Zynga Inc. (NASDAQ:ZNGA), a leading social game developer, today
announced financial results for the third quarter ended
September 30, 2016. In addition to today’s press release, a
copy of our Q3 2016 Quarterly Earnings Letter, which outlines our
Q3 2016 financial results and business outlook, is available on our
website at http://investor.zynga.com. Zynga management will host a
live Q&A session at 2:00 p.m. Pacific Time (5:00 p.m. Eastern
Time) today to discuss Zynga’s Q3 2016 performance.
“In Q3, we executed well on our core business and our new
launches. Our outperformance in the quarter was due to our
over-delivery on CSR2 and advertising. We successfully launched two
new, high quality mobile games, and our focus on our key live
mobile franchises is paying off as demonstrated by the strong
year-over-year growth of Zynga Poker, Social Slots and Words With
Friends. As a team, we have shown good momentum in our turnaround
in a number of key areas including (1) delivering new, high quality
mobile games, (2) growing our existing, live mobile franchises, and
(3) unlocking more operating leverage. Looking forward, we are
focused on delivering mass market, high quality social games that
drive long term engagement and audience growth,” said Frank Gibeau,
Chief Executive Officer of Zynga.
“Our Q3 GAAP revenues were above our expected range at $182.4
million, and our GAAP net loss was $41.7 million, below the low end
of our guidance range,” said Ger Griffin, Chief Financial Officer
of Zynga. “The change in deferred revenue was $14.3 million, above
our expected level of $10 million, and our bookings were above the
high end of our guidance range at $196.7 million, up 12% year over
year and 13% sequentially. Q3 Adjusted EBITDA (previously reported
methodology) was also above our guidance range at $17.9 million.
Adjusted EBITDA (new methodology) was $3.6 million. We are making
steady progress, and as we look for opportunities to create
shareholder value we continue to assess our capital allocation
strategy. As part of that effort, we are announcing a two-year,
$200 million share repurchase program. This is an initial step in
our capital allocation strategy as we look for opportunities to
deliver long term shareholder value.”
Financial Highlights
- GAAP Revenue of $182.4 million; above the high end of the
guidance range, down 7% year-over-year and flat sequentially
- GAAP Net loss of $41.7 million; below the low end of the
guidance range
- Deferred revenue balance increased by $14.3 million in Q3;
above our guidance
- Bookings of $196.7 million; above the high end of the guidance
range, up 12% year-over-year and up 13% sequentially
- Non-GAAP operating expenses of $126.5 million; up 7%
year-over-year and up 7% sequentially, driven by an increase in
marketing spend to support the launches of CSR Racing 2 and
FarmVille: Tropic Escape
- Adjusted EBITDA (previously reported methodology) of $17.9
million; above the high end of the guidance range, up 44%
year-over-year and up 55% sequentially
- Adjusted EBITDA (new methodology) of $3.6 million
- $870.8 million in cash, cash equivalents and marketable
securities, up $2.4 million from the prior quarter end
Mobile Highlights
- Mobile revenue of $145.9 million or 80% of overall revenue; up
16% year-over-year and up 6% sequentially
- Mobile bookings of $162.3 million or 83% of overall bookings;
up 34% year-over-year and up 19% sequentially
- Average Mobile Daily Active Users (mobile DAUs) of 16 million;
up 1% year-over-year and up 7% sequentially
- Apple and Google continue to be our two largest platform
partners for online game bookings
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Three Months Ended |
|
|
Nine Months Ended |
|
(in thousands, except
per share data) |
|
September 30, 2016 |
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June 30, 2016 |
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September 30, 2015 |
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|
September 30, 2016 |
|
|
September 30, 2015 |
|
GAAP
Results |
|
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|
|
Revenue |
|
$ |
182,424 |
|
|
$ |
181,735 |
|
|
$ |
195,737 |
|
|
$ |
550,880 |
|
|
$ |
578,948 |
|
Net income (loss) |
|
$ |
(41,737 |
) |
|
$ |
(4,446 |
) |
|
$ |
3,052 |
|
|
$ |
(72,741 |
) |
|
$ |
(70,312 |
) |
Diluted net income (loss)
per share |
|
$ |
(0.05 |
) |
|
$ |
(0.01 |
) |
|
$ |
0.00 |
|
|
$ |
(0.08 |
) |
|
$ |
(0.08 |
) |
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Non-GAAP
Results |
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Bookings |
|
$ |
196,723 |
|
|
$ |
174,653 |
|
|
$ |
175,979 |
|
|
$ |
553,001 |
|
|
$ |
517,851 |
|
Adjusted EBITDA (new
methodology) (1) |
|
$ |
3,580 |
|
|
$ |
18,647 |
|
|
$ |
32,173 |
|
|
$ |
38,262 |
|
|
$ |
76,568 |
|
Adjusted EBITDA
(previously reported methodology) (2) |
|
$ |
17,879 |
|
|
$ |
11,565 |
|
|
$ |
12,415 |
|
|
$ |
40,383 |
|
|
$ |
15,471 |
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(1) In
response to the SEC’s updated Compliance and Disclosure
Interpretations released on May 17, 2016, Zynga’s new methodology
for computing Adjusted EBITDA includes the change in deferred
revenue. |
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(2) On
August 4, 2016, Zynga provided financial outlook for the third
quarter of 2016, including an Adjusted EBITDA range of $12 to $16
million, which was calculated using its previously reported
methodology (i.e. excluding the change in deferred revenue).
