Zynga Announces Third Quarter 2015 Financial Results
DELIVERS
ANNOUNCES
MOVES LAUNCHES OF DAWN OF TITANS AND CSR2 INTO 2016
ANNOUNCES RESIGNATION OF CFO
"Our teams delivered a strong Q3 driven by the performance by Wizard of Oz Slots, Words With Friends and our newly launched Empires & Allies. We generated
"Based on the opportunity we see for Dawn of Titans and CSR2 we have made the deliberate decision to invest in future development of these games and move their launches into 2016. As we get closer to our players behavior over time, we believe there are a few key areas that we can optimize to increase long-term player retention. For Dawn of Titans specifically, given how strong the early monetization is for the game, we believe that a move of 200 basis points in day 30 retention has the potential to make the game a breakout hit. We are able to make these hard decisions, because of the cost reduction program that we put in place earlier this year," said Pincus.
Financial Highlights
- Bookings of
$176 million ; above the high end of the guidance range, flat year-over-year and up 1% sequentially. - Mobile bookings are
$121 million or 69% of overall bookings, up 26% year-over-year and up 6% sequentially. - Adjusted EBITDA of
$12 million ; above the high end of the guidance range. - Advertising and other bookings up 39% year-over-year and 17% sequentially.
- Non-GAAP operating expenses decreased to
$114 million , a 9% sequential decrease. $1.1 billion in cash, cash equivalents and marketable securities.- Announcing
$200 million share repurchase program.
Product Updates
- Slots - Recently acquired Rising Tide Games and launched
Black Diamond Casino worldwide. Princess Bride Slots to launch worldwide in Q4. - Words With Friends - Grew bookings by 28% sequentially and 34% year-over-year despite audience decline.
- Empires & Allies - Overall performance has been below our expectations but monetization remains strong.
- Dawn of Titans - Launch moved into 2016; continue to see great potential with an average
Apple App Store rating of 4.5 stars. Encouraging initial monetization; ABPU among the highest we've seen in aZynga game. - CSR2 - Launched moved to next year; entered into geo-lock testing in 7 markets with an average
Apple App Store rating of 4.6 stars. Monetization has been promising during early, initial phases of testing.
Announces Share Repurchase Program
Today, the company announced that our Board of Directors authorized a share repurchase program of up to
Announces Resignation of CFO
"I want to thank David for the leadership and commitment he has shown Zynga," said Pincus. "Over the
past six months, David and I have partnered on a number of key initiatives to strengthen the company's long-term position. This has included our
"I believe
Quejado brings with her more than 25 years of experience, and has deep expertise in accounting, financial planning and analysis, and project and people management. She joined
Prior to joining
| Financial Highlights (in thousands, except per share data) | |||||||||||||
| Three Months Ended | |||||||||||||
| GAAP Results | |||||||||||||
| Revenue | $ | 195,737 | $ | 199,918 | $ | 176,611 | |||||||
| Net income (loss) | $ | 3,052 | $ | (26,868 | ) | $ | (57,058 | ) | |||||
| Diluted net income (loss) per share | $ | 0.00 | $ | (0.03 | ) | $ | (0.06 | ) | |||||
| Non-GAAP Results | |||||||||||||
| Bookings | $ | 175,979 | $ | 174,462 | $ | 175,488 | |||||||
| Adjusted EBITDA | $ | 12,415 | $ | 963 | $ | 2,163 | |||||||
| Non-GAAP net income (loss) | $ | 3,681 | $ | (7,578 | ) | $ | (6,681 | ) | |||||
| Non-GAAP earnings (loss) per share | $ | 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 of users of both web and mobile platforms and to correct an error in calculating the third quarter of 2014 MUU which resulted in MUU for that period to be understated by 0.3 million users. For comparative purposes, all of these key operating metrics have been revised for the third quarter of 2014 and MUU for the second quarter of 2015 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 | |||||||||||||||||||||||
| Q3'15 Q/Q | Q3'15 Y/Y | ||||||||||||||||||||||
| Average daily active users (DAUs) | 19 | 21 | 24 | (9 | %) | (21 | %) | ||||||||||||||||
