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TheStreet Open House

Zynga Reports First Quarter 2013 Financial Results

Stocks in this article: ZNGA

SAN FRANCISCO, April 24, 2013 (GLOBE NEWSWIRE) -- Zynga Inc. (Nasdaq:ZNGA), the world's leading provider of social game services, today announced financial results for the quarter ended March 31, 2013.

  • Q1 2013 revenue of $264 million, down 18% year-over-year, and bookings of $230 million, down 30% year-over-year
  • Q1 2013 net income of $4 million and adjusted EBITDA of $29 million
  • Q1 2013 diluted GAAP EPS of $0.00 and non-GAAP EPS of $0.01

"We are encouraged by the strong execution from our teams and the breakout hit performance of FarmVille 2, which captures the imagination of nearly 40 million players every month," said Mark Pincus, CEO and Founder, Zynga. "2013 will continue to be a transition year as we face the challenging environment on the web and invest in developing the leading franchises and network across web and mobile platforms and offer our 253 million monthly players a connected experience that can follow them from work to school to home and anywhere in between."

Financial Highlights (in thousands, except per share data)
     
  Quarter ended
GAAP Results Mar 31, 2013 Mar 31, 2012
Revenue  $ 263,589  $ 320,972
Net income (loss)  $ 4,133  $ (85,351)
Diluted net income (loss) per share  $ 0.00   $ (0.12)
     
Non-GAAP Results    
Bookings  $ 229,815  $ 329,164
Adjusted EBITDA  $ 28,735  $ 86,752
Non-GAAP net income  $ 9,105  $ 47,049
Non-GAAP earnings per share  $ 0.01  $ 0.06

Product Highlights

  • Zynga continued to demonstrate the power of its franchises, and the combined bookings for FarmVille and FarmVille 2 grew year-over-year.
  • FarmVille 2, in particular, was a breakout hit with daily audience engagement and bookings exceeding the company's expectations.
  • Zynga launched standalone player logins for Zynga.com, creating a destination for people looking to play more games and connect with other players around the world.
  • Zynga showed the power of its audience in Q1 by cross-promoting Playdemic's Village Life, a third-party web game that is part of the Zynga Partners publishing program; taking the game to 6.5 million MAU.
  • Subsequent to Q1 2013, Zynga launched its first suite of real money gaming (RMG) offerings, ZyngaPlusPoker and ZyngaPlusCasino, in the UK through its partnership with bwin.party digital entertainment plc. Launching the download and web versions of Zynga's real money games for play in the UK is an exciting move to bring players the real money games they have been asking for. These offerings are the first step toward realizing Zynga's long-term vision of bringing players the next generation of real money games on multiple platforms in regulated markets.

Business Highlights

  • Daily active users (DAUs) decreased from 65 million in the first quarter of 2012 to 52 million in the first quarter of 2013, down 21% year-over-year. On a consecutive quarter basis, DAUs were down 8% from 56 million in the fourth quarter of 2012.
  • Monthly active users (MAUs) decreased from 292 million in the first quarter of 2012 to 253 million in the first quarter of 2013, down 13% year-over-year. On a consecutive quarter basis, MAUs were down 15% from 298 million in the fourth quarter of 2012.
  • Monthly unique users (MUUs) decreased from 182 million in the first quarter of 2012 to 150 million in the first quarter of 2013, down 18% year-over-year. On a consecutive quarter basis, MUUs were down 10% from 167 million in the fourth quarter of 2012.
  • Average daily bookings per average DAU (ABPU) decreased from $0.055 in the first quarter of 2012 to $0.049 in the first quarter of 2013, down 11% year-over-year. On a consecutive quarter basis, ABPU was down 2% from $0.051 in the fourth quarter of 2012.
  • Monthly Unique Payers (MUPs) decreased from 3.5 million in the first quarter of 2012 to 2.5 million in the first quarter of 2013, down 30% year-over-year. On a consecutive quarter basis MUPs were down 14% from 2.9 million in the fourth quarter of 2012.
  • Zynga launched two new titles during the first quarter of 2013, Zynga Slots on web-based platforms and What's The Phrase on mobile platforms.
  • As of March 31, 2013, Zynga had three of the top 10 games on Facebook, based on DAUs as reported by AppData, including some of its most established titles, Words With Friends, Zynga Poker, and FarmVille 2.

Financial Summary

  • Revenue:  Revenue was $263.6 million for the first quarter of 2013, down 18% compared to the first quarter of 2012 and a decrease of 15% compared to the fourth quarter of 2012. Online game revenue was $229.6 million, a decrease of 22% compared to the first quarter of 2012 and a decrease of 16% compared to the fourth quarter of 2012. Advertising revenue was $34.0 million, an increase of 21% compared to the first quarter of 2012 and a decrease of 8% compared to the fourth quarter of 2012.
  • Bookings:  Bookings were $229.8 million for the first quarter of 2013, a decrease of 30% compared to the first quarter of 2012 and a decrease of 12% compared to the fourth quarter of 2012.
  • Net income (loss): Net income was $4.1 million for the first quarter of 2013 compared to a net loss of $85.4 million for the first quarter of 2012. Net income for the first quarter of 2013 included $29.9 million of stock-based expense compared to $133.9 million of stock-based expense included in the first quarter of 2012.
  • Adjusted EBITDA: Adjusted EBITDA was $28.7 million for the first quarter of 2013 compared to $86.8 million for the first quarter of 2012 and $45.0 million in the fourth quarter of 2012.
  • Non-GAAP net income: Non-GAAP net income was $9.1 million for the first quarter of 2013, down from $47.0 million in the first quarter of 2012 and up from $6.9 million in the fourth quarter of 2012.
  • EPS: Diluted EPS was $0.00 for the first quarter of 2013 compared to ($0.12) for the first quarter of 2012 and ($0.06) for the fourth quarter of 2012.
  • Non-GAAP EPS: Non-GAAP EPS was $0.01 for the first quarter of 2013 compared to $0.06 for the first quarter of 2012 and flat when compared to the fourth quarter of 2012.
  • Cash and cash flow:  As of March 31, 2013, cash, cash equivalents and marketable securities were approximately $1.67 billion, compared to $1.65 billion as of December 31, 2012. Cash flow from operations was $26.4 million for the first quarter of 2013, compared to $78.8 million for the first quarter of 2012. Free cash flow was $23.2 million for the first quarter of 2013 compared to $43.8 million for the first quarter of 2012.
  • Share Repurchase Program: During the three months ended March 31, 2013, Zynga repurchased approximately 1.0 million shares of common stock for approximately $2.5 million under its stock repurchase program. From inception of the program Zynga has repurchased a total of approximately 6.0 million shares for $14.3 million. The remaining authorized amount of stock repurchases that may be made under this plan was approximately $186 million as of March 31, 2013.
  • Repayment of Debt: In April 2013, we repaid our long-term debt of $100 million and currently have no debt outstanding.

