Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

February 14, 2012

Date of Report (Date of earliest event reported)

 

 

Zynga Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-35375   42-1733483

(State or other jurisdiction of

incorporation or organization)

 

(Commission

File No.)

 

(I.R.S. employer

identification number)

699 Eighth Street

San Francisco, CA 94103

(Address of principal executive offices, including zip code)

(855) 449-9642

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition

On February 14, 2012, Zynga Inc. (the “Company”) issued a press release announcing financial results for the quarter ended December 31, 2011. A copy of the press release is furnished as Exhibit 99.1 to this Current Report and is incorporated herein by reference.

The information furnished on this Form 8-K, including the exhibit attached, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any other filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) The following exhibit is filed with this report on Form 8-K:

 

Exhibit

Number

   Description
99.1   

Press release issued by Zynga Inc. entitled “Zynga Reports Fourth Quarter and Full Year 2011 Financial Results,” dated

February 14, 2012.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    Zynga Inc.
Date: February 14, 2012   By:  

/s/ David M. Wehner

    David M. Wehner
    Chief Financial Officer


INDEX TO EXHIBITS

 

Exhibit
Number

  

Description

99.1    Press release, dated February 14, 2012, entitled “Zynga Reports Fourth Quarter and Full Year 2011 Financial Results.”
Press Release

Exhibit 99.1

 

LOGO

Press Release

Zynga Reports Fourth Quarter and Full Year 2011 Financial Results

- Q4 Record Bookings of $306.5 Million, Up 26% Year-Over-Year and Up 7% From Q3

- Strong Growth in Player Network with 153 Million Monthly Unique Users in Q4

SAN FRANCISCO, Calif. – February 14, 2012 – Zynga Inc. (NASDAQ: ZNGA), the world’s leading provider of social game services, today announced financial results for the fourth quarter and full year ended December 31, 2011.

 

   

Full year 2011 record bookings of $1.16 billion, up 38% year-over-year, and revenue of $1.14 billion, up 91% year-over-year

 

   

Full year 2011 adjusted EBITDA of $303.3 million

 

   

Full year 2011 non-GAAP EPS of $0.24 and GAAP EPS of ($1.40)

 

   

Q4 record bookings of $306.5 million, up 26% year-over-year and up 7% from the prior quarter

 

   

Q4 adjusted EBITDA of $67.8 million, down 34% year-over-year

 

   

Q4 non-GAAP EPS of $0.05

Founder and CEO Mark Pincus said, “2011 was another milestone year for Zynga’s mission of connecting the world through games. We are seeing social games and more broadly play become one of the most popular pastimes on web and mobile. Zynga set new records in the year in terms of audience size, revenues and bookings. We saw great momentum in mobile and advertising and ended the year with a strong pipeline of new games. We are excited about the opportunities in front of us to continue delighting our current players and to bring play to millions of new people.”

Financial Highlights (in thousands, except per share data)

 

     Quarter ended      Year ended  
     Dec 31, 2011     Dec 31, 2010      Dec 31, 2011     Dec 31, 2010  

Non-GAAP Results

         

Bookings

   $ 306,507      $ 243,499       $ 1,155,509      $ 838,896   

Adjusted EBITDA

   $ 67,801      $ 103,192       $ 303,274      $ 392,738   

Non-GAAP net income

   $ 37,153      $ 63,159       $ 182,483      $ 238,900   

Non-GAAP earnings per share

   $ 0.05      $ 0.09       $ 0.24      $ 0.38   

GAAP Results

         

Revenue

   $ 311,237      $ 195,759       $ 1,140,100      $ 597,459   

Net income (loss)

   $ (435,005   $ 42,992       $ (404,316   $ 90,595   

Diluted net income (loss) per share

   $ (1.22   $ 0.05       $ (1.40   $ 0.11   

Business Highlights

 

   

Daily active users (DAUs) increased from 48 million in the fourth quarter of 2010 to 54 million in the fourth quarter of 2011, up 13%.

 

   

Monthly active users (MAUs) increased from 195 million in the fourth quarter of 2010 to 240 million in the fourth quarter of 2011, up 23%.

 

   

Monthly unique users (MUUs) increased from 111 million in the fourth quarter of 2010 to 153 million in the fourth quarter of 2011, up 38%.

 

   

Average daily bookings per average DAU (ABPU) increased from $0.055 in the fourth quarter of 2010 to $0.061 in the fourth quarter of 2011, up 11%.