| Average mobile DAUs | 16 | 17 | 16 | (5 | %) | (5 | %) | ||||||||||||||||
| Average web DAUs | 3 | 4 | 8 | (22 | %) | (55 | %) | ||||||||||||||||
| Average monthly active users (MAUs) | 75 | 83 | 103 | (9 | %) | (27 | %) | ||||||||||||||||
| Average mobile MAUs | 61 | 64 | 65 | (5 | %) | (6 | %) | ||||||||||||||||
| Average web MAUs | 14 | 19 | 38 | (23 | %) | (63 | %) | ||||||||||||||||
| Average daily bookings per average DAU (ABPU) | $ | 0.100 | $ | 0.091 | $ | 0.079 | 10 | % | 27 | % | |||||||||||||
| Average monthly unique users (MUUs) (1) | 51 | 60 | 66 | (15 | %) | (23 | %) | ||||||||||||||||
| Average monthly unique payers (MUPs) (1) | 0.9 | 1.0 | 1.2 | (9 | %) | (24 | %) | ||||||||||||||||
| Payer conversion (1) | 1.7 | % | 1.6 | % | 1.8 | % | 6 | % | (2 | %) | |||||||||||||
| (1) MUUs, MUPs and payer conversion exclude NaturalMotion legacy games ( | |||||||||||||||||||||||
Third Quarter 2015 Financial Summary
- Revenue:
Revenue was
$196 million for the third quarter of 2015, a decrease of 2% compared to the second quarter of 2015 and an increase of 11% compared to the third quarter of 2014. Online game revenue was$151 million , a decrease of 7% compared to the second quarter of 2015 and an increase of 8% compared to the third quarter of 2014. Advertising and other revenue was$45 million , an increase of 18% compared to the second quarter of 2015 and an increase of 20% compared to the third quarter of 2014. 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% of online game revenue, respectively, for the third quarter of 2015 compared to FarmVille 2, Zynga Poker, FarmVille 2: Country Escape, Hit it Rich! Slots and Wizard of Oz Slots accounted for 18%, 18%, 16%, 16%, and 10% of online game revenue, respectively, for the second quarter of 2015. - Bookings: Bookings were
$176 million for the third quarter of 2015, an increase of 1% compared to the second quarter of 2015 and flat compared to the third quarter of 2014. - Net income (loss): Net income was
$3 million for the third quarter of 2015, compared to net loss of$27 million for the second quarter of 2015 and compared to net loss of$57 million for the third quarter of 2014. The increase in net income was primarily due to lower costs and expenses (primarily headcount-related costs, third party consulting costs, depreciation and amortization expense and restructuring expense) as well as a tax benefit recorded in the third quarter of 2015 related to purchasing accounting associated with our acquisition of Rising Tide Games. - Adjusted EBITDA: Adjusted EBITDA was
$12 million for the third quarter of 2015, compared to$1 million in the second quarter of 2015 and$2 million for the third quarter of 2014. The increase in adjusted EBITDA was primarily due to lower headcount-related costs and third party consulting costs. - Non-GAAP net income (loss): Non-GAAP net income was
$4 million for the third quarter of 2015, compared to non-GAAP net loss of$8 million in the second quarter of 2015 and a non-GAAP net loss of$7 million in the third quarter of 2014. The change in non-GAAP net income (loss) was primarily due to lower headcount-related costs, lower third party consulting costs and lower depreciation expense due to the consolidation of data center facilities. - Net income (loss) per share: Diluted net income per share was
$0.00 for the third quarter of 2015, compared to a diluted net loss per share of$0.03 for the second quarter of 2015 and a diluted net loss per share of$0.06 for the third quarter of 2014. - Non-GAAP earnings (loss) per share: Non-GAAP earnings per share was
$0.00 for the third quarter of 2015, compared to a non-GAAP net loss per share of$0.01 for the second quarter of 2015 and a non-GAAP net loss per share of$0.01 for the third quarter of 2014. - Cash and cash flow: As of
September 30, 2015 , cash, cash equivalents and marketable securities were approximately$1.07 billion , compared to$1.10 billion as ofJune 30, 2015 . Cash flow from operations was($5) million for the third quarter of 2015, compared to$4 million for the second quarter of 2015 and($2) million for the third quarter of 2014. Free cash flow was($7) million for the third quarter of 2015, compared to$1 million for the second quarter of 2015 and($5) million for the third quarter of 2014.
