Zynga Announces Fourth Quarter and 2015 Financial Results
Delivers
Core Live Mobile Franchises Grew Bookings 63% Year-Over-Year in 2015
Outlines Expected 2016 Game Slate
Announces Completion of
"In terms of our financial
scorecard, for 2015, we made good progress in our transition to mobile on a bookings level but, due to the lack of significant new releases, we saw an overall decline in our audience. While our total bookings grew 1%, our core live mobile franchises - Slots, Words With Friends and Poker - were up 63% and all of mobile grew 35%. We ended the year with mobile now representing 73% of total bookings up from 60% in Q4 2014. We saw our web business continue to decline with bookings down 32% and audience down 53%. Overall for the year, we managed to support a relatively large slate of new game development and user acquisition while remaining profitable," said
"Our mobile audience was down 1% in 2015. Within the quarter, it was down sequentially by 5% driven by a lack of significant new releases. However we've stemmed these declines for our core live mobile franchises - Slots, Words With Friends and Poker - which were up 1% for the quarter versus a loss of 6% in Q3. This was led by Slots, which accelerated its audience growth rate from 6% in Q3 to 15% in Q4. Words With Friends moved from a loss of 7% in Q3 to flat in Q4 and a 9% increase in the beginning of Q1. Poker has moved from a 10% decline in Q3 to a 4% decline in Q4 and has flipped to positive growth of 12% in the beginning of Q1," Pincus continued.
"For 2016 and beyond, growth and profits will be driven by our ability to continue our momentum with live franchises and execute on new game launches. While we get that
"We expect to launch 10 new games in 2016. In
2015 Performance Summary
- Ended 2015 with
$700 million in reported bookings; up 1% year-over-year. $17 million in Adjusted EBITDA; down 57% year-over-year.- Grew mobile bookings 35% year-over-year; web bookings declined 32% year-over-year.
- Delivered strong player monetization growth; ABPU up 26% year-over-year.
- Strongest advertising year to date; 2015 ads and other bookings up 22% year-over-year.
- DAU declined 20% year-over-year with mobile DAUs declining 1% and web DAUs declining 53%.
- Launched a
$100 million cost reduction plan;$45 million in annualized savings from workforce reduction and$55 million in annualized savings from reduction in centralized services costs and spend.
Q4 Performance Highlights
Financial Highlights
- Bookings of
$182 million ; above the high end of the guidance range, flat year-over-year and up 3% sequentially. - Adjusted EBITDA of
$1.7 million ; within the guidance range. - Mobile bookings of
$134 million or 73% of overall bookings, up 21% year-over-year and up 10% sequentially. - Advertising and other bookings up 23% year-over-year and 24% sequentially; best advertising quarter to date.
$987 million in cash, cash equivalents and marketable securities.- Began
$200 million share repurchase program which we completed in the first quarter of 2016.
Product Updates
- Slots - Delivered highest quarterly bookings in franchise history; bookings up 78% year-over-year and 7% sequentially. Launched Princess Bride Slots and
Black Diamond Casino , now in the top 30 grossing Casino charts in theApple App Store . - Words With Friends - Delivered strongest quarterly bookings performance in the history of the game; up 28% year-over-year and 29% sequentially. Consumers played 11% more words as a result of fun new features.
- Dawn of Titans - On track to launch in 2016; continuing to see strong potential with an average
Apple App Store rating of 4.4 stars. Scaled to 14 test markets and ABPU remains strong. - CSR2 - On track to launch in 2016; now testing across 10 markets with an average
Apple App Store rating of 4.6 stars. - CityVille - Entered into geo-lock with new CityVille Mobile in the fourth quarter of 2015; worldwide launch expected in 2016.