 

   

Monthly Unique Payers (MUPs) increased from 2.6 million in the third quarter of 2011 to 2.9 million in the fourth quarter of 2011, up 13%.

 

   

Zynga launched 12 games during 2011, including 4 titles on web-based platforms and 8 titles on mobile platforms.


   

As of December 31, 2011, Zynga had the top 5 most played games on Facebook, based on DAUs, including CastleVille, which launched in the fourth quarter of 2011 and reached 7 million DAUs in two weeks.

 

   

Zynga saw strong growth from mobile games in Q4 primarily from titles Dream Zoo, Words with Friends and Zynga Poker. These three games were among the top 10 grossing games on the iOS platform during the quarter.

2011 Annual Financial Summary

 

   

Bookings: Bookings were at a record level of $1.16 billion in 2011, an increase of 38% on a year-over-year basis.

 

   

Revenue: Revenue was $1.14 billion in 2011, an increase of 91% on a year-over-year basis. Online game revenue was $1.07 billion, an increase of 85% on a year-over-year basis. Advertising revenue was $74.5 million, an increase of 226% on a year-over-year basis.

 

   

Adjusted EBITDA: Adjusted EBITDA was $303.3 million in 2011, a decrease of 23% year-over-year, largely due to our increased investment in developing new games.

 

   

Net income (loss): GAAP net loss was $404.3 million in 2011, which included $510 million of stock-based compensation expense for restricted stock units issued to employees that, in accordance with GAAP, was previously unrecognized until the occurrence of a liquidity event, triggered by the Company’s initial public offering.

 

   

Non-GAAP net income: Non-GAAP net income was $182.5 million in 2011, a decrease of 24% year-over-year, largely due to our increased investment in developing new games.

 

   

EPS: Diluted EPS was ($1.40) for the full year 2011, compared to $0.11 for the full year 2010.

 

   

Non-GAAP EPS: Non-GAAP EPS was $0.24 for the full year 2011, compared to $0.38 for the full year 2010.

 

   

Cash flow: Cash flow from operations was $389.2 million for the full year 2011 compared to $326.4 million for the full year 2010. Free cash flow was $137.3 million for the full year 2011 compared to $309.3 million for the full year 2010.

Fourth Quarter Financial Summary

 

   

Bookings: Bookings were at a record level of $306.5 million for the fourth quarter of 2011, an increase of 26% compared to the fourth quarter of 2010 and an increase of 7% compared to the third quarter of 2011.

 

   

Revenue: Revenue was $311.2 million for the fourth quarter of 2011, an increase of 59% compared to the fourth quarter of 2010 and an increase of 1% compared to the third quarter of 2011. Online game revenue was $283.9 million, an increase of 51% compared to the fourth quarter of 2010. Advertising revenue was $27.3 million, an increase of 230% compared to the fourth quarter of 2010.

 

   

Adjusted EBITDA: Adjusted EBITDA was $67.8 million for the fourth quarter of 2011, a decrease of 34% year-over-year due primarily to our increased investment in developing new games, and an increase of 17% from the prior quarter.

 

   

Net income (loss): Net loss was $435.0 million for the fourth quarter of 2011, which included $510 million of stock-based compensation expense for restricted stock units issued to employees that, in accordance with GAAP, was previously unrecognized until triggered by our initial public offering.

 

   

Non-GAAP net income: Non-GAAP net income was $37.2 million for the fourth quarter of 2011, a decrease of 41% compared to the fourth quarter of 2010.

 

2


   

EPS: Diluted EPS was ($1.22) for the fourth quarter of 2011 compared to $0.05 for the fourth quarter of 2010.

 

   

Non-GAAP EPS: Non-GAAP EPS was $0.05 for the fourth quarter of 2011 compared to $0.09 for the fourth quarter of 2010.

 

   

Cash and cash flow: As of December 31, 2011, cash, cash equivalents and marketable securities were $1.92 billion, compared to $738.1 million as of December 31, 2010. Cash flow from operations was $164.0 million for the fourth quarter of 2011, compared to $57.8 million for the fourth quarter of 2010. Free cash flow was $101.9 million for the fourth quarter of 2011, compared to $86.4 million for the fourth quarter of 2010.