Fourth Quarter Outlook
Zynga's outlook for the fourth quarter of 2015 is as follows:
- Revenue is projected to be in the range of
$170 million to$185 million - Net loss is projected to be in the range of
($75) million to($53) million - Net loss per share is projected to be in the range of (
$0.08 ) to ($0.06 ) based on a share count projected to be approximately 933 million shares - Bookings are projected to be in the range of
$165 million to$180 million - Adjusted EBITDA is projected to be in the range of
($5) million to$5 million - Non-GAAP net 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 933 million shares
Conference Call Details
In addition to today's press release, a copy of our Q3 2015 Quarterly Earnings Letter, which outlines our third quarter 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: 57603682
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 NaturalMotion
legacy games (
We acquired NaturalMotion in
Forward-Looking Statements
This press release contains forward-looking statements relating to, among other things, our outlook for the fourth
quarter 2015 revenue, net loss, net loss per share, weighted average diluted share count, bookings, Adjusted EBITDA, non-GAAP net loss 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; the breadth and depth of our game slate for 2015 and the success of this slate, including the success of the recently launched Empires & Allies 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 Leagues feature in Empires & Allies) 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") and Rising Tide Games, Inc.'s ("Rising Tide Games") operations and NaturalMotion's and Rising Tide 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 NaturalMotion games in 2016 and hit games from Rising Tide Games; planned launches from our franchises and planned launches in the content categories where we are focused; the ability of our games to generate revenue and bookings for a significant period of time after launch and the timing for market acceptance of new games; the effectiveness of our marketing program and initiatives and our ability to obtain game featuring from partners; our ability to understand industry trends, such as seasonality, and position our business to take advantage of these trends; our ability to successfully monitor and adapt to changes in gaming platform and consumer demand as the industry continues to evolve; our ability to run successful in game advertising campaigns; our exposure to illegitimate credit card activity and other security risks, including sales or purchases of virtual goods used in our games through unauthorized or illegitimate third-party websites; our ability to anticipate and address technical challenges that may arise; our ability to protect our players' information and adequately address privacy concerns; our ability to maintain technology infrastructure and employees that can efficiently and reliably handle increased player usage, changes in mobile devices and game platforms, fast load times and the rapid deployment of new features and products; our ability to maintain reliable security services and infrastructure to protect against security breaches, computer malware and hacking attacks; competition in our industry; changing interests of players; our exposure to intellectual property disputes and other litigation; asset impairment charges; our evaluation of new business opportunities and acquisitions by us, including integration of newly acquired businesses; our future spend, including spend on R&D and marketing and our future margins; our ability to renew our existing brand, technology and content licenses as they expire and secure new licenses for top brands; our ability to manage risks, costs and other challenges associated with international expansion; the impact of laws and regulations on our business; changes in corporate strategy or management; our search for a Chief Financial Officer; and risks related to our share repurchase program and any repurchases of our shares, including that the timing and amount of any stock repurchases that will be determined based on market conditions, share price and other factors, that the program does not require us to repurchase any specific number of shares of our Class A common stock, and may be modified, suspended or terminated at any time without notice, that the stock repurchase program will be funded from existing cash on hand, the fact that the Company may adopt one or more plans pursuant to the provisions of Rule 10b5-1 under the Securities Exchange Act of 1934 in connection with the repurchase program and any share repurchases may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, or by any combination of such methods, and that repurchases of our Class A common stock in the open market could result in increased volatility in our stock price.