Announces Acquisition of Zindagi Games
Today,
Announces Completion of Share Repurchase Program
Today, the company announced the completion of our last repurchase program of
Financial Highlights (in thousands, except per share data)
Quarter ended | Year ended | |||||||||||||||||||||
GAAP Results | ||||||||||||||||||||||
Revenue | $ | 185,769 | $ | 195,737 | $ | 192,547 | $ | 764,717 | $ | 690,410 | ||||||||||||
Net income (loss) | $ | (46,869 | ) | $ | 3,052 | $ | (45,126 | ) | $ | (117,181 | ) | $ | (225,900 | ) | ||||||||
Diluted net income (loss) per share | $ | (0.05 | ) | $ | 0.00 | $ | (0.05 | ) | $ | (0.13 | ) | $ | (0.26 | ) | ||||||||
Non-GAAP Results | ||||||||||||||||||||||
Bookings | $ | 182,104 | $ | 175,979 | $ | 182,352 | $ | 699,955 | $ | 694,300 | ||||||||||||
Adjusted EBITDA | $ | 1,656 | $ | 12,415 | $ | 9,432 | $ | 17,127 | $ | 39,932 | ||||||||||||
Non-GAAP net income (loss) | $ | 375 | $ | 3,681 | $ | (2,451 | ) | $ | (10,235 | ) | $ | (12,582 | ) | |||||||||
Non-GAAP earnings (loss) per share | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||||
Player Metrics (users and payers in millions)
The company tracks operating metrics using internal systems which rely on internal company data and third party data. We rely on the veracity of data provided by individuals and reported by third parties to calculate our metrics and reduce duplication of data. In the first quarter of
2015, the company modified its calculations to take into account our business's transition to mobile and updates to our operating metrics which utilize additional third party data to help us identify whether a player logged in under two or more accounts is the same individual. As a result of these changes, we revised the definitions for DAUs, MAUs, MUUs, and MUPs in the first quarter of 2015. In the third quarter of 2015, the company made a subsequent modification to its calculations of MUU to further reduce duplication. For comparative purposes, all of these key operating metrics have been revised for the fourth quarter of 2014 to reflect the company's current definitions and calculations for all periods presented. Please refer to our Quarterly Report on Form 10-Q for the quarters ended
Three Months Ended | |||||||||||||||||||||||
2015 | 2015 | 2014 | Q4'15 Q/Q | Q4'15 Y/Y | |||||||||||||||||||
Average daily active users (DAU) | 18 | 19 | 24 | (5 | %) | (24 | %) | ||||||||||||||||
Average mobile DAUs | 15 | 16 | 18 | (5 | %) | (14 | %) | ||||||||||||||||
Average web DAUs | 3 | 3 | 6 | (7 | %) | (49 | %) | ||||||||||||||||
Average monthly active user (MAUs) | 68 | 75 | 98 | (9 | %) | (30 | %) | ||||||||||||||||
Average mobile MAUs | 55 | 61 | 70 | (9 | %) | (21 | %) | ||||||||||||||||
Average web MAUs | 13 | 14 | 28 | (11 | %) | (54 | %) | ||||||||||||||||
Average daily bookings per average DAU (ABPU) | $ | 0.110 | $ | 0.100 | $ | 0.084 | 9 | % | 31 | % | |||||||||||||
Average monthly unique users (MUUs)(1) | 48 | 51 | 64 | (5 | %) | (24 | %) | ||||||||||||||||
Average monthly unique payers (MUPs)(1) | 0.8 | 0.9 | 1.0 | (7 | %) | (19 | %) | ||||||||||||||||
Payer conversion(1) | 1.7 | % | 1.7 | % | 1.6 | % | (2 | %) | 7 | % | |||||||||||||
(1) MUUs, MUPs and payer conversion exclude | |||||||||||||||||||||||
Fourth Quarter 2015 Financial Summary
- Revenue: Revenue was
$186 million for the fourth quarter of 2015, a decrease of 5% compared to the third quarter of 2015 and a decrease of 4% compared to the fourth quarter of 2014. Online game revenue was$130 million , a decrease of 14% compared to the third quarter of 2015 and a decrease of 4% compared to the fourth quarter of 2014. Advertising and other revenue was$56 million , an increase of 26% compared to the third quarter of 2015 and a decrease of 2% compared to the fourth quarter of 2014. Zynga Poker, FarmVille 2, Hit It Rich! Slots and Wizard of Oz Slots accounted for 18%, 17%, 17% and 15% of online game revenue, respectively, for the fourth quarter of 2015 while FarmVille 2, Zynga Poker, Hit It Rich! Slots, FarmVille 2: Country Escape and Wizard of Oz Slots accounted for 21%, 17%, 16%, 14% and 12%, respectively, for the third quarter of 2015. - Bookings: Bookings were
$182 million for the fourth quarter of 2015, an increase of 3% compared to the third quarter of 2015 and flat compared to the fourth quarter of 2014. - Net income (loss): Net loss was
$47 million for the fourth quarter of 2015, compared to net income of$3 million for the third quarter of 2015 and net loss of$45 million for the fourth quarter of 2014. The quarter-over-quarter change in net loss was primarily due to higher costs and expenses (primarily, in order of significance, restructuring expense, marketing costs and third party hosting costs) as well as a tax benefit recorded in the third quarter of 2015 in connection with our acquisition of Rising Tide Games. - Adjusted EBITDA: Adjusted EBITDA was
$2 million for the fourth quarter of 2015, compared to$12 million in the third quarter of 2015 and$9 million for the fourth quarter of 2014. The quarter-over-quarter decrease in adjusted EBITDA was primarily due to higher marketing costs due to seasonality and, to a lesser extent, higher third party hosting costs due to our data center migration. - Non-GAAP net income (loss): Non-GAAP net income was
$0.4 million for the fourth quarter of 2015, compared to non-GAAP net income of$4 million in the third quarter of 2015 and non-GAAP net loss of$2 million in the fourth quarter of 2014. - Net income (loss) per share: Diluted net loss per share was
$0.05 for the fourth quarter of 2015, compared to diluted net income per share of$0.00 for the third quarter of 2015 and diluted net loss per share of$0.05 for the fourth quarter of 2014. - Non-GAAP earnings (loss) per share: Non-GAAP earnings per share was
$0.00 for the fourth quarter of 2015, compared to non-GAAP earnings per share of$0.00 for the third quarter of 2015 and non-GAAP loss per share of$0.00 for the fourth quarter of 2014. - Cash and cash flow: As of
December 31, 2015 , cash, cash equivalents and marketable securities were approximately$987 million , compared to$1.07 billion as ofSeptember 30, 2015 . In the fourth quarter of 2015, we repurchased 37.9 million shares of our Class A common stock at a weighted average price of$2.60 per share for a total of$98.9 million . Cash flow from operations was$7 million for the fourth quarter of 2015, compared to($5) million for the third quarter of 2015 and$4 million for the fourth quarter of 2014. Free cash flow was$7 million for the fourth quarter of 2015 compared to($7) million for the third quarter of 2015 and$2 million for the fourth quarter of 2014.
