Form 8-K ZYNGA INC For: May 04

Delaware

001-35375

42-1733483

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

699 Eighth Street

San Francisco, CA 94103

94103

(Address of Principal Executive Offices)

(Zip Code)

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Exhibit

Number

Description

99.1

Press release issued by Zynga Inc., dated May 4, 2016.

ZYNGA INC.

Date:  May 4, 2016

By:

/s/ Michelle Quejado

Michelle Quejado

Interim Chief Financial Officer and Chief Accounting Officer

Exhibit

Number

Description

99.1

Press release issued by Zynga Inc., dated May 4, 2016.

·

Bookings of $182 million; above the high end of the guidance range, up 8% year-over-year and flat sequentially.

·

Adjusted EBITDA of $11 million; above the guidance range.

·

Advertising and other bookings up 42% year-over-year.

·

$857 million in cash, cash equivalents and marketable securities.

·

Completed the remaining $102 million of $200 million share repurchase announced at Q3 earnings.

·

Mobile bookings of $139 million or 76% of overall bookings, up 31% year-over-year and up 4% sequentially.

·

Average Mobile Daily Active Users (mobile DAUs): 16 million; up 7% sequentially.

·

Apple is now our largest platform partner, surpassing Facebook in terms of online game bookings.

·

Slots – Mobile bookings up 77% year-over-year and 13% sequentially. Launched Willy Wonka and the Chocolate Factory Slots which is now in the top 30 grossing Casino charts in the Apple App Store; entered into soft launch with True Vegas Slots and this week we launched Spin It Rich! Slots worldwide.

·

Zynga Poker – Mobile bookings up 13% year-over-year and 8% sequentially.

·

Words With Friends – Delivered strong mobile bookings up 60% year-over-year.

·

Match-3 – Launched Zindagi’s Crazy Cake Swap, which received Best New Game featuring from both Apple and Google at launch; entered into soft launch with two new games, Wizard of Oz Magic Match and Ice Age Arctic Blast.

·

FarmVille – Entered into soft launch with new FarmVille mobile experience, FarmVille: Tropic Escape; worldwide launch expected in the second half of 2016.

·

CSR2 – Currently testing across 11 test markets with an expected worldwide launch in early Q3.

·

Dawn of Titans – Scaled to 14 test markets with an expected worldwide launch in late Q4.

Three Months Ended

March 31, 2016

December 31, 2015

March 31, 2015

GAAP Results

Revenue

$

186,721

$

185,769

$

183,293

Net income (loss)

$

(26,558

)

$

(51,198

)

$

(46,496

)

Diluted net income (loss) per share

$

(0.03

)

$

(0.06

)

$

(0.05

)

Non-GAAP Results

Bookings

$

181,625

$

182,104

$

167,410

Adjusted EBITDA

$

10,939

$

1,656

$

2,093

Non-GAAP net income (loss)

$

1,553

$

375

$

(6,713

)

Non-GAAP earnings (loss) per share

$

0.00

$

0.00

$

(0.01

)

Three Months Ended

March 31,

December 31,

March 31,

Q1'16

Q1'16

2016

2015

2015

Q/Q

Y/Y

Average daily active users (DAUs)

19

18

25

7

%

(21

)%

Average mobile DAUs

16

15

19

7

%

(16

)%

Average web DAUs

3

3

6

10

%

(37

)%

Average monthly active user (MAUs)

68

68

100

1

%

(32

)%

Average mobile MAUs

55

55

76

0

%

(27

)%

Average web MAUs

13

13

24

4

%

(46

)%

Average daily bookings per average DAU (ABPU)

$

0.103

$

0.110

$

0.076

(6

)%

36

%

Average monthly unique users (MUUs) ⁽¹⁾

56

48

71

⁽²⁾

16

%

(21

)%

Average monthly unique payers (MUPs) ⁽¹⁾

1.0

0.8

1.1

18

%

(12

)%

Payer conversion ⁽¹⁾

1.7

%

1.7

%

1.5

%

2

%

11

%

⁽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 first quarter of 2015, NaturalMotion legacy games (CSR Racing, CSR Classics and Clumsy Ninja) are excluded from MUUs, MUPs and payer conversion.

·

For the fourth quarter of 2015, NaturalMotion legacy games (CSR Racing, CSR Classics and Clumsy Ninja) and Rising Tide games (Black Diamond Casino) are excluded from MUUs, MUPs and payer conversion.

·

For the first quarter of 2016, Rising Ride games (Black Diamond Casino and Vegas Diamond Slots) and Zindagi legacy games (Yummy Gummy and Crazy Kitchen) are excluded from MUUs, MUPs and payer conversion.