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 loss, non-GAAP operating expense, free cash flow, non-GAAP provision for (benefit from) income taxes, and non-GAAP net 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 loss, non-GAAP operating expense, free cash flow, non-GAAP provision for (benefit from) income taxes, and non-GAAP net loss per share:
- Adjusted EBITDA, non-GAAP operating expense, non-GAAP net loss and non-GAAP provision for (benefit from) expense do not include the impact of stock-based expense, impairment of intangible assets previously acquired, acquisition-related transaction expenses, contingent consideration fair value adjustments and restructuring expense;
- Total Bookings, Adjusted EBITDA, non-GAAP net 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 and non-GAAP operating expense 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;
- Non-GAAP net loss per share gives effect to all dilutive awards based on the treasury stock method that were excluded from the GAAP diluted earnings per share calculation in periods when non-GAAP net income (loss) is positive and GAAP net income (loss) is negative;
- 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 | $ | 663,020 | $ | 131,303 | ||||||
| Marketable securities | 406,701 | 785,221 | ||||||||
| Accounts receivable | 87,214 | 89,611 | ||||||||
| Income tax receivable | 5,016 | 3,304 | ||||||||
| Deferred tax assets | 520 | 2,765 | ||||||||
| Restricted cash | 210 | 48,047 | ||||||||
| Other current assets | 31,475 | 22,688 | ||||||||
| Total current assets | 1,194,156 | 1,082,939 | ||||||||
| Long-term marketable securities | 4,515 | 231,385 | ||||||||
| 667,195 | 650,778 | |||||||||
| Other intangible assets, net | 72,497 | 66,861 | ||||||||
| Property and equipment, net | 280,535 | 297,919 | ||||||||
| Long-term restricted cash | 1,000 | - | ||||||||
| Other long-term assets | 17,886 | 18,911 | ||||||||
| Total assets | $ | 2,237,784 | $ | 2,348,793 | ||||||
| Liabilities and stockholders' equity | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 27,507 | $ | 14,965 | ||||||
| Other current liabilities | 59,541 | 164,150 | ||||||||
| Deferred revenue | 132,510 | 189,923 | ||||||||
| Total current liabilities | 219,558 | 369,038 | ||||||||
| Deferred revenue | 198 | 3,882 | ||||||||
| Deferred tax liabilities | 6,592 | 5,323 | ||||||||
| Other non-current liabilities | 91,007 | 74,858 | ||||||||
| Total liabilities | 317,355 | 453,101 | ||||||||
| Stockholders' equity: | ||||||||||
| Common stock and additional paid in capital | 3,206,629 | 3,096,982 | ||||||||
| Accumulated other comprehensive income (loss) | (41,414 | ) | (29,175 | ) | ||||||
| Accumulated deficit | (1,244,786 | ) | (1,172,115 | ) | ||||||
| Total stockholders' equity | 1,920,429 | 1,895,692 | ||||||||
| Total liabilities and stockholders' equity | $ | 2,237,784 | $ | 2,348,793 | ||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||||||||
| (In thousands, except per share data, unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Online game | $ | 151,168 | $ | 162,161 | $ | 139,372 | $ | 461,292 | $ | 402,608 | ||||||||||||||||
| Advertising and other | 44,569 | 37,757 | 37,239 | 117,656 | 95,255 | |||||||||||||||||||||