Adjusted EBITDA under the previously reported methodology for the
third quarter of 2016 was $18 million, which reflects an adjustment
for the change in deferred revenue of $14 million. Note that we are
providing Adjusted EBITDA under the previously reported methodology
one last time this quarter for comparative purposes. |
|
Player Metrics (users and payers in
millions) |
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|
Three Months Ended |
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|
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|
September 30, |
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|
June 30, |
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|
September 30, |
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Q3'16 |
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Q3'16 |
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|
2016 |
|
|
2016 |
|
|
2015 |
|
|
Q/Q |
|
|
Y/Y |
|
Average daily active users
(DAUs) |
|
|
18 |
|
|
|
18 |
|
|
|
19 |
|
|
3 |
% |
|
|
(3 |
)% |
Average mobile DAUs |
|
|
16 |
|
|
|
15 |
|
|
|
16 |
|
|
7 |
% |
|
|
1 |
% |
Average web DAUs |
|
|
2 |
|
|
|
3 |
|
|
|
3 |
|
|
(14 |
)% |
|
|
(21 |
)% |
|
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|
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|
Average monthly active
user (MAUs) |
|
|
66 |
|
|
|
61 |
|
|
|
75 |
|
|
8 |
% |
|
|
(13 |
)% |
Average mobile MAUs |
|
|
56 |
|
|
|
49 |
|
|
|
61 |
|
|
13 |
% |
|
|
(9 |
)% |
Average web MAUs |
|
|
10 |
|
|
|
12 |
|
|
|
14 |
|
|
(13 |
)% |
|
|
(29 |
)% |
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Average daily bookings per
average DAU (ABPU) |
|
$ |
0.116 |
|
|
$ |
0.107 |
|
|
$ |
0.100 |
|
|
8 |
% |
|
|
16 |
% |
Average monthly unique
users (MUUs) (1) |
|
|
57 |
|
|
|
50 |
|
|
|
51 |
(2 |
) |
|
|
14 |
% |
|
|
12 |
% |
Average monthly unique
payers (MUPs) (1) |
|
|
1.3 |
|
|
|
0.9 |
|
|
|
0.9 |
|
|
42 |
% |
|
|
48 |
% |
Payer conversion (1) |
|
|
2.3 |
% |
|
|
1.8 |
% |
|
|
1.7 |
% |
|
24 |
% |
|
|
32 |
% |
|
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(1)
MUUs, MUPs and payer conversion exclude certain games as our
systems are unable to distinguish whether a player of these games
is also a player of other Zynga games. We exclude players of these
games to avoid potential duplication. |
For the third
quarter of 2015, CSR Racing, CSR Classics and Clumsy Ninja are
excluded from MUUs, MUPs and payer conversion. For the second
quarter of 2016, Black Diamond Casino, Vegas Diamond Slots, Yummy
Gummy and Crazy Kitchen are excluded from MUUs, MUPs and payer
conversion. For the third quarter of 2016, Vegas Diamond Slots and
Daily Celebrity Crossword are excluded from MUUs, MUPs, and payer
conversion. |
|
Third Quarter 2016 Financial Summary
- Revenue: Revenue was $182 million for the
third quarter of 2016, flat compared to the second quarter of 2016
and a decrease of 7% compared to the third quarter of 2015. Online
game revenue was $134 million, a decrease of 1% compared to the
second quarter of 2016 and a decrease of 11% compared to the third
quarter of 2015. Advertising and other revenue was $48 million, an
increase of 5% compared to the second quarter of 2016 and an
increase of 8% compared to the third quarter of 2015. Zynga Poker,
Wizard of Oz Slots, Hit It Rich! Slots and FarmVille 2 accounted
for 19%, 12%, 12%, and 11% of online game revenue, respectively,
for the third quarter of 2016 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.
- Change in deferred revenue: The change in
deferred revenue was $14 million from the second quarter of 2016 to
the third quarter of 2016.