2012 Outlook

As of today, we are providing the following outlook for 2012:

 

   

Bookings are projected to be in the range of $1.35 billion to $1.45 billion. We expect that growth will be weighted towards the back-half of the year with slower sequential growth in the first half of the year.

 

   

Adjusted EBITDA is projected to be in the range of $390 million to $440 million.

 

   

Stock-based compensation expense is projected to be in the range of $400 million to $425 million excluding the impact of equity awards granted in connection with potential future acquisitions.

 

   

Capital expenditures are projected to be in the range of $140 million to $160 million. Our effective tax rate for non-GAAP net income is projected to be in the range of 20% to 25%.

 

   

We project non-GAAP weighted-average diluted shares outstanding to be approximately 865 million shares in Q1 2012 and approximately 890 million shares in Q4 2012. Full year 2012 non-GAAP EPS is projected to be in the range of $0.24 to $0.28.

Conference Call Details:

Zynga will host a conference call today, February 14, 2012, at 2:00 pm Pacific Time (5:00 pm Eastern Time) to discuss financial results. A live webcast of the conference call and supplemental slides will be accessible from the Investor Relations page of our website at http://investor.zynga.com, and a replay will be archived and accessible at the same website after the call. The conference call can also be accessed via dial-in:

Toll-Free Dial-In Number: (866) 515-9839

International Dial-In Number: (408) 774-4582

Conference ID: 46506257

A replay of the conference call will be available on the Investor Relations website, or via dial-in:

Replay Dial In: (855) 859-2056

Replay Dial In: (404) 537-3406

Conference ID: 46506257

About Zynga (www.zynga.com):

Zynga Inc. (NASDAQ: ZNGA) is the world’s leading provider of social game services with more than 240 million monthly active users playing its games, which include CityVille, FarmVille, Words With Friends, Scramble With Friends, CastleVille, Hidden Chronicles, Zynga Poker, Empires & Allies, Indiana Jones™ Adventure World, The Pioneer Trail, Mafia Wars and Café World. Zynga’s games are available on a number of global platforms, including Facebook, Google+, Tencent, Apple iOS and Google Android. Through Zynga.org, Zynga players have raised more than $10 million for world social causes. Zynga is headquartered in San Francisco, Calif.

Forward-Looking Statements

This press release contains forward-looking statements relating to, among other things, our outlook for full year 2012 bookings, adjusted EBITDA, stock-based compensation expense, capital expenditures, weighted average diluted shares, effective tax rate and non-GAAP EPS; our higher growth rate in the back-half of 2012; our launch of successful new games; the growth of the social games market, including mobile and advertising growth; and our future operational plans. 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 ability to launch new games in a timely manner and monetize these games, our ability to control expenses, competition, changing interests of players, intellectual property disputes or other litigation, changes in the Facebook platform or our relationship with Facebook, acquisitions by us and changes in corporate strategy or management.

 

3


More information about factors that could affect our operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our registration statement on Form S-1, as amended, filed with the Securities and Exchange Commission on December 15, 2011, copies of which may be obtained by visiting our Investor Relations web site at http://investor.zynga.com or the SEC’s web site at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to us on the date hereof. We assume no obligation to update such statements. The results we report in our Annual Report on Form 10-K for the year ended December 31, 2011 could differ from the preliminary results we have announced in this press release.

DAU, MAU, MUU, and MUP figures presented above represent the average for each period 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. The figures presented in this press release represent the quarterly average of the three months within each quarter presented. MUPs does 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. Unique payer data for our mobile games for the third and fourth quarters of 2011 became available during the fourth quarter of 2011, and all MUP data in this press release includes mobile payer data.

Non-GAAP Financial Measures:

We have provided in this release non-GAAP financial information including bookings, adjusted EBITDA, free cash flow, non-GAAP net income and non-GAAP EPS, as a supplement to the consolidated financial statements, which are prepared in accordance with generally accepted accounting principles (“GAAP”). Management uses these non-GAAP financial measures internally in analyzing our financial results to assess operational performance and liquidity. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key financial metrics we use in making operating decisions and because our investors and analysts use them to help assess the health of our business. We have provided reconciliations between our non-GAAP financial measures to the most directly comparable GAAP financial measures. However, we have not provided reconciliation of bookings outlook to revenue, adjusted EBITDA outlook to net income (loss), non-GAAP effective tax rate outlook to GAAP effective tax rate or non-GAAP EPS outlook to GAAP EPS because certain reconciling items necessary to accurately project revenue (including the projected mix of virtual goods sold in our games, and the projected estimated average lives of durable virtual goods for our games) are not in our control and cannot be reasonably projected due to variability from period to period caused by changes in player behavior and other factors. As revenue and/or net income for the applicable future period is a necessary input to determine all of these comparable GAAP figures, we are not able to provide these reconciliations. Accordingly, a reconciliation to revenue, net income (loss), GAAP effective tax rate and GAAP EPS is not available without unreasonable effort.