| Total revenue | 195,737 | 199,918 | 176,611 | 578,948 | 497,863 | |||||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||
| Cost of revenue | 57,187 | 57,779 | 53,286 | 172,588 | 158,078 | |||||||||||||||||||||
| Research and development | 78,416 | 90,896 | 100,113 | 276,832 | 291,419 | |||||||||||||||||||||
| Sales and marketing | 43,549 | 41,119 | 44,005 | 116,507 | 115,466 | |||||||||||||||||||||
| General and administrative | 25,765 | 37,805 | 38,536 | 103,951 | 128,703 | |||||||||||||||||||||
| Total costs and expenses | 204,917 | 227,599 | 235,940 | 669,878 | 693,666 | |||||||||||||||||||||
| Income (loss) from operations | (9,180 | ) | (27,681 | ) | (59,329 | ) | (90,930 | ) | (195,803 | ) | ||||||||||||||||
| Interest income (expense), net | 566 | 605 | 841 | 1,965 | 2,487 | |||||||||||||||||||||
| Other income (expense), net | 2,285 | 1,199 | 647 | 11,843 | 2,668 | |||||||||||||||||||||
| Income (loss) before income taxes | (6,329 | ) | (25,877 | ) | (57,841 | ) | (77,122 | ) | (190,648 | ) | ||||||||||||||||
| Provision for (benefit from) income taxes | (9,381 | ) | 991 | (783 | ) | (6,810 | ) | (9,874 | ) | |||||||||||||||||
| Net income (loss) | $ | 3,052 | $ | (26,868 | ) | $ | (57,058 | ) | $ | (70,312 | ) | $ | (180,774 | ) | ||||||||||||
| Net income (loss) per share: | ||||||||||||||||||||||||||
| Basic | $ | 0.00 | $ | (0.03 | ) | $ | (0.06 | ) | $ | (0.08 | ) | $ | (0.21 | ) | ||||||||||||
| Diluted | $ | 0.00 | $ | (0.03 | ) | $ | (0.06 | ) | $ | (0.08 | ) | $ | (0.21 | ) | ||||||||||||
| Weighted average common shares used to compute net income (loss) per share: | ||||||||||||||||||||||||||
| Basic | 921,116 | 911,699 | 884,021 | 910,469 | 869,178 | |||||||||||||||||||||
| Diluted | 940,032 | 911,699 | 884,021 | 910,469 | 869,178 | |||||||||||||||||||||
| Stock-based expense included in the above line items: | ||||||||||||||||||||||||||
| Cost of revenue | $ | 991 | $ | 772 | $ | 1,110 | $ | 2,835 | $ | 3,391 | ||||||||||||||||
| Research and development | 22,308 | 19,860 | 24,281 | 70,485 | 60,293 | |||||||||||||||||||||
| Sales and marketing | 2,045 | 1,617 | 1,187 | 5,181 | 4,505 | |||||||||||||||||||||
| General and administrative | 5,092 | 5,656 | 9,717 | 21,302 | 25,279 | |||||||||||||||||||||
| Total stock-based expense | $ | 30,436 | $ | 27,905 | $ | 36,295 | $ | 99,803 | $ | 93,468 | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||||||||||
| (In thousands, unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| Operating activities | ||||||||||||||||||||||||||
| Net income (loss) | $ | 3,052 | $ | (26,868 | ) | $ | (57,058 | ) | $ | (70,312 | ) | $ | (180,774 | ) | ||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||||
| Depreciation and amortization | 11,287 | 13,340 | 19,283 | 42,349 | 64,553 | |||||||||||||||||||||
| Stock-based expense | 30,436 | 27,905 | 36,295 | 99,803 | 93,468 | |||||||||||||||||||||
| Accretion and amortization on marketable securities | 1,057 | 1,797 | 2,385 | 4,941 | 7,783 | |||||||||||||||||||||
| (Gain) loss from sales of investments, assets and other, net | (633 | ) | 406 | 853 | (6,283 | ) | 2,131 | |||||||||||||||||||
| Tax benefits (costs) from stock-based awards | 90 | - | - | 90 | - | |||||||||||||||||||||