⁽²⁾

In the third quarter of 2015, the company made a modification to its calculation of MUU to further reduce duplication. MUU for the first quarter of 2015 has been revised to reflect the company’s current calculation.

·

Revenue: Revenue was $187 million for the first quarter of 2016, an increase of 1% compared to the fourth quarter of 2015 and an increase of 2% compared to the first quarter of 2015. Online game revenue was $137 million, an increase of 6% compared to the fourth quarter of 2015 and a decrease of 7% compared to the first quarter of 2015. Advertising and other revenue was $50 million, a decrease of 12% compared to the fourth quarter of 2015 and an increase of 41% compared to the first quarter of 2015. Zynga Poker, Hit It Rich! Slots, Wizard of Oz Slots and FarmVille 2 accounted for 19%, 15%, 15% and 14% of online game revenue, respectively, for the first quarter of 2016 while FarmVille 2, Zynga Poker, FarmVille 2: Country Escape and Hit It Rich! Slots accounted for 20%, 19%, 16% and 15%, respectively, for the first quarter of 2015.

·

Bookings: Bookings were $182 million for the first quarter of 2016, flat compared to the fourth quarter of 2015 and an increase of 8% compared to the first quarter of 2015.

·

Net income (loss): Net loss was ($27) million for the first quarter of 2016, compared to net loss of ($51) million for the fourth quarter of 2015 and net loss of ($46) million for the first quarter of 2015. The quarter-over-quarter decrease in net loss was primarily due to lower costs and expenses (primarily, in order of significance, restructuring expense, the elimination of duplicative data center costs and marketing costs).

·

Adjusted EBITDA: Adjusted EBITDA was $11 million for the first quarter of 2016, compared to $2 million in the fourth quarter of 2015 and $2 million for the first quarter of 2015. The quarter-over-quarter change in adjusted EBITDA was primarily due to the elimination of duplicative data center costs and, to a lesser extent, lower marketing costs due to seasonality in the fourth quarter of 2015.

·

Non-GAAP net income (loss): Non-GAAP net income was $2 million for the first quarter of 2016, compared to non-GAAP net income of $0.4 million in the fourth quarter of 2015 and non-GAAP net loss of ($7) million in the first quarter of 2015.

·

Net income (loss) per share: Diluted net loss per share was ($0.03) for the first quarter of 2016, compared to diluted net loss per share of ($0.06) for the fourth quarter of 2015 and diluted net loss per share of ($0.05) for the first quarter of 2015.

·

Non-GAAP earnings (loss) per share: Non-GAAP earnings per share was $0.00 for the first quarter of 2016, compared to non-GAAP earnings per share of $0.00 for the fourth quarter of 2015 and non-GAAP loss per share of ($0.01) for the first quarter of 2015.

·

Cash and cash flow: As of March 31, 2016, cash, cash equivalents and marketable securities were approximately $857 million, compared to $987 million as of December 31, 2015. In the first quarter of 2016, we repurchased 42.2 million shares of our Class A common stock at a weighted average price of $2.40 per share for a total of $102 million. Cash flow from operations was ($3) million for the first quarter of 2016, compared to $3 million for the fourth quarter of 2015 and ($47) million for the first quarter of 2015. Free cash flow was ($6) million for the first quarter of 2016 compared to $3 million for the fourth quarter of 2015 and ($49) million for the first quarter of 2015.

·

Revenue is projected to be in the range of $170 million to $180 million

·

Net loss is projected to be in the range of ($26) million to ($20) million

·

Net loss per share is projected to be in the range of ($0.03) to ($0.02) based on a share count projected to be approximately 875 million shares

·

Bookings are projected to be in the range of $160 million to $170 million

·

Adjusted EBITDA is projected to be in the range of break-even to $5 million.

·

Non-GAAP loss per share is projected to be in the range of ($0.01) to $0.00, based on a share count projected to be approximately 875 million shares

·

Adjusted EBITDA, non-GAAP net income (loss) and non-GAAP provision for (benefit from) expense do not include the impact of stock-based expense, acquisition-related transaction expenses, contingent consideration fair value adjustments and restructuring expense;

·

Bookings, Adjusted EBITDA, non-GAAP net income (loss) and non-GAAP provision for (benefit from) expense do 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 does 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 excludes depreciation and amortization of intangible assets, while non-GAAP net income (loss) 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; 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.