2015 Annual Financial Summary
-
Revenue: Revenue was
$765 million in 2015, an increase of 11% on a year-over-year basis. Online game revenue was$591 million , an increase of 10% on a year-over-year basis. Advertising revenue was$174 million , an increase of 14% on a year-over-year basis. - Bookings: Bookings were
$700 million in 2015, an increase of 1% on a year-over-year basis. - Net income (loss): Net loss was
$117 million in 2015, which included$132 million of stock-based expense,$32 million of restructuring expense and a$9 million income tax benefit, compared to net loss of$226 million in 2014. - Adjusted EBITDA: Adjusted EBITDA was
$17 million in 2015, a decrease of 57% year-over-year, primarily due to an increase in payment processing fees due to our increased mobile bookings mix and, to a lesser extent, an increase in royalty expense for licensed intellectual property. - Non-GAAP net income (loss): Non-GAAP net loss was
$10 million in 2015, compared to non-GAAP net loss of$13 million in 2014. - Net income (loss) per share: Diluted net loss per share was
$0.13 for the full year 2015, compared to diluted net loss per share of$0.26 for the full year 2014. - Non-GAAP earnings (loss) per share: Non-GAAP loss per share was
$0.01 for the full year 2015, compared to non-GAAP loss per share of$0.01 for the full year 2014. - Cash and cash flow: As of
December 31, 2015 , cash, cash equivalents and marketable securities were approximately$987 million , compared to$1.15 billion as ofDecember 31, 2014 . In the fourth quarter of 2015, we repurchased 37.9 million shares of our Class A common stock at a weighted average price of$2.60 per share for a total of$98.9 million . Cash flow from operations was($41) million for the year endedDecember 31, 2015 , compared to($5) million for the year endedDecember 31, 2014 . Free cash flow was($48) million for the year endedDecember 31, 2015 compared to($14) million for the year endedDecember 31, 2014 .
Restructuring Charges From Our Cost Reduction Plan in the First Quarter of 2015
We incurred a restructuring charge of
First Quarter Outlook
Zynga's outlook for the first quarter of 2016 is as follows:
- Revenue is projected to be in the range of
$160 million to$175 million - Net loss is projected to be in the range of
($40) million to($30) million - Net
loss per share is projected to be in the range of (
$0.05 ) to ($0.03 ) based on a share count projected to be approximately 866 million shares - Bookings are projected to be in the range of
$150 million to$165 million - Adjusted EBITDA is projected to be in the range of
($10) million to break-even - Non-GAAP loss per share is projected to be in the range of (
$0.01 ) to$0.00 , based on a share count projected to be approximately 866 million shares
Conference Call Details
In addition to today's press release, a copy of our Q4 2015 Quarterly Earnings Letter, which outlines our Q4 2015 financial results and business outlook, is available on our website at http://investor.zynga.com.
The live Q&A session can be accessed at http://investor.zynga.com - a replay of which will be available through the website after the call - or via the below conference dial-in number:
Toll-Free Dial-In Number: (800) 537-0745
International Dial-In Number: (253) 237-1142
Conference ID: 13589408
About
The
Key Operating Metrics
We manage our business by tracking several operating metrics: "DAUs," which measure daily active users of our games, "MAUs," which measure monthly active users of our games, "MUUs," which measure monthly unique users of our games, "MUPs," which measure monthly unique payers in our games, and "ABPU," which measures our average daily bookings per average DAU, each of which is recorded by our internal analytics systems. The numbers for these operating metrics are calculated using internal company data based on tracking of user account activity. We also use third party network logins to help us track whether a player logged under two or more different user accounts is the same individual. We believe that the numbers are reasonable estimates of our user base for the applicable period of measurement; however, factors relating to user activity and systems may impact these numbers.