| Excess tax benefits from stock-based awards | (90 | ) | - | - | (90 | ) | - | |||||||||||||||||||
| Deferred income taxes | (10,392 | ) | 243 | (1,038 | ) | (9,151 | ) | (10,113 | ) | |||||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||||||||
| Accounts receivable, net | (4,313 | ) | (3,233 | ) | (2,560 | ) | 2,544 | (13,443 | ) | |||||||||||||||||
| Income tax receivable | (183 | ) | (331 | ) | 4,478 | (1,712 | ) | 3,200 | ||||||||||||||||||
| Other assets | (3,068 | ) | (1,105 | ) | 4,032 | (11,860 | ) | (3,860 | ) | |||||||||||||||||
| Accounts payable | (536 | ) | 11,699 | (7,503 | ) | 12,226 | (5,919 | ) | ||||||||||||||||||
| Deferred revenue | (19,757 | ) | (25,457 | ) | (1,123 | ) | (61,097 | ) | 13,838 | |||||||||||||||||
| Other liabilities | (12,062 | ) | 5,806 | (460 | ) | (49,360 | ) | 20,280 | ||||||||||||||||||
| Net cash provided by (used in) operating activities | (5,112 | ) | 4,202 | (2,416 | ) | (47,912 | ) | (8,856 | ) | |||||||||||||||||
| Investing activities | ||||||||||||||||||||||||||
| Purchase of marketable securities | - | - | (147,082 | ) | (101,091 | ) | (617,256 | ) | ||||||||||||||||||
| Sales and maturities of marketable securities | 211,350 | 256,112 | 141,286 | 702,017 | 667,706 | |||||||||||||||||||||
| Acquisition of property and equipment | (1,608 | ) | (3,127 | ) | (2,429 | ) | (6,847 | ) | (7,078 | ) | ||||||||||||||||
| Proceeds from sale of property and equipment | 750 | - | 3 | 750 | 5,059 | |||||||||||||||||||||
| Business acquisition, net of cash acquired | (20,023 | ) | - | (718 | ) | (20,023 | ) | (391,711 | ) | |||||||||||||||||
| Proceeds from sale of equity method investment | - | - | - | 10,507 | - | |||||||||||||||||||||
| Other investing activities, net | - | - | (343 | ) | - | 357 | ||||||||||||||||||||
| Net cash provided by (used in) investing activities | 190,469 | 252,985 | (9,283 | ) | 585,313 | (342,923 | ) | |||||||||||||||||||
| Financing activities | ||||||||||||||||||||||||||
| Taxes paid related to net share settlement of equity awards | (453 | ) | (405 | ) | (210 | ) | (1,866 | ) | (963 | ) | ||||||||||||||||
| Proceeds from employee stock purchase plan and exercise of stock options | 2,957 | 945 | 4,805 | 7,292 | 15,728 | |||||||||||||||||||||
| Excess tax benefits from stock-based awards | 90 | - | - | 90 | - | |||||||||||||||||||||
| Acquisition related contingent consideration payment | - | - | - | (10,790 | ) | - | ||||||||||||||||||||
| Net cash provided by (used in) financing activities | 2,594 | 540 | 4,595 | (5,274 | ) | 14,765 | ||||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (359 | ) | 246 | (246 | ) | (410 | ) | (231 | ) | |||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 187,592 | 257,973 | (7,350 | ) | 531,717 | (337,245 | ) | |||||||||||||||||||
| Cash and cash equivalents, beginning of period | 475,428 | 217,455 | 135,628 | 131,303 | 465,523 | |||||||||||||||||||||
| Cash and cash equivalents, end of period | $ | 663,020 | $ | 475,428 | $ | 128,278 | 663,020 | $ | 128,278 | |||||||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP RESULTS | ||||||||||||||||||||||||