- Bookings: Bookings were $197 million for the
third quarter of 2016, an increase of 13% compared to the second
quarter of 2016 and an increase of 12% compared to the third
quarter of 2015. The quarter-over-quarter increase in bookings was
primarily due to the launch of CSR Racing 2 at the end of June
2016.
- Net income (loss): Net loss was ($42) million
for the third quarter of 2016, compared to net loss of ($4) million
for the second quarter of 2016 and net income of $3 million for the
third quarter of 2015. The quarter-over-quarter change in net loss
was primarily due to $21 million of impairment on intangible assets
and higher costs and expenses (primarily, in order of significance,
mobile payment processing fees due to the launch of CSR Racing 2,
headcount-related expenses and marketing costs for CSR Racing 2 and
FarmVille: Tropic Escape).
- Adjusted EBITDA
- New methodology: Adjusted EBITDA, including
the change in deferred revenue, was $4 million for the third
quarter of 2016, compared to $19 million in the second quarter of
2016 and $32 million for the third quarter of 2015. The
quarter-over-quarter change in Adjusted EBITDA (new methodology)
was due to higher costs and expenses (primarily, in order of
significance, mobile payment processing fees due to the launch of
CSR Racing 2, headcount-related expenses and marketing costs for
CSR Racing 2 and FarmVille: Tropic Escape).
- Previously reported methodology: Adjusted
EBITDA, excluding the change in deferred revenue, was $18 million
for the third quarter of 2016, compared to $12 million in the
second quarter of 2016 and $12 million for the third quarter of
2015. The quarter-over-quarter change in Adjusted EBITDA
(previously reported methodology) was due to higher costs and
expenses (primarily, in order of significance, mobile payment
processing fees due to the launch of CSR Racing 2,
headcount-related expenses and marketing costs for CSR Racing 2 and
FarmVille: Tropic Escape), offset by an increase in
bookings.
- Net income (loss) per share: Diluted net
income (loss) per share was ($0.05) for the third quarter of 2016,
compared to ($0.01) for the second quarter of 2016 and $0.00 for
the third quarter of 2015.
- Cash and cash flow: As of September 30,
2016, cash, cash equivalents and marketable securities were
approximately $871 million, compared to $868 million as of
June 30, 2016. Cash flow from operations was $21 million for
the third quarter of 2016, compared to $15 million for the second
quarter of 2016 and $(5) million for the third quarter of 2015.
Free cash flow was $18 million for the third quarter of 2016
compared to $13 million for the second quarter of 2016 and $(7)
million for the third quarter of 2015.
Fourth Quarter Outlook
Zynga’s outlook for the fourth quarter of 2016 is as
follows:
GAAP:
- Revenue is projected to be in the range of $180 million to $190
million
- Net loss is projected to be in the range of ($27) million to
($25) million
- Net loss per share is projected to be ($0.03) based on a share
count projected to be approximately 889 million shares
- The change in deferred revenue is projected to be $5
million
Non-GAAP:
- Bookings are projected to be in the range of $185 million to
$195 million
- Adjusted EBITDA (new methodology) is projected to be in the
range of $12 million to $14 million
Share Repurchase Program
In November 2016, a share repurchase program was authorized for
up to $200 million of our outstanding Class A common stock
that remains in effect through the end of October 2018. The timing
and amount of any stock repurchases will be determined based on
market conditions, share price and other factors. 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. The stock repurchase program
will be funded from existing cash on hand or other sources of
funding as the Company may determine to be appropriate. Share
repurchases under these authorizations may be made through a
variety of methods, which may include open market purchases,
privately negotiated transactions, block trades, accelerated share
repurchase transactions, purchases through 10b5-1 plans or by any
combination of such methods. Repurchases of our Class A common
stock in the open market could result in increased volatility in
our stock price. There is no guarantee that we will do any share
repurchases under the program or otherwise in the future.
Conference Call Details
In addition to today’s press release, a copy of our Q3 2016
Quarterly Earnings Letter, which outlines our Q3 2016 financial
results and business outlook, is available on our website at
http://investor.zynga.com.
Zynga will host a live Q&A session today, November 2, at
2:00 pm Pacific Time (5:00 pm Eastern Time) to discuss financial
results. Questions may be asked on the call or submitted in advance
via email to investors@zynga.com, and Zynga will respond to as many
questions as possible.
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: 89556311
About Zynga Inc.
Since its founding in 2007, Zynga's mission has been to connect
the world through games. To-date, more than 1 billion people have
played Zynga's games across Web and mobile, including FarmVille,
Zynga Poker, Words With Friends, Hit it Rich! Slots and CSR Racing.
Zynga's games are available on a number of global platforms
including Apple iOS, Google Android, Facebook and Zynga.com. The
company is headquartered in San Francisco, Calif., and has
additional offices in the U.S., Canada, U.K., Ireland and India.
Learn more about Zynga at http://blog.zynga.com or follow us
on Twitter and Facebook.
