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Zynga Reports First Quarter 2013 Financial Results

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

  • Adjusted EBITDA and non-GAAP net income (loss) do not include the impact of stock-based expense and restructuring expense;
  • Bookings, adjusted EBITDA and non-GAAP net income (loss) do not reflect that we defer and recognize online game revenue and revenue from certain advertising transactions 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, and interest income;
  • 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;
  • Adjusted EBITDA and non-GAAP net income (loss) do not include gains and losses associated with legal settlements;
  • Non-GAAP EPS gives effect to all dilutive awards based on the treasury stock method;
  • 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; and
  • Other companies, including companies in our industry, may calculate bookings, adjusted EBITDA, non-GAAP net income, non-GAAP EPS and free cash flow differently or not at all, which will reduce their usefulness as a comparative measure.

Because of these limitations, you should consider bookings, adjusted EBITDA, non-GAAP net income (loss), non-GAAP EPS,  free cash flow and adjusted EBITDA margin, along with other financial performance measures, including revenue, net income (loss) and our other financial results presented in accordance with GAAP. See the GAAP to non-GAAP reconciliations below for further details.

ZYNGA INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
     
  March 31, 2013 December 31, 2012
Assets    
Current assets:    
Cash and cash equivalents  $ 426,251  $ 385,949
Marketable securities  842,432 898,821
Accounts receivable 92,518 106,327
Income tax receivable  5,650 5,607
Deferred tax assets  26,633 30,122
Restricted cash  785 28,152
Other current assets  29,742 29,392
Total current assets  1,424,011 1,484,370
     
Long-term marketable securities  402,721 367,543
Goodwill  208,012 208,955
Other intangible assets, net  30,372 33,663
Property and equipment, net  442,293 466,074
Other long-term assets  15,427 15,715
Total assets   $ 2,522,836  $ 2,576,320
     
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable   $ 25,768  $ 23,298
Other current liabilities  102,381 146,883
Deferred revenue  302,722 338,964
Total current liabilities  430,871 509,145
     
Long-term debt 100,000 100,000
Deferred revenue  10,509 8,041
Deferred tax liabilities  12,653 24,584
Other non-current liabilities  105,303 109,047
Total liabilities   659,336  750,817
     
Stockholders' equity:    
Common stock and additional paid-in capital  2,762,756  2,725,605
Treasury stock  --   (295,113)
Accumulated other comprehensive income (loss)  (2,232)  (1,447)
Accumulated deficit  (897,024)  (603,542)
Total stockholders' equity  1,863,500 1,825,503
Total liabilities and stockholders' equity   $ 2,522,836  $ 2,576,320
 
 
ZYNGA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)
     
  Three Months Ended March 31,
  2013 2012
Revenue:    
Online game  $ 229,566  $ 292,780
Advertising 34,023 28,192
Total revenue 263,589 320,972
Costs and expenses:    
Cost of revenue  69,394 90,122
Research and development   129,181  186,876
Sales and marketing   27,307  56,837
General and administrative   42,640  72,715
Total costs and expenses   268,522  406,550
Loss from operations   (4,933)  (85,578)
Interest income   1,163  1,291
Other income (expense), net   (863)  (1,142)
Income (loss) before income taxes   (4,633)  (85,429)
Benefit from income taxes   8,766  78
Net income (loss)   $ 4,133  $ (85,351)
     
Net income (loss) per share:    
Basic   $ 0.01  $ (0.12)
Diluted  $ 0.00  $ (0.12)
     
Weighted average common shares used to compute net income (loss) per share:    
Basic 779,949 707,693
Diluted 827,526 707,693
     
Stock-based expense included in the above line items:    
Cost of revenue  $ 1,933  $ 6,818
Research and development 20,900 78,146
Sales and marketing 1,413 12,915
General and administrative 5,676 35,972
Total stock-based expense  $ 29,922  $ 133,851
 
 
ZYNGA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
     
   
  Three Months Ended March 31,
  2013 2012
Operating activities    
Net income (loss)  $ 4,133  $ (85,351)
     
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization  32,061  29,398
Stock-based expense  29,922  133,851
Accretion and amortization on marketable securities  4,856  2,836
Loss from sales of investments, assets and other, net  1,207  12
Tax benefits from stock based awards  1,657  -- 
Excess tax benefits from stock-based awards  (1,657)  -- 
Deferred income taxes  (8,591)  (1,286)
Changes in operating assets and liabilities:    
Accounts receivable, net  13,809  (5,617)
Income tax receivable  (43)  14,242
Other assets  848  (4,818)
Accounts payable  2,470  (283)
Deferred revenue  (33,774)  8,192
Other liabilities  (20,453)  (12,359)
Net cash provided by operating activities   26,445  78,817
     
Investing activities    
Purchase of marketable securities  (278,719)  (964,741)
Sales of marketable securities  98,615  16,747
Maturities of marketable securities  195,068  116,126
Acquisition of property and equipment  (4,924)  (34,994)
Business acquisitions, net of cash acquired  --   (182,164)
Restricted cash  167  (224,952)
Other investing activities, net  (803)  (3,177)
Net cash provided by (used in) investing activities  9,404  (1,277,155)
     
