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TheStreet Open House

Zynga Reports Second Quarter 2013 Financial Results

SAN FRANCISCO, July 25, 2013 (GLOBE NEWSWIRE) -- Zynga Inc. (Nasdaq:ZNGA), a leading provider of social game services, today announced financial results for the quarter ended June 30, 2013.

  • Q2 2013 revenue of $231 million, down 31% year-over-year, and bookings of $188 million, down 38% year-over-year
  • Q2 2013 net loss of $16 million and adjusted EBITDA of $8 million
  • Q2 2013 GAAP EPS of ($0.02) and non-GAAP EPS of ($0.01)
  • Implemented significant cost reductions resulting in a $25 million Q2 2013 restructuring charge with an expected annualized pre-tax cash savings ranging from $70 million - $80 million

"The next few years will be a time of phenomenal growth in our space and Zynga has incredible assets to take advantage of the market opportunity," said Don Mattrick, CEO, Zynga. "To do that, we need to get back to basics and take a longer term view on our products and business, develop more efficient processes and tighten up execution all across the company. We have a lot of hard work in front of us and as we reset, we expect to see more volatility in our business than we would like over the next two to four quarters. I'm privileged to lead Zynga and I look forward to spending more time with our players, employees and shareholders."

Financial Highlights ( in thousands, except per share data)
  Three months ended Six months ended
GAAP Results June 30, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Revenue  $ 230,735  $ 332,493  $ 494,324  $ 653,465
Net loss  $ (15,805)  $ (22,811)  $ (11,672)  $ (108,162)
Diluted net loss per share  $ (0.02)  $ (0.03)  $ (0.01)  $ (0.15)
         
Non-GAAP Results        
Bookings  $ 187,578  $ 301,588  $ 417,393  $ 630,752
Adjusted EBITDA  $ 8,310  $ 65,309  $ 37,045  $ 152,061
Non-GAAP net income (loss)  $ (6,129)  $ 4,555  $ 2,976  $ 51,604
Non-GAAP earnings per share  $ (0.01)  $ 0.01 $ 0.00  $ 0.06

Product Highlights

  • Zynga released six new titles during the second quarter of 2013, including Hidden Shadows on web-based platforms, and War of the Fallen, Draw Something 2, Battlestone, Solstice Arena and Running With Friends on mobile platforms.
  • As of June 30, 2013, Zynga had 3 of the top 10 games on Facebook, based on DAUs as reported by the Facebook API, including titles from its most established franchises, Words With Friends, Zynga Poker and FarmVille 2.
  • For the second quarter of 2013, Zynga.com, Zynga's own gaming destination, had 4.2 million MAUs. This was the first full quarter subsequent to its re-launch to include standalone player logins for users seeking a more dedicated gaming experience.
  • FarmVille and FarmVille 2 combined bookings grew 29% year-over-year, continuing to demonstrate the power of Zynga's franchises.
  • FarmVille 2 showed the value of bold beats such as County Fair, which drove a 15% increase in engagement of players level 20 and up.
  • For the first time ever, two Zynga developed games – Running With Friends and Solstice Arena – received Apple's "Editor's Choice" honors, demonstrating Zynga's commitment to developing quality mobile social games.

Business Highlights

  • In July 2013, Don A. Mattrick was hired as Zynga's Chief Executive Officer, replacing Mark Pincus, and was appointed as a director of the Company. Mr. Pincus continues to serve as Chairman of the Board and Chief Product Officer of the Company.
  • Daily active users (DAUs) decreased from 72 million in the second quarter of 2012 to 39 million in the second quarter of 2013, down 45% year-over-year. On a consecutive quarter basis, DAUs were down 24% from 52 million in the first quarter of 2013. Web DAUs and Mobile DAUs were 23 million and 16 million in the second quarter of 2013, respectively.
  • Monthly active users (MAUs) decreased from 306 million in the second quarter of 2012 to 187 million in the second quarter of 2013, down 39% year-over-year. On a consecutive quarter basis, MAUs were down 26% from 253 million in the first quarter of 2013. Web MAUs and Mobile MAUs were 129 million and 57 million in the second quarter of 2013, respectively.
  • Monthly unique users (MUUs) decreased from 192 million in the second quarter of 2012 to 123 million in the second quarter of 2013, down 36% year-over-year. On a consecutive quarter basis, MUUs were down 18% from 150 million in the first quarter of 2013.
  • Average daily bookings per average DAU (ABPU) increased from $0.046 in the second quarter of 2012 to $0.053 in the second quarter of 2013, up 14% year-over-year. On a consecutive quarter basis, ABPU was up 6% from $0.049 in the first quarter of 2013.
  • Monthly Unique Payers (MUPs) decreased from 4.1 million in the second quarter of 2012 to 1.9 million in the second quarter of 2013, down 53% year-over-year. On a consecutive quarter basis, MUPs were down 22%.
  • In the second quarter of 2013, Zynga began implementation of a restructuring plan that included a reduction in work force of approximately 520 employees and the closure of certain offices as part of an overall plan to reduce the Company's long term cost structure.
  • During the second quarter of 2013, Zynga completed its acquisition of Spooky Cool Labs LLC, a provider of social casino games.
  • Zynga believes its biggest opportunity is to focus on free to play social games. While the Company continues to evaluate its real money gaming products in the United Kingdom test, Zynga is making the focused choice not to pursue a license for real money gaming in the United States. Zynga will continue to evaluate all of its priorities against the growing market opportunity in free, social gaming, including social casino offerings. 