Key Operating and Financial Metrics
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
quarter ended June 30, 2016 and, when filed, our Quarterly Report
on Form 10-Q for the quarter ended September 30, 2016, for our
definitions of “DAU,” “MAU,” “MUU,” “MUP” and “ABPU”.
Financial Metrics. We regularly review a number of key
financial metrics, including the following metrics, to evaluate our
business, measure our performance, identify trends in our business,
prepare financial projections and make strategic decisions.
Bookings. Bookings is a non-GAAP financial measure that is equal
to revenue recognized during the period plus the change in deferred
revenue during the period. We record the sale of virtual goods as
deferred revenue and then recognize that revenue over the estimated
average life of the purchased virtual goods or as the virtual goods
are consumed. Advertising sales, which consist of certain branded
virtual goods and sponsorships, are also deferred and recognized
over the estimated average life of the branded virtual good,
similar to online game revenue. Bookings, as opposed to revenue, is
the fundamental top-line metric we use to manage our business, as
we believe it is a useful indicator of the sales activity in a
given period. Over the long term, the factors impacting our
bookings and revenue are the same. However, in the short term,
there are factors that may cause revenue to exceed or be less than
bookings in any period.
Adjusted EBITDA (new methodology). Adjusted EBITDA (new
methodology) is a non-GAAP financial measure that we calculate as
net income (loss), adjusted for provision for (benefit from) income
taxes; other income (expense), net; interest income; gain (loss)
from significant legal settlements; restructuring expense, net;
depreciation and amortization; impairment of intangible assets;
stock-based expense; contingent consideration fair value
adjustments; and acquisition-related transaction expenses. Zynga’s
new methodology for computing Adjusted EBITDA includes the change
in deferred revenue.
Forward Looking Statements
This press release contains forward-looking statements,
including those statements relating to our outlook for the fourth
quarter of 2016 under the heading “Fourth Quarter Outlook” and
statements relating to, among other things: our momentum in our
turnaround; our ability to delivery new, high quality mobile games,
grow our existing franchises, unlock operating leverage and deliver
mass market, high quality social games that drive long term
engagement and audience growth; and the announced share repurchase
program and any potential repurchases of our shares.
Forward-looking statements often include words such as
“outlook,” “projected,” “intends,” “will,” “anticipate,” “believe,”
“target,” “expect,” and statements in the future tense are
generally forward-looking. The achievement or success of the
matters covered by such forward-looking statements involves
significant risks, uncertainties, and assumptions. Our actual
results could differ materially from those predicted or implied and
reported results should not be considered as an indication of our
future performance. Undue reliance should not be placed on
such forward-looking statements, which are based on information
available to us on the date hereof. We assume no obligation
to update such statements.
More information about factors that could affect our operating
results are or will be described in greater detail in our public
filings with the Securities and Exchange Commission (the “SEC”),
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.
Non-GAAP Financial Measures
We have provided in this press release certain non-GAAP
financial measures to supplement our consolidated financial
statements prepared in accordance with GAAP (our “GAAP financial
statements”). Management uses non-GAAP financial measures
internally in analyzing our financial results to assess operational
performance and liquidity. Our non-GAAP financial measures may be
different from non-GAAP financial measures used by other
companies.
The presentation of our non-GAAP financial measures is not
intended to be considered in isolation or as a substitute for our
GAAP financial statements. We believe that both management and
investors benefit from referring to our non-GAAP financial measures
in assessing our performance and when planning, forecasting and
analyzing future periods. We believe our non-GAAP financial
measures are useful to investors because they allow for greater
transparency with respect to key financial 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 of our non-GAAP financial
measures used in this press release to the most directly comparable
GAAP financial measures in the tables below.
Because of the following limitations of our non-GAAP financial
measures, you should consider the non-GAAP financial measures
presented in this press release with our GAAP financial statements.
Some limitations of our non-GAAP financial measures include:
- Adjusted EBITDA (new methodology) and Adjusted EBITDA
(previously reported methodology) do not include the impact of
stock-based expense, acquisition-related transaction expenses,
contingent consideration fair value adjustments and restructuring
expense;
- Bookings does 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 (new methodology) and Adjusted EBITDA
(previously reported methodology) do 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 (new methodology) and Adjusted EBITDA
(previously reported methodology) exclude depreciation and
amortization of intangible assets. Although depreciation and
amortization are non-cash charges, the assets being depreciated and
amortized may have to be replaced in the future; and
- 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.