Financing activities    
Repurchase of common stock  (2,432)  -- 
Taxes paid related to net share settlement of equity awards  (344)  (23,500)
Proceeds from exercise of stock options and warrants  2,393  533
Proceeds from employee stock purchase plan  3,506  -- 
Excess tax benefits from stock-based awards  1,657  -- 
Net cash provided by (used in) financing activities  4,780  (22,967)
     
Effect of exchange rate changes on cash and cash equivalents   (327)  36
     
Net increase (decrease) in cash and cash equivalents   40,302  (1,221,269)
Cash and cash equivalents, beginning of period   385,949  1,582,343
     
Cash and cash equivalents, end of period   $ 426,251  $ 361,074
 
 
ZYNGA INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share data, unaudited)
     
   
  Three months ended March 31,
  2013 2012
Reconciliation of Revenue to Bookings    
Revenue  $ 263,589  $ 320,972
Change in deferred revenue  (33,774)  8,192
Bookings  $ 229,815  $ 329,164
Reconciliation of Net Income (Loss) to Adjusted EBITDA    
Net income (loss)  $ 4,133  $ (85,351)
Benefit from income taxes  (8,766)  (78)
Other income (expense), net  863  1,142
Interest income  (1,163)  (1,291)
Restructuring expense  5,459  -- 
Legal settlements  --   889
Depreciation and amortization  32,061  29,398
Stock-based expense  29,922  133,851
Change in deferred revenue  (33,774)  8,192
Adjusted EBITDA  $ 28,735 $ 86,752
Reconciliation of Net Income (Loss) to Non-GAAP Net Income    
Net income (loss)  $ 4,133  $ (85,351)
Stock-based expense  29,922  133,851
Amortization of intangible assets from acquisitions  3,658  6,951
Change in deferred revenue  (33,774)  8,192
Restructuring expense  5,459  --  
Legal settlements  --   889
Tax effect of non-GAAP adjustments to net loss  (293)  (17,483)
Non-GAAP net income  $ 9,105 $ 47,049
Reconciliation of GAAP Diluted Shares to Non-GAAP    
Diluted Shares    
GAAP diluted shares 827,526 707,693
Other dilutive equity awards -- 135,993
Non-GAAP diluted shares (1) 827,526 843,686
     
Non-GAAP earnings per share  $ 0.01  $ 0.06
     
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow    
Net cash provided by operating activities  $ 26,445  $ 78,817
Acquisition of property and equipment  (4,924)  (34,994)
Excess tax benefits from stock-based awards  1,657  -- 
Free cash flow  $ 23,178  $ 43,823
     
Reconciliation of GAAP to Non-GAAP (Provision for) Benefit from Income Taxes    
GAAP benefit from income taxes  $ 8,766  $ 78
Stock-based expense  (1,669)  (15,612)
Amortization of intangible assets from acquisitions  (204)  (811)
Change in deferred revenue  1,884  (956)
Restructuring expense  (304)  -- 
Legal settlements  --   (104)
Non-GAAP (provision for) benefit from income taxes  $ 8,473  $ (17,405)
 
(1)  Includes the effect of all dilutive awards based on the treasury stock method.
 
 
ZYNGA INC.
RECONCILIATION OF GAAP TO NON-GAAP SECOND QUARTER 2013 OUTLOOK
(In thousands, except per share data)
   
  Second Quarter 2013 
Reconciliation of Revenue to Bookings   
Revenue range $ 225,000 – 235,000
Change in deferred revenue  (45,000)
Bookings range $ 180,000 190,000
   
Reconciliation of Net Loss to Adjusted EBITDA  
Net loss range $ (36,500) – (26,500)
Provision for income taxes  4,000
Other expense, net  3,500
Interest income  (1,000)
Depreciation and amortization  32,000
Stock-based expense  33,000
Change in deferred revenue  (45,000)
Adjusted EBITDA range $ (10,000) 0
   
Reconciliation of Net Loss to Non-GAAP Net Loss  
Net loss range $ (36,500) – (26,500)
Stock-based expense  33,000
Amortization of intangible assets from acquisitions  3,000
Change in deferred revenue   (45,000)
Tax effect of non-GAAP adjustments to net loss  15,500 – 13,500
Non-GAAP net loss range $ (30,000) – (22,000)
   
  785,000 – 795,000
GAAP and Non-GAAP diluted shares   
   
Net loss per share range $ (0.05) – $ (0.03)
Non-GAAP net loss per share range $ (0.04) – $ (0.03)
CONTACT: Investors - Krista Bessinger
         415-339-5266
         investors@zynga.com
         
         Press - Stephanie Hess
         415-503-0303
         press@zynga.com

Zynga Inc. Logo

Stock quotes in this article: ZNGA 

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