Please refer to our Quarterly Report on
Form 10-Q for the quarters ended
MUUs, MUPs and payer conversion in this press release exclude
We acquired
Forward-Looking Statements
This press release contains forward-looking statements relating to, among other things, our outlook for the first quarter 2016 revenue, net loss, net loss per share, weighted average diluted share count, bookings, Adjusted EBITDA, non-GAAP earnings per share and non-GAAP weighted average diluted share count; certain other financial items necessary for GAAP to Non-GAAP reconciliation; our future operational plans, use of cash, strategies and prospects;
our cost structure and cost reduction plans and estimated savings and charges, including our reduction in workforce and reduction in centralized services costs and spend; our ability to accelerate execution, drive profitability and nurture creativity and innovation while reducing costs and lowering discretionary spend; the breadth and depth of our 2015 game slate and our game slate for 2016 and the success of these slates; including recently launched Princess Bride Slots and
Forward-looking statements often include words such as "outlook," "project," "plan," "intend," "could," "should," "would," "will," "might," "anticipate," "estimate," "continue," "believe," "may," "target," "expect," or similar expressions, or the negative or plural of these words or expressions and statements in the future tense are generally forward-looking. The achievement or success of the matters covered by such forward-looking statements is subject to a number of risks, uncertainties, and assumptions. Moreover, we operate in a very competitive and rapidly changing environment and industry. New risks may also emerge from time to time. It is not possible for our management to predict all of the risks related to our business and operations, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any forward-looking statements we may make 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, the ability of key games, including our franchise games, to sustain or grow audiences, bookings and engagement; our relationship with Facebook, changes in the Facebook platform and/or changes in our agreement with Facebook; our relationship with Apple, Google and other Android platform providers, changes in the Android or iOS platforms and/or changes in our agreements with Apple, Google and/or other Android platform providers; our relationship and/or agreements with key licensing partners, additional platform providers or any key partners; the effectiveness of our cost-cutting activities and our
ability to control and reduce expenses, including our estimated savings and charges associated with our restructuring efforts; our ability to efficiently deploy employees, leverage our teams and talent, including shifting resources when necessary to prioritize more important projects; our ability to retain and attract new talent; our ability to work as a team to execute against our strategy; our use of working capital in general; attrition or decline in existing games, including franchise games; our ability to launch and monetize successfully new games and features for web and mobile in a timely manner (such as the Weekly Word feature in Words With Friends and the Leagues feature in Zynga Poker) and the success of these games and features, including planned features for our existing games; the process of integrating our operations into NaturalMotion Limited's
("NaturalMotion's"), Rising Tide Games, Inc.'s ("Rising Tide Games") and Zindagi Games's operations and NaturalMotion's, Rising Tide Games's and Zindagi Games's operations into our operations, including but not limited to our expected ability to expand our creative pipeline, accelerate our growth on mobile and deliver hit
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 Annual Report on Form 10-K for the year ended
Non-GAAP Financial Measures
We have provided in this release non-GAAP financial information including bookings, Adjusted EBITDA, non-GAAP net income (loss), non-GAAP operating expense, free cash flow, non-GAAP provision for (benefit from) income taxes, and non-GAAP net income (loss) per share, as a supplement to the consolidated financial statements, which are prepared in accordance with
Some limitations of bookings, Adjusted EBITDA, non-GAAP net income (loss), non-GAAP operating expense, free cash flow, non-GAAP provision for (benefit from) income taxes, and non-GAAP net income (loss) per share:
- Adjusted EBITDA, non-GAAP net income (loss) and non-GAAP provision for (benefit from) expense do not include the impact of stock-based expense, acquisition-related transaction expenses, contingent consideration fair value adjustments and restructuring expense;
- Total Bookings, Adjusted EBITDA, non-GAAP net income (loss) and non-GAAP provision for (benefit from) expense do not reflect that we defer and recognize online game revenue and revenue from certain advertising transactions over the estimated average life of durable virtual goods or as virtual goods are consumed;
- Adjusted EBITDA does not reflect income tax expense and does not include other income (expense) net, which includes foreign exchange gains and losses and interest income;
- Adjusted EBITDA excludes depreciation and amortization of intangible assets, while non-GAAP net loss excludes amortization of intangible assets from acquisitions. Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future;
- Free cash flow is derived from net cash provided by operating activities less cash spent on capital expenditures and acquisitions, and removing the excess income tax benefits or costs associated with stock-based awards; and
- Other companies, including companies in our industry, may calculate bookings, Adjusted EBITDA, non-GAAP net loss, non-GAAP operating expense, free cash flow, non-GAAP provision for (benefit from) income taxes, and non-GAAP net loss per share differently or not at all, which will reduce their usefulness as a comparative measure.