March 31,

December 31,

2016

2015

Assets

Current assets:

Cash and cash equivalents

$

731,451

$

742,217

Marketable securities

126,010

245,033

Accounts receivable

72,393

79,610

Income tax receivable

4,638

5,233

Restricted cash

2,082

209

Other current assets

41,065

39,988

Total current assets

977,639

1,112,290

Goodwill

652,436

657,671

Other intangible assets, net

58,406

64,016

Property and equipment, net

271,590

273,221

Restricted cash

250

986

Other long-term assets

17,298

16,446

Total assets

$

1,977,619

$

2,124,630

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

13,398

$

29,676

Other current liabilities

61,107

77,691

Deferred revenue

123,920

128,839

Total current liabilities

198,425

236,206

Deferred revenue

27

204

Deferred tax liabilities

6,461

6,026

Other non-current liabilities

95,928

95,293

Total liabilities

300,841

337,729

Stockholders’ equity:

Common stock and additional paid in capital

3,270,310

3,234,551

Treasury stock

(102,130

)

(98,942

)

Accumulated other comprehensive income (loss)

(69,581

)

(52,388

)

Accumulated deficit

(1,421,821

)

(1,296,320

)

Total stockholders’ equity

1,676,778

1,786,901

Total liabilities and stockholders’ equity

$

1,977,619

$

2,124,630

Three Months Ended

March 31, 2016

December 31, 2015

March 31, 2015

Revenue:

Online game

$

137,057

$

129,463

$

147,963

Advertising and other

49,664

56,306

35,330

Total revenue

186,721

185,769

183,293

Costs and expenses:

Cost of revenue

57,139

63,397

57,622

Research and development

87,737

85,099

107,520

Sales and marketing

46,344

53,066

31,839

General and administrative

22,384

39,333

40,381

Total costs and expenses

213,604

240,895

237,362

Income (loss) from operations

(26,883

)

(55,126

)

(54,069

)

Interest income

705

603

794

Other income (expense), net

2,100

1,463

8,359

Income (loss) before income taxes

(24,078

)

(53,060

)

(44,916

)

Provision for (benefit from) income taxes

2,480

(1,862

)

1,580

Net income (loss)

$

(26,558

)

$

(51,198

)

$

(46,496

)

Net income (loss) per share attributable to common stockholders:

Basic and diluted

$

(0.03

)

$

(0.06

)

$

(0.05

)

Weighted average common shares used to compute net income (loss) per share attributable to common stockholders:

Basic and diluted

871,093

922,540

898,344

Stock-based expense included in the above line items

Cost of revenue

$

649

$

1,712

$

1,072

Research and development

24,203

24,063

28,317

Sales and marketing

1,991

2,320

1,519

General and administrative

2,765

3,677

10,554

Total stock-based expense

$

29,608

$

31,772

$

41,462

Three Months Ended

March 31, 2016

December 31, 2015

March 31, 2015

Operating activities:

Net income (loss)

$

(26,558

)

$

(51,198

)

$

(46,496

)

Adjustments to reconcile net income (loss) to net cash provided by (used in)

operating activities:

Depreciation and amortization

10,812

11,966

17,722

Stock-based expense

29,608

31,772

41,462

(Gain) loss from sales of investments, assets and other, net

11

725

(6,056

)

Tax benefits (costs) from stock-based awards

—

899

—

Excess tax benefits (costs) from stock-based awards

—

(899

)

—

Accretion and amortization on marketable securities

259

770

2,087

Deferred income taxes

1,422

(3,542

)

998

Changes in operating assets and liabilities:

Accounts receivable, net

7,217

7,604

10,090

Income tax receivable

595

(217

)

(1,198

)

Other assets

(1,812

)

(4,307

)

(7,687

)

Accounts payable

(12,818

)

(1,292

)

1,063

Deferred revenue

(5,096

)

(3,665

)

(15,883

)

Other liabilities

(6,945

)

14,849

(43,104

)

Net cash provided by (used in) operating activities

(3,305

)

3,465

(47,002

)

Investing activities:

Purchases of marketable securities

—

—

(101,091

)

Sales and maturities of marketable securities

118,900

165,181

234,555

Acquisition of property and equipment

(2,654

)

(985

)

(2,112

)

Business acquisitions, net of cash acquired

(12,500

)

—

—

Proceeds from sale of property and equipment

398

64

—

Proceeds from sale of equity method investment

—

—

10,507

Net cash provided by (used in) investing activities

104,144

164,260

141,859

Financing activities:

Taxes paid related to net share settlement of equity awards

(919

)

(1,036

)

(1,008

)

Repurchases of common stock

(112,392

)

(88,409

)

—

Proceeds from employee stock purchase plan and exercise of stock options

2,476

275

3,390

Excess tax benefits (costs) from stock-based awards

—

899

—

Acquisition-related contingent consideration payment

—

—

(10,790

)

Net cash provided by (used in) financing activities

(110,835

)

(88,271

)