| (In thousands, except per share data, unaudited) | ||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| Reconciliation of Revenue to Bookings | ||||||||||||||||||||||||
| Revenue | $ | 195,737 | $ | 199,918 | $ | 176,611 | $ | 578,948 | $ | 497,863 | ||||||||||||||
| Change in deferred revenue | (19,758 | ) | (25,456 | ) | (1,123 | ) | (61,097 | ) | 14,085 | |||||||||||||||
| Bookings | $ | 175,979 | $ | 174,462 | $ | 175,488 | $ | 517,851 | $ | 511,948 | ||||||||||||||
| Reconciliation of Net income (loss) to Adjusted EBITDA | ||||||||||||||||||||||||
| Net income (loss) | $ | 3,052 | $ | (26,868 | ) | $ | (57,058 | ) | $ | (70,312 | ) | $ | (180,774 | ) | ||||||||||
| Provision for (benefit from) income taxes | (9,381 | ) | 991 | (783 | ) | (6,810 | ) | (9,874 | ) | |||||||||||||||
| Other income (expense), net | (2,285 | ) | (1,199 | ) | (647 | ) | (11,843 | ) | (2,668 | ) | ||||||||||||||
| Interest income (expense), net | (566 | ) | (605 | ) | (841 | ) | (1,965 | ) | (2,487 | ) | ||||||||||||||
| Restructuring expense, net | 416 | 12,855 | 287 | 16,732 | 27,672 | |||||||||||||||||||
| Gain (loss) on legal settlements | (1,681 | ) | - | - | (1,681 | ) | - | |||||||||||||||||
| Depreciation and amortization | 11,287 | 13,340 | 19,283 | 42,349 | 64,553 | |||||||||||||||||||
| Acquisition-related transaction expenses | 895 | - | - | 895 | 6,425 | |||||||||||||||||||
| Contingent consideration fair value adjustment | - | - | 6,750 | 9,400 | 20,100 | |||||||||||||||||||
| Stock-based expense | 30,436 | 27,905 | 36,295 | 99,803 | 93,468 | |||||||||||||||||||
| Change in deferred revenue | (19,758 | ) | (25,456 | ) | (1,123 | ) | (61,097 | ) | 14,085 | |||||||||||||||
| Adjusted EBITDA | $ | 12,415 | $ | 963 | $ | 2,163 | $ | 15,471 | $ | 30,500 | ||||||||||||||
| Reconciliation of Net income (loss) to Non-GAAP net income (loss) | ||||||||||||||||||||||||
| Net income (loss) | $ | 3,052 | $ | (26,868 | ) | $ | (57,058 | ) | $ | (70,312 | ) | $ | (180,774 | ) | ||||||||||
| Acquisition-related transaction expenses | 895 | - | - | 895 | 6,425 | |||||||||||||||||||
| Contingent consideration fair value adjustment | - | - | 6,750 | 9,400 | 20,100 | |||||||||||||||||||
| Stock-based expense | 30,436 | 27,905 | 36,295 | 99,803 | 93,468 | |||||||||||||||||||
| Amortization of intangible assets from acquisitions | 6,233 | 6,160 | 6,710 | 18,657 | 15,908 | |||||||||||||||||||
| Change in deferred revenue | (19,758 | ) | (25,456 | ) | (1,123 | ) | (61,097 | ) | 14,085 | |||||||||||||||
| Restructuring expense, net | 416 | 12,855 | 287 | 16,732 | 27,672 | |||||||||||||||||||
| Gain (loss) on legal settlements | (1,681 | ) | - | - | (1,681 | ) | - | |||||||||||||||||
| Tax effect of non-GAAP adjustments to net income (loss) | (15,912 | ) | (2,174 | ) | 1,458 | (23,007 | ) | (7,015 | ) | |||||||||||||||
| Non-GAAP net income (loss) | $ | 3,681 | $ | (7,578 | ) | $ | (6,681 | ) | $ | (10,610 | ) | $ | (10,131 | ) | ||||||||||
| GAAP and Non-GAAP diluted shares | 940,032 | 911,699 | 884,021 | 910,469 | 869,178 | |||||||||||||||||||
| Non-GAAP net income (loss) per share: | $ | 0.00 | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||||
| Reconciliation of Cash provided by (used in) operating activities to Free cash flow | ||||||||||||||||||||||||