Some limitations of bookings, adjusted EBITDA, non-GAAP net income, free cash flow and non-GAAP EPS are:

 

   

Adjusted EBITDA and non-GAAP net income do not include the impact of stock-based compensation;

 

   

Bookings, adjusted EBITDA and non-GAAP net income do not reflect that we defer and recognize revenue over the estimated average life of virtual goods or as virtual goods are consumed;

 

   

Adjusted EBITDA does not reflect income tax expense;

 

   

Adjusted EBITDA does not include other income and expense, which includes foreign exchange gains and losses;

 

   

Adjusted EBITDA excludes both depreciation and amortization of intangible assets, while non-GAAP net income 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;

 

4


   

Adjusted EBITDA and non-GAAP net income do not include gains and losses associated with legal settlements;

 

   

Free cash flow is derived from net cash provided by operating activities less cash spent on capital expenditures, and removing the excess income tax benefits or costs associated with stock-based awards;

 

   

Non-GAAP EPS treats shares of convertible preferred stock as if they had converted to common stock at the beginning of each period presented;

 

   

Non-GAAP EPS gives effect to all dilutive awards outstanding, including stock options, warrants and unvested restricted stock units that were excluded from the GAAP diluted earnings per share calculation. See non-GAAP EPS reconciliation for further details; and

 

   

Other companies, including companies in our industry, may calculate bookings, adjusted EBITDA, non-GAAP net income and non-GAAP EPS 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, free cash flow and non-GAAP EPS along with other financial performance measures, including revenue, net income and our financial results presented in accordance with GAAP.

Contact:

Investors - Mike Gupta

415-339-5266

investors@zynga.com

Press - Dani Dudeck

415-503-0303

press@zynga.com

 

5


ZYNGA INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)

 

     December 31,  
     2011     2010  

Current assets:

    

Cash and cash equivalents

   $ 1,582,343      $ 187,831   

Marketable securities

     225,165        550,259   

Accounts receivable

     135,633        79,974   

Income tax receivable

     18,583        36,577   

Deferred tax assets

     23,515        24,399   

Restricted cash

     3,846        2,821   

Other current assets

     34,824        24,353   
  

 

 

   

 

 

 

Total current assets

     2,023,909        906,214   

Marketable securities

     110,098        —     

Goodwill

     91,765        60,217   

Other intangible assets, net

     32,112        44,001   

Property and equipment, net

     246,740        74,959   

Restricted cash

     4,082        14,301   

Other long-term assets

     7,940        12,880   
  

 

 

   

 

 

 

Total Assets

   $ 2,516,646      $ 1,112,572   
  

 

 

   

 

 

 

Current liabilities:

    

Accounts payable

   $ 44,020      $ 33,431   

Other current liabilities

     167,271        78,749   

Income tax payable

     —          —     

Current deferred revenue

     457,394        408,470   
  

 

 

   

 

 

 

Total current liabilities

     668,685        520,650   

Deferred revenue

     23,251        56,766   

Deferred tax liabilities

     13,950        14,123   

Other non-current liabilities

     61,221        38,818   
  

 

 

   

 

 

 

Total Liabilities

     767,107        630,357   

Stockholders’ equity:

    

Preferred stock

     —          394,026   

Common stock

     4        2   

Additional paid-in capital

     2,426,164        79,335   

Treasury stock

     (282,897     (1,484

Other comprehensive income

     362        114   

Retained earnings

     (394,094     10,222   
  

 

 

   

 

 

 

Total stockholders’ equity

     1,749,539        482,215   
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 2,516,646      $ 1,112,572   
  

 

 

   

 

 

 

 

6


ZYNGA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data, unaudited)

 

     Three months ended     Twelve months ended  
     December 31,     December 31,  
     2011     2010     2011     2010  

Revenue:

        

