Zynga Reports Fourth Quarter And Full Year 2011 Financial Results

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
Non-GAAP Results		Dec 31, 2011		Dec 31, 2010		Dec 31, 2011		Dec 31, 2010
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.
• 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: [phone]International Dial-In Number: [phone]Conference ID: 46506257

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