Because of these limitations, you should consider bookings, Adjusted EBITDA, non-GAAP net income (loss), non-GAAP operating expense, free cash flow, non-GAAP provision for (benefit from) income taxes, and non-GAAP net income (loss) per share, along with other financial performance measures, including revenue, net income (loss), diluted net loss per share, cash flow from operations, GAAP operating expense, GAAP operating margin and our other financial results presented in accordance with GAAP. See the GAAP to non-GAAP reconciliations below and in the places listed above for further details.
CONSOLIDATED BALANCE SHEETS | ||||||||||
(In thousands, unaudited) | ||||||||||
2015 | 2014 | |||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 742,217 | $ | 131,303 | ||||||
Marketable securities | 245,033 | 785,221 | ||||||||
Accounts receivable | 79,610 | 89,611 | ||||||||
Income tax receivable | 5,233 | 3,304 | ||||||||
Deferred tax assets | - | 2,765 | ||||||||
Restricted cash | 209 | 48,047 | ||||||||
Other current assets | 40,625 | 22,688 | ||||||||
Total current assets | 1,112,927 | 1,082,939 | ||||||||
Long-term marketable securities | - | 231,385 | ||||||||
657,671 | 650,778 | |||||||||
Other intangible assets, net | 64,016 | 66,861 | ||||||||
Property and equipment, net | 273,221 | 297,919 | ||||||||
Long-term restricted cash | 986 | - | ||||||||
Other long-term assets | 16,446 | 18,911 | ||||||||
Total assets | $ | 2,125,267 | $ | 2,348,793 | ||||||
Liabilities and stockholders' equity | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 29,676 | $ | 14,965 | ||||||
Other current liabilities | 75,141 | 164,150 | ||||||||
Deferred revenue | 128,839 | 189,923 | ||||||||
Total current liabilities | 233,656 | 369,038 | ||||||||
Deferred revenue | 204 | 3,882 | ||||||||
Deferred tax liabilities | 6,026 | 5,323 | ||||||||
Other non-current liabilities | 94,151 | 74,858 | ||||||||
Total liabilities | 334,037 | 453,101 | ||||||||
Stockholders' equity: | ||||||||||
Common stock and additional paid in capital | 3,234,551 | 3,096,982 | ||||||||
(98,942 | ) | - | ||||||||
Accumulated other comprehensive income (loss) | (52,388 | ) | (29,175 | ) | ||||||
Accumulated deficit | (1,291,991 | ) | (1,172,115 | ) | ||||||
Total stockholders' equity | 1,791,230 | 1,895,692 | ||||||||
Total liabilities and stockholders' equity | $ | 2,125,267 | $ | 2,348,793 | ||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||||||||
(In thousands, except per share data, unaudited) | ||||||||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||
2015 | 2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||
Online game | $ | 129,463 | $ | 151,168 | $ | 135,011 | $ | 590,755 | $ | 537,619 | ||||||||||||||||
Advertising and other | 56,306 | 44,569 | 57,536 | 173,962 | 152,791 | |||||||||||||||||||||
Total revenue | 185,769 | 195,737 | 192,547 | 764,717 | 690,410 | |||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||
Cost of revenue | 63,397 | 57,187 | 55,492 | 235,985 | 213,570 | |||||||||||||||||||||
Research and development | 80,770 | 78,416 | 105,134 | 357,602 | 396,553 | |||||||||||||||||||||
Sales and marketing | 53,066 | 43,549 | 41,898 | 169,573 | 157,364 | |||||||||||||||||||||
General and administrative | 39,333 | 25,765 | 38,961 | 143,284 | 167,664 | |||||||||||||||||||||
Total costs and expenses | 236,566 | 204,917 | 241,485 | 906,444 | 935,151 | |||||||||||||||||||||
Income (loss) from operations | (50,797 | ) | (9,180 | ) | (48,938 | ) | (141,727 | ) | (244,741 | ) | ||||||||||||||||
Interest income | 603 | 566 | 779 | 2,568 | 3,266 | |||||||||||||||||||||
Other income (expense), net | 1,463 | 2,285 | 5,580 | 13,306 | 8,248 | |||||||||||||||||||||
Income (loss) before income taxes | (48,731 | ) | (6,329 | ) | (42,579 | ) | (125,853 | ) | (233,227 | ) | ||||||||||||||||
Provision for (benefit from) income taxes | (1,862 | ) | (9,381 | ) | 2,547 | (8,672 | ) | (7,327 | ) | |||||||||||||||||