(8,408

)

Effect of exchange rate changes on cash and cash equivalents

(770

)

(257

)

(297

)

Net increase (decrease) in cash and cash equivalents

(10,766

)

79,197

86,152

Cash and cash equivalents, beginning of period

742,217

663,020

131,303

Cash and cash equivalents, end of period

$

731,451

$

742,217

$

217,455

Three Months Ended

March 31, 2016

December 31, 2015

March 31, 2015

Reconciliation of Revenue to Bookings

Revenue

$

186,721

$

185,769

$

183,293

Change in deferred revenue

(5,096

)

(3,665

)

(15,883

)

Bookings

$

181,625

$

182,104

$

167,410

Reconciliation of Net income (loss) to Adjusted EBITDA

Net income (loss)

$

(26,558

)

$

(51,198

)

$

(46,496

)

Provision for (benefit from) income taxes

2,480

(1,862

)

1,580

Other income (expense), net

(2,100

)

(1,463

)

(8,359

)

Interest income

(705

)

(603

)

(794

)

Restructuring expense, net

468

19,748

3,461

Depreciation and amortization

10,812

11,966

17,722

Acquisition-related transaction expenses

—

249

—

Contingent consideration fair value adjustment

2,030

(3,288

)

9,400

Stock-based expense

29,608

31,772

41,462

Change in deferred revenue

(5,096

)

(3,665

)

(15,883

)

Adjusted EBITDA

$

10,939

$

1,656

$

2,093

Reconciliation of Net income (loss) to Non-GAAP net income (loss)

Net income (loss)

$

(26,558

)

$

(51,198

)

$

(46,496

)

Restructuring expense, net

468

19,748

3,461

Amortization of intangible assets from acquisitions

7,379

7,402

6,264

Acquisition-related transaction expenses

—

249

—

Contingent consideration fair value adjustment

2,030

(3,288

)

9,400

Stock-based expense

29,608

31,772

41,462

Change in deferred revenue

(5,096

)

(3,665

)

(15,883

)

Tax effect of non-GAAP adjustments to net income (loss)

(6,278

)

(645

)

(4,921

)

Non-GAAP net income (loss)

$

1,553

$

375

$

(6,713

)

GAAP diluted shares

871,093

922,540

898,344

Non-GAAP diluted shares

882,350

939,110

898,344

Non-GAAP earnings (loss) per share:

$

0.00

$

0.00

$

(0.01

)

Reconciliation of Cash provided by operating activities to free cash flow

Net cash provided by (used in) operating activities

(3,305

)

3,465

(47,002

)

Acquisition of property and equipment

(2,654

)

(985

)

(2,112

)

Excess tax benefits (costs) from stock-based awards

—

899

—

Free cash flow

$

(5,959

)

$

3,379

$

(49,114

)

Reconciliation of GAAP to Non-GAAP provision for (benefit from) income taxes

GAAP provision for (benefit from) income taxes

2,480

(1,862

)

1,580

Restructuring expense, net

85

2,240

381

Amortization of intangible assets from acquisitions

1,347

378

689

Acquisition-related transaction expenses

—

453

—

Contingent consideration fair value adjustment

371

(964

)

1,035

Stock-based expense

5,405

396

4,564

Change in deferred revenue

(930

)

(1,858

)

(1,748

)

Non-GAAP provision for (benefit from) income taxes

$

8,758

$

(1,217

)

$

6,501

Second Quarter 2016

Reconciliation of Revenue to Bookings

Revenue range

$

170,000 - 180,000

Change in deferred revenue

(10,000)

Bookings range

$

160,000 - 170,000

Reconciliation of Net income (loss) to Adjusted EBITDA

Net income (loss) range

$

(26,000) - (20,000)

Provision for (benefit from) income taxes

0 - 2,000

Other income (expense), net

(1,000) - (2,000)

Interest income

(1,000)

Depreciation and amortization

11,000

Stock-based expense

27,000 - 25,000

Change in deferred revenue

(10,000)

Adjusted EBITDA range

$

0 - 5,000

Reconciliation of Net income (loss) to Non-GAAP net income (loss)

Net income (loss) range

$

(26,000) - (20,000)

Amortization of intangible assets from acquisitions

7,000

Stock-based expense

27,000 - 25,000

Change in deferred revenue

(10,000)

Tax effect of non-GAAP adjustments to net income (loss)

(3,000) - (4,000)

Non-GAAP net income (loss) range

$

(5,000) - (2,000)

GAAP and Non-GAAP diluted shares

875,000

Net income (loss) per share range

$

(0.03) - (0.02)

Non-GAAP earnings (loss) per share range

$

(0.01) - 0.00