ZYNGA INC. |
CONSOLIDATED BALANCE SHEETS |
(In thousands, unaudited) |
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2016 |
|
|
2015 |
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
866,319 |
|
|
$ |
742,217 |
|
Marketable
securities |
|
|
4,501 |
|
|
|
245,033 |
|
Accounts
receivable |
|
|
72,351 |
|
|
|
79,610 |
|
Income tax
receivable |
|
|
1,010 |
|
|
|
5,233 |
|
Restricted
cash |
|
|
2,082 |
|
|
|
209 |
|
Other
current assets |
|
|
27,718 |
|
|
|
39,988 |
|
Total current assets |
|
|
973,981 |
|
|
|
1,112,290 |
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
633,913 |
|
|
|
657,671 |
|
Other intangible assets,
net |
|
|
32,309 |
|
|
|
64,016 |
|
Property and equipment,
net |
|
|
269,285 |
|
|
|
273,221 |
|
Restricted cash |
|
|
3,050 |
|
|
|
986 |
|
Other long-term
assets |
|
|
28,021 |
|
|
|
16,446 |
|
Total assets |
|
$ |
1,940,559 |
|
|
$ |
2,124,630 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
stockholders’ equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
16,045 |
|
|
$ |
29,676 |
|
Other
current liabilities |
|
|
64,871 |
|
|
|
77,691 |
|
Deferred
revenue |
|
|
130,904 |
|
|
|
128,839 |
|
Total current
liabilities |
|
|
211,820 |
|
|
|
236,206 |
|
Deferred revenue |
|
|
260 |
|
|
|
204 |
|
Deferred tax
liabilities |
|
|
5,243 |
|
|
|
6,026 |
|
Other non-current
liabilities |
|
|
76,391 |
|
|
|
95,293 |
|
Total liabilities |
|
|
293,714 |
|
|
|
337,729 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Common stock and
additional paid in capital |
|
|
3,323,823 |
|
|
|
3,234,551 |
|
Treasury stock |
|
|
— |
|
|
|
(98,942 |
) |
Accumulated other
comprehensive income (loss) |
|
|
(106,555 |
) |
|
|
(52,388 |
) |
Accumulated deficit |
|
|
(1,570,423 |
) |
|
|
(1,296,320 |
) |
Total stockholders’
equity |
|
|
1,646,845 |
|
|
|
1,786,901 |
|
Total liabilities and
stockholders’ equity |
|
$ |
1,940,559 |
|
|
$ |
2,124,630 |
|
|
|
|
|
|
|
|
|
|
ZYNGA
INC. |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(In
thousands, except per share data, unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, 2016 |
|
|
June 30,2016 |
|
|
September 30, 2015 |
|
|
September 30, 2016 |
|
|
September 30, 2015 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online
game |
|
$ |
134,254 |
|
|
$ |
135,823 |
|
|
$ |
151,168 |
|
|
$ |
407,134 |
|
|
$ |
461,292 |
|
Advertising
and other |
|
|
48,170 |
|
|
|
45,912 |
|
|
|
44,569 |
|
|
|
143,746 |
|
|
|
117,656 |
|
Total revenue |
|
|
182,424 |
|
|
|
181,735 |
|
|
|
195,737 |
|
|
|
550,880 |
|
|
|
578,948 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenue |
|
|
62,675 |
|
|
|
56,103 |
|
|
|
57,187 |
|
|
|
175,917 |
|
|
|
172,588 |
|
Research and
development |
|
|
73,913 |
|
|
|
66,233 |
|
|
|
78,416 |
|
|
|
227,883 |
|
|
|
276,832 |
|
Sales and
marketing |
|
|
49,802 |
|
|
|
40,631 |
|
|
|
43,549 |
|
|
|
136,777 |
|
|
|
116,507 |
|
General and
administrative |
|
|
21,656 |
|
|
|
25,374 |
|
|
|
25,765 |
|
|
|
69,414 |
|
|
|
103,951 |
|
Impairment
of intangible assets |
|
|
20,677 |
|
|
|
— |
|
|
|
— |
|
|
|
20,677 |
|
|
|
— |
|
Total costs and
expenses |
|
|
228,723 |
|
|
|
188,341 |
|
|
|
204,917 |
|
|
|
630,668 |
|
|
|
669,878 |
|
Income (loss) from
operations |
|
|
(46,299 |
) |
|
|
(6,606 |
) |
|
|
(9,180 |
) |
|
|
(79,788 |
) |
|
|
(90,930 |
) |
Interest income |
|
|
800 |
|
|
|
761 |
|
|
|
566 |
|
|
|
2,266 |
|
|
|
1,965 |
|
Other income (expense),
net |
|
|
980 |
|
|
|
1,905 |
|
|
|
2,285 |
|
|
|
4,985 |
|
|
|
11,843 |
