
|Reconciliation of Revenue to Bookings|
|Change in deferred revenue||20,000|
|Reconciliation of Net Loss to Adjusted EBITDA|
|Provision for income taxes||6,000|
|Other income, net||(3,000)|
|Depreciation and amortization||11,000|
|Stock-based compensation expense||18,000|
|Acquisition-related transaction expenses||2,000|
|Contingent consideration fair value adjustment||1,000|