Net income (loss) | $ | (46,869 | ) | $ | 3,052 | $ | (45,126 | ) | $ | (117,181 | ) | $ | (225,900 | ) | ||||||||||||
Net income (loss) per share: | ||||||||||||||||||||||||||
Basic | $ | (0.05 | ) | $ | 0.00 | $ | (0.05 | ) | $ | (0.13 | ) | $ | (0.26 | ) | ||||||||||||
Diluted | $ | (0.05 | ) | $ | 0.00 | $ | (0.05 | ) | $ | (0.13 | ) | $ | (0.26 | ) | ||||||||||||
Weighted average common shares used to compute net income (loss) per share: | ||||||||||||||||||||||||||
Basic | 922,540 | 921,116 | 890,350 | 913,511 | 874,509 | |||||||||||||||||||||
Diluted | 922,540 | 940,032 | 890,350 | 913,511 | 874,509 | |||||||||||||||||||||
Stock-based expense included in the above line items: | ||||||||||||||||||||||||||
Cost of revenue | $ | 1,712 | $ | 991 | $ | 1,232 | $ | 4,547 | $ | 4,623 | ||||||||||||||||
Research and development | 24,063 | 22,308 | 23,380 | 94,548 | 83,673 | |||||||||||||||||||||
Sales and marketing | 2,320 | 2,045 | 1,422 | 7,501 | 5,927 | |||||||||||||||||||||
General and administrative | 3,677 | 5,092 | 9,731 | 24,979 | 35,010 | |||||||||||||||||||||
Total stock-based expense | $ | 31,772 | $ | 30,436 | $ | 35,765 | $ | 131,575 | $ | 129,233 | ||||||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||||||||||
(In thousands, unaudited) | ||||||||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||
2015 | 2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||||
Operating activities | ||||||||||||||||||||||||||
Net income (loss) | $ | (46,869 | ) | $ | 3,052 | $ | (45,126 | ) | $ | (117,181 | ) | $ | (225,900 | ) | ||||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||||
Depreciation and amortization | 11,966 | 11,287 | 18,341 | 54,315 | 82,894 | |||||||||||||||||||||
Stock-based expense | 31,772 | 30,436 | 35,765 | 131,575 | 129,233 | |||||||||||||||||||||
Accretion and amortization on marketable securities | 770 | 1,057 | 2,278 | 5,711 | 10,061 | |||||||||||||||||||||
(Gain) loss from sales of investments, assets and other, net | 725 | (633 | ) | (3,741 | ) | (5,558 | ) | (1,610 | ) | |||||||||||||||||
Tax benefits (costs) from stock-based awards | 899 | 90 | (86 | ) | 989 | (86 | ) | |||||||||||||||||||
Excess tax benefits (costs) from stock-based awards | (899 | ) | (90 | ) | 86 | (989 | ) | 86 | ||||||||||||||||||
Deferred income taxes | (3,542 | ) | (10,392 | ) | (869 | ) | (12,693 | ) | (10,982 | ) | ||||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||||||||
Accounts receivable, net | 7,604 | (4,313 | ) | (3,046 | ) | 10,148 | (16,489 | ) | ||||||||||||||||||
Income tax receivable | (217 | ) | (183 | ) | 2,233 | (1,929 | ) | 5,433 | ||||||||||||||||||
Other assets | (4,944 | ) | (3,068 | ) | 4,831 | (16,804 | ) | 971 | ||||||||||||||||||
Accounts payable | 2,169 | (536 | ) | (474 | ) | 14,395 | (6,393 | ) | ||||||||||||||||||
Deferred revenue | (3,665 | ) | (19,757 | ) | (10,195 | ) | (64,762 | ) | 3,643 | |||||||||||||||||
Other liabilities | 11,157 | (12,062 | ) | 4,348 | (38,203 | ) | 24,628 | |||||||||||||||||||
Net cash provided by (used in) operating activities | 6,926 | (5,112 | ) | 4,345 | (40,986 | ) | (4,511 | ) | ||||||||||||||||||
Investing activities | ||||||||||||||||||||||||||
Purchase of marketable securities | - | - | (141,253 | ) | (101,091 | ) | (758,509 | ) | ||||||||||||||||||
Sales and maturities of marketable securities | 165,181 | 211,350 | 138,526 | 867,198 | 806,232 | |||||||||||||||||||||
Acquisition of property and equipment | (985 | ) | (1,608 | ) | (2,123 | ) | (7,832 | ) | (9,201 | ) | ||||||||||||||||
Proceeds from sale of property and equipment | 64 | 750 | - | 814 | 5,059 | |||||||||||||||||||||
Business acquisition, net of cash acquired | - | (20,023 | ) | (700 | ) | (20,023 | ) | (392,411 | ) | |||||||||||||||||
Proceeds from sale of equity method investment | - | - | - | 10,507 | - | |||||||||||||||||||||