|
Income (loss) before
income taxes |
|
|
(44,519 |
) |
|
|
(3,940 |
) |
|
|
(6,329 |
) |
|
|
(72,537 |
) |
|
|
(77,122 |
) |
Provision for (benefit
from) income taxes |
|
|
(2,782 |
) |
|
|
506 |
|
|
|
(9,381 |
) |
|
|
204 |
|
|
|
(6,810 |
) |
Net income (loss) |
|
$ |
(41,737 |
) |
|
$ |
(4,446 |
) |
|
$ |
3,052 |
|
|
$ |
(72,741 |
) |
|
$ |
(70,312 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.05 |
) |
|
$ |
(0.01 |
) |
|
$ |
0.00 |
|
|
$ |
(0.08 |
) |
|
$ |
(0.08 |
) |
Diluted |
|
$ |
(0.05 |
) |
|
$ |
(0.01 |
) |
|
$ |
0.00 |
|
|
$ |
(0.08 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares used to compute net income (loss) per share
attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
882,408 |
|
|
|
873,393 |
|
|
|
921,116 |
|
|
|
875,656 |
|
|
|
910,469 |
|
Diluted |
|
|
882,408 |
|
|
|
873,393 |
|
|
|
940,032 |
|
|
|
875,656 |
|
|
|
910,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
expense included in the above line items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenue |
|
$ |
1,049 |
|
|
$ |
1,127 |
|
|
$ |
991 |
|
|
$ |
2,825 |
|
|
$ |
2,835 |
|
Research and
development |
|
|
18,662 |
|
|
|
20,213 |
|
|
|
22,308 |
|
|
|
63,078 |
|
|
|
70,485 |
|
Sales and
marketing |
|
|
1,541 |
|
|
|
2,206 |
|
|
|
2,045 |
|
|
|
5,738 |
|
|
|
5,181 |
|
General and
administrative |
|
|
3,223 |
|
|
|
3,353 |
|
|
|
5,092 |
|
|
|
9,341 |
|
|
|
21,302 |
|
Total
stock-based expense |
|
$ |
24,475 |
|
|
$ |
26,899 |
|
|
$ |
30,436 |
|
|
$ |
80,982 |
|
|
$ |
99,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZYNGA INC. |
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(In thousands, unaudited) |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, 2016 |
|
|
June 30,2016 |
|
|
September 30, 2015 |
|
|
September 30, 2016 |
|
|
September 30, 2015 |
|
Operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(41,737 |
) |
|
$ |
(4,446 |
) |
|
$ |
3,052 |
|
|
$ |
(72,741 |
) |
|
$ |
(70,312 |
) |
Adjustments to reconcile
net income (loss) to net cash provided by (used in) operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
10,511 |
|
|
|
10,835 |
|
|
|
11,287 |
|
|
|
32,158 |
|
|
|
42,349 |
|
Stock-based expense |
|
|
24,475 |
|
|
|
26,899 |
|
|
|
30,436 |
|
|
|
80,982 |
|
|
|
99,803 |
|
(Gain) loss from sales of
investments, assets and other, net |
|
|
(82 |
) |
|
|
231 |
|
|
|
(633 |
) |
|
|
160 |
|
|
|
(6,283 |
) |
Tax benefits (costs) from
stock-based awards |
|
|
— |
|
|
|
— |
|
|
|
90 |
|
|
|
— |
|
|
|
90 |
|
Excess tax benefits
(costs) from stock-based awards |
|
|
— |
|
|
|
— |
|
|
|
(90 |
) |
|
|
— |
|
|
|
(90 |
) |
Accretion and amortization
on marketable securities |
|
|
11 |
|
|
|
52 |
|
|
|
1,057 |
|
|
|
322 |
|
|
|
4,941 |
|
Deferred income taxes |
|
|
(4,304 |
) |
|
|
148 |
|
|
|
(10,392 |
) |
|
|
(2,734 |
) |
|
|
(9,151 |
) |
Impairment of intangible
assets |
|
|
20,677 |
|
|
|
— |
|
|
|
— |
|
|
|
20,677 |
|
|
|
— |
|
Changes in operating
assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable,
net |
|
|
(5,793 |
) |
|
|
7,319 |
|
|
|
(4,313 |
) |
|
|
8,743 |
|
|
|
2,544 |
|
Income tax receivable |
|
|
939 |
|
|
|
177 |
|
|
|
(183 |
) |
|
|
1,711 |
|
|
|
(1,712 |
) |
Other assets |
|
|
1,923 |
|
|
|
(2,630 |
) |
|
|
(3,068 |
) |
|
|
(2,519 |
) |
|
|
(11,860 |
) |
Accounts payable |
|
|
4,145 |
|
|
|
(1,498 |
) |
|
|
(536 |
) |
|
|
(10,171 |
) |
|
|
12,226 |
|
Deferred revenue |
|
|
14,299 |
|
|
|
(7,082 |
) |
|
|
(19,757 |
) |
|
|
2,121 |
|
|
|
(61,097 |