Online game

   $ 283,910      $ 187,481      $ 1,065,648      $ 574,632   

Advertising

     27,327        8,278        74,452        22,827   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     311,237        195,759        1,140,100        597,459   

Costs and expenses:

        

Cost of revenue

     104,135        51,603        330,043        176,052   

Research and development

     444,702        51,500        727,018        149,519   

Sales and marketing

     112,228        38,280        234,199        114,165   

General and administrative

     136,733        (17,088     254,456        32,251   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

     797,798        124,295        1,545,716        471,987   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     (486,561     71,464        (405,616     125,472   

Interest income

     457        473        1,680        1,222   

Other income (expense), net

     (1,933     (113     (2,206     365   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (488,037     71,824        (406,142     127,059   

Provision for (benefit from) income taxes

     (53,032     28,832        (1,826     36,464   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (435,005   $ 42,992      $ (404,316   $ 90,595   
  

 

 

   

 

 

   

 

 

   

 

 

 

Deemed dividend to a Series B-2 convertible preferred stockholder

     —          —          —          4,590   

Net income attributable to participating securities

     —          26,932        —          58,110   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common stockholders

   $ (435,005   $ 16,060      $ (404,316   $ 27,895   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share attributable to common stockholders:

        

Basic

   $ (1.22   $ 0.06      $ (1.40   $ 0.12   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted (1)

   $ (1.22   $ 0.05      $ (1.40   $ 0.11   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares used to compute net income (loss) per share atributable to common stockholders:

        

Basic

     356,305        252,883        288,599        223,881   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     356,305        359,769        288,599        329,256   
  

 

 

   

 

 

   

 

 

   

 

 

 

Stock-based compensation included in the above line items:

        

Cost of revenue

   $ 16,058      $ 543      $ 17,660      $ 2,128   

Research and development

     334,227        5,251        374,920        10,242   

Sales and marketing

     71,225        2,979        81,326        7,899   

General and administrative

     108,461        1,422        126,306        5,425   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stock-based compensation

   $ 529,971      $ 10,195      $ 600,212      $ 25,694   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) For periods when we have net income, diluted earnings per share results cannot be recalculated using the numbers above due to reallocation of net income as required by the two-class method. Refer to the Net income (loss) per share footnote in the Company’s filings for further details.

 

7


ZYNGA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 

     Three months ended     Twelve months ended  
     December 31,     December 31,  
     2011     2010     2011     2010  

Net income (loss)

   $ (435,005   $ 42,992      $ (404,316   $ 90,595   

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

        

Depreciation and amortization

     31,266        13,139        95,414        39,481   

Stock-based compensation expense

     528,785        9,662        583,453        23,782   

Loss on equity method investment

     —          192        —          558   

Common stock warrant issued in connection with services

     1,186        533        16,759        1,912   

Accretion and amortization on marketable securities

     646        851        2,873        1,746   

Loss from sale of property and equipment

     830        —          1,016        —     

(Gain) from sale of investment

     —          —          (1,566     —     

Excess tax (benefits) costs from stock-based awards

     11,720        (39,742     13,750        (39,742

Deferred income taxes

     4,367        (7,361     4,367        (8,469

Changes in operating assets and liabilities:

        

Accounts receivable, net

     (16,156     (24,200     (55,432     (69,518

Income tax receivable

     (14,626     (25,799     17,994        (25,287

Other assets

     7,555        (1,448     (14,559     (32,495

Accounts payable

     (8,466     1,822        10,373        10,626   

Deferred revenue

     (4,730     47,740        15,409        241,437   

Other liabilities

     56,587        39,444        103,637        91,786   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     163,959        57,825        389,172        326,412   

Investing activities

        

Purchase of marketable securities

     (137,408     (91,331     (649,972     (804,542

Sales of marketable securities

     6,586        —          19,206        4,222   

Maturities of marketable securities

     116,245        97,368        841,560        319,820   

Acquisition of property and equipment

     (50,355     (11,170     (238,091     (56,839

Proceeds from sale of property and equipment

     81        —          153        —     

Acquisition of purchased technology and other intangible assets

     (80     (60     (3,792     (1,078

Business acquisitions, net of acquired cash

     (4,823     (43,740     (42,774     (62,277

Restricted cash

     16,878        (3,190     9,194        (16,469

Proceeds from sale of investment

     —          —          2,049        —     

Purchase of other investments

     —          (75     (988     (275
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (52,876     (52,198     (63,455     (617,438