Other investing activities, net | - | - | 4,314 | - | 4,671 | |||||||||||||||||||||
Net cash provided by (used in) investing activities | 164,260 | 190,469 | (1,236 | ) | 749,573 | (344,159 | ) | |||||||||||||||||||
Financing activities | ||||||||||||||||||||||||||
Repurchase of common stock | (91,870 | ) | - | - | (91,870 | ) | - | |||||||||||||||||||
Taxes paid related to net share settlement of equity awards | (1,036 | ) | (453 | ) | (253 | ) | (2,902 | ) | (1,216 | ) | ||||||||||||||||
Proceeds from employee stock purchase plan and exercise of stock options | 275 | 2,957 | 693 | 7,567 | 16,421 | |||||||||||||||||||||
Excess tax benefits (costs) from stock-based awards | 899 | 90 | (86 | ) | 989 | (86 | ) | |||||||||||||||||||
Acquisition-related contingent consideration payment | - | - | - | (10,790 | ) | - | ||||||||||||||||||||
Net cash provided by (used in) financing activities | (91,732 | ) | 2,594 | 354 | (97,006 | ) | 15,119 | |||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (257 | ) | (359 | ) | (438 | ) | (667 | ) | (669 | ) | ||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 79,197 | 187,592 | 3,025 | 610,914 | (334,220 | ) | ||||||||||||||||||||
Cash and cash equivalents, beginning of period | 663,020 | 475,428 | 128,278 | 131,303 | 465,523 | |||||||||||||||||||||
Cash and cash equivalents, end of period | $ | 742,217 | $ | 663,020 | $ | 131,303 | $ | 742,217 | $ | 131,303 | ||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP RESULTS | ||||||||||||||||||||||||
(In thousands, except per share data, unaudited) | ||||||||||||||||||||||||
Three months ended | Twelve months ended | |||||||||||||||||||||||
2015 | 2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||
Reconciliation of Revenue to Bookings | ||||||||||||||||||||||||
Revenue | $ | 185,769 | $ | 195,737 | $ | 192,547 | $ | 764,717 | $ | 690,410 | ||||||||||||||
Change in deferred revenue | (3,665 | ) | (19,758 | ) | (10,195 | ) | (64,762 | ) | 3,890 | |||||||||||||||
Bookings | $ | 182,104 | $ | 175,979 | $ | 182,352 | $ | 699,955 | $ | 694,300 | ||||||||||||||
Reconciliation of Net income (loss) to Adjusted EBITDA | ||||||||||||||||||||||||
Net income (loss) | $ | (46,869 | ) | $ | 3,052 | $ | (45,126 | ) | $ | (117,181 | ) | $ | (225,900 | ) | ||||||||||
Provision for (benefit from) income taxes | (1,862 | ) | (9,381 | ) | 2,547 | (8,672 | ) | (7,327 | ) | |||||||||||||||
Other income (expense), net | (1,463 | ) | (2,285 | ) | (5,580 | ) | (13,306 | ) | (8,248 | ) | ||||||||||||||
Interest income | (603 | ) | (566 | ) | (779 | ) | (2,568 | ) | (3,266 | ) | ||||||||||||||
Restructuring expense, net | 15,419 | 416 | (3,391 | ) | 32,151 | 24,281 | ||||||||||||||||||
Gain (loss) on legal settlements | - | (1,681 | ) | 5,250 | (1,681 | ) | 5,250 | |||||||||||||||||
Depreciation and amortization | 11,966 | 11,287 | 18,341 | 54,315 | 82,894 | |||||||||||||||||||
Acquisition-related transaction expenses | 249 | 895 | - | 1,144 | 6,425 | |||||||||||||||||||
Contingent consideration fair value adjustment | (3,288 | ) | - | 12,600 | 6,112 | 32,700 | ||||||||||||||||||
Stock-based expense | 31,772 | 30,436 | 35,765 | 131,575 | 129,233 | |||||||||||||||||||
Change in deferred revenue | (3,665 | ) | (19,758 | ) | (10,195 | ) | (64,762 | ) | 3,890 | |||||||||||||||
Adjusted EBITDA | $ | 1,656 | $ | 12,415 | $ | 9,432 | $ | 17,127 | $ | 39,932 | ||||||||||||||
Reconciliation of Net income (loss) to Non-GAAP net income (loss) | ||||||||||||||||||||||||
Net income (loss) | $ | (46,869 | ) | $ | 3,052 | $ | (45,126 | ) | $ | (117,181 | ) | $ | (225,900 | ) | ||||||||||
Acquisition-related transaction expenses | 249 | 895 | - | 1,144 | 6,425 | |||||||||||||||||||
Contingent consideration fair value adjustment | (3,288 | ) | - | 12,600 | 6,112 | 32,700 | ||||||||||||||||||
Stock-based expense | 31,772 | 30,436 | 35,765 | 131,575 | 129,233 | |||||||||||||||||||