) |
Other liabilities |
|
|
(4,032 |
) |
|
|
(15,459 |
) |
|
|
(12,062 |
) |
|
|
(26,436 |
) |
|
|
(49,360 |
) |
Net cash provided by (used
in) operating activities |
|
|
21,032 |
|
|
|
14,546 |
|
|
|
(5,112 |
) |
|
|
32,273 |
|
|
|
(47,912 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of marketable
securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(101,091 |
) |
Sales and maturities of
marketable securities |
|
|
35,535 |
|
|
|
85,902 |
|
|
|
211,350 |
|
|
|
240,337 |
|
|
|
702,017 |
|
Acquisition of property
and equipment |
|
|
(2,674 |
) |
|
|
(1,293 |
) |
|
|
(1,608 |
) |
|
|
(6,621 |
) |
|
|
(6,847 |
) |
Business acquisitions, net
of cash acquired |
|
|
(19,410 |
) |
|
|
(1,720 |
) |
|
|
(20,023 |
) |
|
|
(33,630 |
) |
|
|
(20,023 |
) |
Proceeds from sale of
property and equipment |
|
|
1,458 |
|
|
|
1,179 |
|
|
|
750 |
|
|
|
3,035 |
|
|
|
750 |
|
Proceeds from sale of
equity method investment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,507 |
|
Net cash provided by (used
in) investing activities |
|
|
14,909 |
|
|
|
84,068 |
|
|
|
190,469 |
|
|
|
203,121 |
|
|
|
585,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes paid related to net
share settlement of equity awards |
|
|
(498 |
) |
|
|
(746 |
) |
|
|
(453 |
) |
|
|
(2,163 |
) |
|
|
(1,866 |
) |
Repurchases of common
stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(112,392 |
) |
|
|
— |
|
Proceeds from employee
stock purchase plan and exercise of stock options |
|
|
2,685 |
|
|
|
409 |
|
|
|
2,957 |
|
|
|
5,570 |
|
|
|
7,292 |
|
Excess tax benefits
(costs) from stock-based awards |
|
|
— |
|
|
|
— |
|
|
|
90 |
|
|
|
— |
|
|
|
90 |
|
Acquisition-related
contingent consideration payment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10,790 |
) |
Net cash provided by (used
in) financing activities |
|
|
2,187 |
|
|
|
(337 |
) |
|
|
2,594 |
|
|
|
(108,985 |
) |
|
|
(5,274 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
|
|
(197 |
) |
|
|
(1,340 |
) |
|
|
(359 |
) |
|
|
(2,307 |
) |
|
|
(410 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in
cash and cash equivalents |
|
|
37,931 |
|
|
|
96,937 |
|
|
|
187,592 |
|
|
|
124,102 |
|
|
|
531,717 |
|
Cash and cash equivalents,
beginning of period |
|
|
828,388 |
|
|
|
731,451 |
|
|
|
475,428 |
|
|
|
742,217 |
|
|
|
131,303 |
|
Cash and cash equivalents,
end of period |
|
$ |
866,319 |
|
|
$ |
828,388 |
|
|
$ |
663,020 |
|
|
$ |
866,319 |
|
|
$ |
663,020 |
|
|
ZYNGA INC. |
RECONCILIATION OF GAAP TO NON-GAAP
RESULTS |
(In thousands, except per share data,
unaudited) |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, 2016 |
|
|
June 30,2016 |
|
|
September 30, 2015 |
|
|
September 30, 2016 |
|
|
September 30, 2015 |
|
Reconciliation of
Revenue to Bookings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
182,424 |
|
|
$ |
181,735 |
|
|
$ |
195,737 |
|
|
$ |
550,880 |
|
|
$ |
578,948 |
|
Change in deferred
revenue |
|
|
14,299 |
|
|
|
(7,082 |
) |
|
|
(19,758 |
) |
|
|
2,121 |
|
|
|
(61,097 |
) |
Bookings |
|
$ |
196,723 |
|
|
$ |
174,653 |
|
|
$ |
175,979 |
|
|
$ |
553,001 |
|
|
$ |
517,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Net income (loss) to Adjusted EBITDA (new methodology)
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(41,737 |
) |
|
$ |
(4,446 |
) |
|
$ |
3,052 |
|
|
$ |
(72,741 |
) |
|
$ |
(70,312 |
) |
Provision for (benefit
from) income taxes |
|
|
(2,782 |
) |
|
|
506 |
|
|
|
(9,381 |
) |
|
|
204 |
|
|
|
(6,810 |
) |