Outlook

Zynga's outlook for the second quarter of 2013 is as follows:

  • Revenue is projected to be in the range of $225 million to $235 million.
  • Net loss is projected to be in the range of $36.5 million to $26.5 million.
  • EPS is projected to be in the range of ($0.05) to ($0.03), based on a share count of approximately 785 million to 795 million shares.
  • Bookings are projected to be in the range of $180 million to $190 million.
  • Adjusted EBITDA is projected to be in the range of ($10) million to break even.
  • Non-GAAP EPS is projected to be in the range of ($0.04) to ($0.03), based on a share count of approximately 785 million to 795 million shares.

For full year 2013:

  • Adjusted EBITDA margin (adjusted EBITDA as a percentage of bookings) is projected to be in the range of 0% to 10%.

Disclosure Using Social Media Channels

Zynga currently announces material information to its investors using SEC filings, press releases, public conference calls and webcasts. Zynga uses these channels as well as social media channels to announce information about the company, games, employees and other issues. Given the recent SEC guidance regarding the use of social media channels to announce material information to investors, Zynga is notifying investors, the media, its players and others interested in the company that in the future, it might choose to communicate material information via social media channels or, it is possible that information it discloses through social media channels may be deemed to be material. Therefore, Zynga encourages investors, the media, players and others interested in Zynga to review the information posted on the company blog ( http://zyngablog.typepad.com/zynga/ ) and the company Facebook site ( https://facebook.com/Zynga ) and the company twitter account ( https://twitter.com/Zynga ). Investors, the media, players or other interested parties can subscribe to the company blog and twitter feed at the addresses listed above. Any updates to the list of social media channels Zynga will use to announce material information will be posted on the Investor Relations page of the company's website at http://investor.zynga.com .

Conference Call Details:

Zynga will host a conference call today, April 24, 2013, 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 the company's website at  http://investor.zynga.com and a replay will be archived and accessible at the same website after the call.

About Zynga Inc.

Zynga Inc. (Nasdaq:ZNGA) is the world's leading provider of social game services with 253 million monthly active users playing its games, which include Zynga Poker, Words With Friends, Scramble With Friends, Gems With Friends, Draw Something, FarmVille 2, ChefVille, CityVille, Bubble Safari and Ruby Blast. Zynga's games are available on a number of global platforms, including Facebook, Zynga.com, Google+, Tencent, Apple iOS and Google Android. Zynga is headquartered in San Francisco, California.  Learn more about Zynga at http://blog.zynga.com or follow Zynga on Twitter and Facebook

The Zynga Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=11743

Forward-Looking Statements

This press release contains forward-looking statements relating to, among other things, our outlook for second quarter 2013 revenue, net loss, EPS, weighted average diluted share count, bookings, adjusted EBITDA, non-GAAP EPS and non-GAAP weighted average diluted share count; our outlook for full year 2013 adjusted EBITDA margin; our ability to remain profitable on an adjusted EBITDA basis; our future game launches; our ability to grow our franchises on mobile and web and the success of our games and network generally; our ability to build and expand our network, including creating and building a mobile network and the success of that network; our ability to successfully launch, promote and monetize games on our network; our ability to successfully launch offerings in real money gaming on multiple platforms in available markets; our ability to transition our web franchises to mobile and create new multiplatform franchises; our ability to launch successful new multiplatform games and hit games for web and mobile generally; our ability to rationalize our product pipeline and reduce the cost of operating live games; our ability to reduce indirect costs; our proposed share repurchase program; and the market opportunity in the social games market, including the mobile market and the advertising market. 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 statements. 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. Factors that could cause or contribute to such differences include, but are not limited to, our relationship with Facebook or changes in the Facebook platform, our relationship with and/or agreements with iOS and or Android platform providers and/or changes to the Android or iOS platforms, our ability to launch new games in a timely manner and monetize these games effectively on the web and on mobile, our ability to launch games that are successful across platforms, our ability to continue to maintain bookings for franchise games, despite increasing decay rates for games generally, our ability to control and reduce expenses, our ability to anticipate and address technical challenges that may arise, competition, changing interests of players, our relationship with bwin.party, our ability to enter the real money gaming market and monetize opportunities in the real money gaming category, our exposure to illegitimate credit card activity and other security risks, regulatory, gaming or licensing issues, intellectual property disputes or other litigation, asset impairment charges, our ability to retain key employees, acquisitions by us and changes in corporate strategy or management.

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