Amortization of intangible assets from acquisitions | 7,402 | 6,233 | 6,493 | 26,059 | 22,401 | |||||||||||||||||||
Change in deferred revenue | (3,665 | ) | (19,758 | ) | (10,195 | ) | (64,762 | ) | 3,890 | |||||||||||||||
Restructuring expense, net | 15,419 | 416 | (3,391 | ) | 32,151 | 24,281 | ||||||||||||||||||
Gain (loss) on legal settlements | - | (1,681 | ) | 5,250 | (1,681 | ) | 5,250 | |||||||||||||||||
Tax effect of non-GAAP adjustments to net income (loss) | (645 | ) | (15,912 | ) | (3,847 | ) | (23,652 | ) | (10,862 | ) | ||||||||||||||
Non-GAAP net income (loss) | $ | 375 | $ | 3,681 | $ | (2,451 | ) | $ | (10,235 | ) | $ | (12,582 | ) | |||||||||||
GAAP and Non-GAAP diluted shares | 939,110 | 940,032 | 890,350 | 913,511 | 874,509 | |||||||||||||||||||
Non-GAAP earnings (loss) per share: | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||||||
Reconciliation of Cash provided by operating activities to Free cash flow | ||||||||||||||||||||||||
Net cash provided by (used in) operating activities | 6,926 | (5,112 | ) | 4,345 | (40,986 | ) | (4,511 | ) | ||||||||||||||||
Acquisition of property and equipment | (985 | ) | (1,608 | ) | (2,123 | ) | (7,832 | ) | (9,201 | ) | ||||||||||||||
Excess tax benefits (costs) from stock-based awards | 899 | 90 | (86 | ) | 989 | (86 | ) | |||||||||||||||||
Free cash flow | $ | 6,840 | $ | (6,630 | ) | $ | 2,136 | $ | (47,829 | ) | $ | (13,798 | ) | |||||||||||
Reconciliation of GAAP to Non-GAAP provision for (benefit from) income taxes | ||||||||||||||||||||||||
GAAP provision for (benefit from) income taxes | (1,862 | ) | (9,381 | ) | 2,547 | (8,672 | ) | (7,327 | ) | |||||||||||||||
Stock-based expense | 1,150 | 7,351 | 2,571 | 15,912 | 6,262 | |||||||||||||||||||
Amortization of intangible assets from acquisitions | 530 | 3,858 | 457 | 5,720 | 1,086 | |||||||||||||||||||
Acquisition-related transaction expenses | 459 | 1,248 | 58 | 1,707 | 312 | |||||||||||||||||||
Contingent consideration fair value adjustment | (928 | ) | - | 791 | 107 | 1,584 | ||||||||||||||||||
Change in deferred revenue | (2,234 | ) | (562 | ) | (368 | ) | (7,229 | ) | 188 | |||||||||||||||
Restructuring expense, net | 1,668 | 2,905 | 84 | 6,323 | 1,176 | |||||||||||||||||||
Gain (loss) on legal settlements | - | 1,112 | 254 | 1,112 | 254 | |||||||||||||||||||
Non-GAAP provision for (benefit from) income taxes | $ | (1,217 | ) | $ | 6,531 | $ | 6,394 | $ | 14,980 | $ | 3,535 | |||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP FIRST QUARTER 2016 OUTLOOK | ||||
(In thousands, except per share data, unaudited) | ||||
First Quarter 2016 | ||||
Reconciliation of Revenue to Bookings | ||||
Revenue range | $ | 160,000 - 175,000 | ||
Change in deferred revenue | (10,000 | ) | ||
Bookings range | $ | 150,000 - 165,000 | ||
Reconciliation of Net income (loss) to Adjusted EBITDA | ||||
Net income (loss) range | $ | (40,000) - (30,000) | ||
Provision for (benefit from) income taxes | 0 - 3,000 | |||
Other income (expense), net | (2,000) - (3,000) | |||
Interest income | (1,000 | ) | ||
Depreciation and amortization | 12,000 | |||
Stock-based expense | 31,000 - 29,000 | |||
Change in deferred revenue | (10,000 | ) | ||
Adjusted EBITDA range | $ | (10,000) - 0 | ||
Reconciliation of Net income (loss) to Non-GAAP net income (loss) | ||||
Net income (loss) range | $ | (40,000) - (30,000) | ||
Stock-based expense | 31,000 - 29,000 | |||
Amortization of intangible assets from acquisitions | 9,000 | |||
Change in deferred revenue | (10,000 | ) | ||
Non-GAAP net income (loss) range | $ | (10,000) - (2,000) | ||
GAAP and Non-GAAP diluted shares | 866,000 | |||
Net income (loss) per share range | $ | (0.05) - (0.03) | ||
Non-GAAP earnings (loss) per share range | $ | (0.01) - 0.00 | ||
Investors -Source:Melissa Fisher 415-339-5266 investors@zynga.com Press -Stephanie Hess 415-503-0303 press@zynga.com
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