Other income (expense),
net |
|
|
(980 |
) |
|
|
(1,905 |
) |
|
|
(2,285 |
) |
|
|
(4,985 |
) |
|
|
(11,843 |
) |
Interest income |
|
|
(800 |
) |
|
|
(761 |
) |
|
|
(566 |
) |
|
|
(2,266 |
) |
|
|
(1,965 |
) |
Restructuring expense,
net |
|
|
(49 |
) |
|
|
1,710 |
|
|
|
416 |
|
|
|
2,129 |
|
|
|
16,732 |
|
Depreciation and
amortization |
|
|
10,511 |
|
|
|
10,835 |
|
|
|
11,287 |
|
|
|
32,158 |
|
|
|
42,349 |
|
Acquisition-related
transaction expenses |
|
|
75 |
|
|
|
199 |
|
|
|
895 |
|
|
|
274 |
|
|
|
895 |
|
Contingent consideration
fair value adjustment |
|
|
(5,810 |
) |
|
|
(14,390 |
) |
|
|
— |
|
|
|
(18,170 |
) |
|
|
9,400 |
|
Gain (loss) on legal
settlements |
|
|
— |
|
|
|
— |
|
|
|
(1,681 |
) |
|
|
— |
|
|
|
(1,681 |
) |
Impairment of intangible
assets |
|
|
20,677 |
|
|
|
— |
|
|
|
— |
|
|
|
20,677 |
|
|
|
— |
|
Stock-based expense |
|
|
24,475 |
|
|
|
26,899 |
|
|
|
30,436 |
|
|
|
80,982 |
|
|
|
99,803 |
|
Adjusted EBITDA
(new methodology) (1) |
|
$ |
3,580 |
|
|
$ |
18,647 |
|
|
$ |
32,173 |
|
|
$ |
38,262 |
|
|
$ |
76,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in deferred
revenue |
|
|
14,299 |
|
|
|
(7,082 |
) |
|
|
(19,758 |
) |
|
|
2,121 |
|
|
|
(61,097 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(previously defined methodology) (2) |
|
$ |
17,879 |
|
|
$ |
11,565 |
|
|
$ |
12,415 |
|
|
$ |
40,383 |
|
|
$ |
15,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Cash provided by operating activities to free cash
flow |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used
in) operating activities |
|
|
21,032 |
|
|
|
14,546 |
|
|
|
(5,112 |
) |
|
|
32,273 |
|
|
|
(47,912 |
) |
Acquisition of property
and equipment |
|
|
(2,674 |
) |
|
|
(1,293 |
) |
|
|
(1,608 |
) |
|
|
(6,621 |
) |
|
|
(6,847 |
) |
Excess tax benefits
(costs) from stock-based awards |
|
|
— |
|
|
|
— |
|
|
|
90 |
|
|
|
— |
|
|
|
90 |
|
Free cash
flow |
|
$ |
18,358 |
|
|
$ |
13,253 |
|
|
$ |
(6,630 |
) |
|
$ |
25,652 |
|
|
$ |
(54,669 |
) |
|
(1)
Zynga’s new methodology for computing Adjusted EBITDA includes the
change in deferred revenue. |
|
(2)
Zynga’s previously reported methodology for computing Adjusted
EBITDA excludes the change in deferred revenue. This is the last
time Adjusted EBITDA under the previously reported methodology will
be reported. |
ZYNGA INC. |
RECONCILIATION OF GAAP TO NON-GAAP FOURTH
QUARTER 2016 OUTLOOK |
(In thousands, except per share data,
unaudited) |
|
|
|
Fourth Quarter 2016 |
|
Reconciliation of
Revenue to Bookings |
|
|
|
|
Revenue range |
$ |
180,000 - 190,000 |
|
Change in deferred
revenue |
|
|
5,000 |
|
|
Bookings
range |
$ |
185,000 - 195,000 |
|
|
|
|
|
|
Reconciliation of
Net income (loss) to Adjusted EBITDA (new methodology)
(1) |
|
|
|
|
Net income (loss)
range |
$ |
(27,000) - (25,000) |
|
Provision for (benefit
from) income taxes |
|
1,000 - 3,000 |
|
Other income (expense),
net |
|
|
(2,000 |
) |
|
Interest income |
|
|
(1,000 |
) |
|
Depreciation and
amortization |
|
|
9,000 |
|
|
Stock-based expense |
|
32,000 - 30,000 |
|
Adjusted EBITDA
range (new methodology) (1) |
$ |
12,000 - 14,000 |
|
|
|
|
|
|
GAAP diluted
shares |
|
|
889,000 |
|
|
Net income (loss)
per share |
$ |
|
(0.03 |
) |
|
|
|
|
|
|
|
(1)
Zynga’s new methodology for computing Adjusted EBITDA includes the
change in deferred revenue. |
|
CONTACTS
Rebecca Lauinvestorrelations@zynga.com
Stephanie HessVice President of
Communicationsshess@zynga.com
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