| Net cash provided by (used in) operating activities | (5,112 | ) | 4,202 | (2,416 | ) | (47,912 | ) | (8,856 | ) | |||||||||||||||
| Acquisition of property and equipment | (1,608 | ) | (3,127 | ) | (2,429 | ) | (6,847 | ) | (7,078 | ) | ||||||||||||||
| Excess tax benefits (loss) from stock-based awards | 90 | - | - | 90 | - | |||||||||||||||||||
| Free cash flow | $ | (6,630 | ) | $ | 1,075 | $ | (4,845 | ) | $ | (54,669 | ) | $ | (15,934 | ) | ||||||||||
| Reconciliation of GAAP to Non-GAAP provision for (benefit from) income taxes | ||||||||||||||||||||||||
| GAAP provision for (benefit from) income taxes | (9,381 | ) | 991 | (783 | ) | (6,810 | ) | (9,874 | ) | |||||||||||||||
| Stock-based expense | 7,351 | 2,847 | (72 | ) | 14,762 | 3,691 | ||||||||||||||||||
| Amortization of intangible assets from acquisitions | 3,858 | 643 | 23 | 5,190 | 629 | |||||||||||||||||||
| Acquisition-related transaction expenses | 1,248 | - | (169 | ) | 1,248 | 254 | ||||||||||||||||||
| Contingent consideration fair value adjustment | - | - | (85 | ) | 1,035 | 793 | ||||||||||||||||||
| Change in deferred revenue | (562 | ) | (2,685 | ) | (445 | ) | (4,995 | ) | 556 | |||||||||||||||
| Restructuring expense, net | 2,905 | 1,369 | (710 | ) | 4,655 | 1,092 | ||||||||||||||||||
| Gain (loss) on legal settlements | 1,112 | - | - | 1,112 | - | |||||||||||||||||||
| Non-GAAP provision for (benefit from) income taxes | $ | 6,531 | $ | 3,165 | $ | (2,241 | ) | $ | 16,197 | $ | (2,859 | ) | ||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP FOURTH QUARTER 2015 OUTLOOK | ||||
| (In thousands, except per share data, unaudited) | ||||
| Fourth Quarter 2015 | ||||
| Reconciliation of Revenue to Bookings | ||||
| Revenue range | $ | 170,000 - 185,000 | ||
| Change in deferred revenue | (5,000 | ) | ||
| Bookings range | $ | 165,000 - 180,000 | ||
| Reconciliation of Net income (loss) to Adjusted EBITDA | ||||
| Net income (loss) range | $ | (75,000) - (53,000) | ||
| Provision for (benefit from) income taxes | 0 - 3,000 | |||
| Other income (expense), net | (2,000 | ) | ||
| Interest income (expense), net | (1,000 | ) | ||
| Restructuring expense, net | 31,000 - 21,000 | |||
| Depreciation and amortization | 12,000 | |||
| Stock-based expense | 35,000 - 30,000 | |||
| Change in deferred revenue | (5,000 | ) | ||
| Adjusted EBITDA range | $ | (5,000) - 5,000 | ||
| Reconciliation of Net income (loss) to Non-GAAP net income (loss) | ||||
| Net income (loss) range | $ | (75,000) - (53,000) | ||
| Stock-based expense | 35,000 - 30,000 | |||
| Amortization of intangible assets from acquisitions | 7,000 | |||
| Change in deferred revenue | (5,000 | ) | ||
| Restructuring expense, net | 31,000 - 21,000 | |||
| Tax effect of non-GAAP adjustments to net income (loss) | (1,000) - (2,000) | |||
| Non-GAAP net income (loss) range | $ | (8,000) - (2,000) | ||
| GAAP and Non-GAAP diluted shares | 933,000 | |||
| Net income (loss) per share range | $ | (0.08) - (0.06) | ||
| Non-GAAP net income (loss) per share range | $ | (0.01) - (0.00) | ||
Investors -Melissa Fisher 415-339-5266 investors@zynga.com Press -Stephanie Hess 415-503-0303 press@zynga.com
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