 

8


ZYNGA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(In thousands, unaudited)

 

     Three months ended     Twelve months ended  
     December 31,     December 31,  
     2011     2010     2011     2010  

Financing activities

        

Proceeds from initial public offering, net of offering costs

   $ 961,402      $ —        $ 961,402      $ —     

Taxes paid related to net share settlement of equity awards

     (83,232     —          (83,232     —     

Repurchase of common stock

     —          (191     (283,770     (1,484

Exercise of stock options

     550        2,735        2,756        3,358   

Excess tax benefits (costs) from stock-based awards

     (11,720     39,742        (13,750     39,742   

Net proceeds from issuance of preferred stock

     —          —          485,300        309,821   

Exercise of warrants

     113        —          138        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by financing activities

     867,113        42,286        1,068,844        351,437   

Effect of exchange rate changes on cash and cash equivalents

     (68     43        (49     84   

Net increase in cash and cash equivalents

     978,128        47,956        1,394,512        60,495   

Cash and cash equivalents, beginning of year

     604,215        139,875        187,831        127,336   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 1,582,343      $ 187,831      $ 1,582,343      $ 187,831   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

9


ZYNGA INC.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(In thousands, except per share data, unaudited)

 

     Three months ended     Twelve months ended  
     December 31,     December 31,  
     2011     2010     2011     2010  

Reconciliation of Revenue to Bookings

        

Revenue

   $ 311,237      $ 195,759      $ 1,140,100      $ 597,459   

Change in deferred revenue

     (4,730     47,740        15,409        241,437   
  

 

 

   

 

 

   

 

 

   

 

 

 

Bookings

   $ 306,507      $ 243,499      $ 1,155,509      $ 838,896   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of Net income to Adjusted EBITDA

        

Net income

   $ (435,005   $ 42,992      $ (404,316   $ 90,595   

Provision for (benefit from) income taxes

     (53,032     28,832        (1,826     36,464   

Other income (expense), net

     1,933        113        2,206        (365

Interest income

     (457     (473     (1,680     (1,222

Legal settlement

     (2,145     (39,346     (2,145     (39,346

Depreciation and amortization

     31,266        13,139        95,414        39,481   

Stock-based compensation

     529,971        10,195        600,212        25,694   

Change in deferred revenue

     (4,730     47,740        15,409        241,437   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 67,801      $ 103,192      $ 303,274      $ 392,738   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of Net income to Non-GAAP net income

        

Net income

   $ (435,005   $ 42,992      $ (404,316   $ 90,595   

Stock-based compensation

     529,971        10,195        600,212        25,694   

Amortization of intangible assets from acquisitions

     7,151        4,348        26,282        8,600   

Change in deferred revenue

     (4,730     47,740        15,409        241,437   

Legal settlements

     (2,145     (39,346     (2,145     (39,346

Tax effect of non-GAAP adjustments to net income

     (58,089     (2,770     (52,959     (88,080
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income

   $ 37,153      $ 63,159      $ 182,483      $ 238,900   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of GAAP diluted shares to Non-GAAP diluted shares

        

GAAP diluted shares

     356,305        359,769        288,599        329,256   

Add back: assumed preferred stock conversion (1)

     252,428        270,727        288,833        241,963   

Add back: other dilutive equity awards (2)

     173,374        45,328        183,034        52,701   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP diluted shares

     782,107        675,824        760,466        623,920   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income per share:

   $ 0.05      $ 0.09      $ 0.24      $ 0.38   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of cash provided by operating activities to free cash flow

        

Net cash provided by operating activities

   $ 163,959     $ 57,825     $ 389,172     $ 326,412   

Acquisition of property and equipment

     (50,355     (11,170     (238,091     (56,839

Excess tax benefits from stock-based awards

     (11,720     39,742        (13,750     39,742   
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

   $ 101,884      $ 86,397      $ 137,331      $ 309,315   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 outstanding, including stock options, warrants and unvested restricted stock units that were excluded from the GAAP diluted earnings per share calculation because they were anti-dilutive as a result of our net loss position or they were considered participating securities and excluded from dilutive shares outstanding in accordance with GAAP. For comparability purposes, the impact of unvested restricted stock units, which were excluded from GAAP weighted-average diluted shares outstanding in periods prior to the IPO, are included in all periods presented.

 

10