Q2 2013 Financial Summary

  • Revenue: Revenue was $231 million for the second quarter of 2013, a decrease of 31% compared to the second quarter of 2012 and a decrease of 12% compared to the first quarter of 2013. Online game revenue was $203 million, a decrease of 30% compared to the second quarter of 2012 and a decrease of 11% compared to the first quarter of 2013. Advertising revenue was $27 million, a decrease of 33% compared to the second quarter of 2012 and a decrease of 19% compared to the first quarter of 2013.
  • Bookings: Bookings were $188 million for the second quarter of 2013, a decrease of 38% compared to the second quarter of 2012 and a decrease of 18% compared to the first quarter of 2013.
  • Net loss: Net loss was $16 million for the second quarter of 2013 compared to a net loss of $23 million for the second quarter of 2012.
  • Adjusted EBITDA: Adjusted EBITDA was $8 million for the second quarter of 2013 compared to $65 million for the second quarter of 2012 and $29 million in the first quarter of 2013.
  • Non-GAAP net income (loss): Non-GAAP net loss was $6 million for the second quarter of 2013, down from non-GAAP net income of $5 million in the second quarter of 2012 and down from non-GAAP net income of $9 million in the first quarter of 2013.
  • EPS: Diluted EPS was ($0.02) for the second quarter of 2013 compared to ($0.03) for the second quarter of 2012 and $0.00 for the first quarter of 2013.
  • Non-GAAP EPS: Non-GAAP EPS was ($0.01) for the second quarter of 2013 compared to $0.01 for the second quarter of 2012 and $0.01 for the first quarter of 2013.
  • Cash and cash flow: As of June 30, 2013, cash, cash equivalents and marketable securities were approximately $1.53 billion, compared to $1.67 billion as of March 31, 2013. Cash flow from operations was ($0.6) million for the second quarter of 2013, compared to $67 million for the second quarter of 2012. Free cash flow was ($14) million for the second quarter of 2013 compared to ($204) million for the second quarter of 2012.

Outlook

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

  • Revenue is projected to be in the range of $175 million to $200 million.
  • Net loss is projected to be in the range of ($43) million to ($14) million.
  • EPS is projected to be in the range of ($0.05) to ($0.02), based on a share count of approximately 803 million to 813 million shares.
  • Bookings are projected to be in the range of $125 million to $150 million.
  • Adjusted EBITDA is projected to be in the range of ($30) million to breakeven.
  • Non-GAAP EPS is projected to be in the range of ($0.09) to ($0.05), based on a share count of approximately 803 million to 813 million shares.

For full year 2013:

  • Adjusted EBITDA margin (adjusted EBITDA as a percentage of bookings) is targeted to be in the range of 0% to 5%.

Conference Call Details:

Zynga will host a conference call today, July 25, 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.

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

About Zynga Inc.

Zynga Inc. is a leading provider of social game services, which include Zynga Poker, Words With Friends, Scramble With Friends, Gems with Friends, Draw Something, FarmVille, FarmVille2 , ChefVille, CityVille, Bubble Safari and Ruby Blast. For the quarter ended June 30, 2013, Zynga had approximately 187 million monthly active users playing its games. Zynga's games are available on a number of global platforms, including Facebook, Zynga.com, Apple iOS and Google Android. Zynga is headquartered in San Francisco, Calif. Learn more about Zynga at http://blog.zynga.com  or follow us on Twitter and Facebook.

Forward-Looking Statements

This press release contains forward-looking statements relating to, among other things, our outlook for third quarter 2013 revenue, net loss, EPS, weighted average diluted share count, bookings, adjusted EBITDA, non-GAAP net loss, non-GAAP EPS, non-GAAP weighted average diluted share count, our outlook for full year 2013 adjusted EBITDA margin; our estimated pre-tax savings from our cost reduction plans; our ability to take advantage of the social gaming market opportunity and developing more efficient business processes and improving execution across the company; our ability to unlock our full potential and our ability to remain profitable on an adjusted EBITDA basis; our future operational and strategic plans; expanding our network, including creating and building a mobile network and the success of that network; our ability to transition our web franchises to mobile and create new franchises on the web and mobile; our ability to launch successful games, including invest & express games, on mobile; our ability to launch successful new games and hit games for web and mobile generally; the success of our franchise games and our games and platform generally and the growth of 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, attrition and declines in our existing games, our ability to launch new games in a timely manner and monetize these games effectively on the web and on mobile, our ability to control and reduce expenses, our exposure to illegitimate credit card activity and other security risks, sales or purchases of virtual goods used in Zynga Poker or our other games through unauthorized or fraudulent third-party websites, our ability to anticipate and address technical challenges that may arise, competition, changing interests of players, 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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