ZNGA
$2.81
Zynga Inc Cl A Cmn
($.01)
(.35%)
Earnings Details
2nd Quarter June 2016
Thursday, August 04, 2016 4:05:19 PM
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Summary

Zynga Inc Cl A Cmn Misses

Zynga Inc Cl A Cmn (ZNGA) reported breakeven results for the 2nd Quarter June 2016 on revenue of $181.7 million. The consensus estimate was for breakeven results on revenue of $169.5 million. The Earnings Whisper number was $0.02 per share. Revenue fell 9.1% compared to the same quarter a year ago.

The company said it expects third quarter non-GAAP earnings of approximately $0.01 per share on revenue of $170.0 million to $180.0 million. The current consensus estimate is for earnings of $0.01 per share on revenue of $192.6 million for the quarter ending September 30, 2016.

Zynga Inc provides social game services. The Company develops, markets and operates social games as live services played on mobile platforms such as iOS and Android and social networking sites such as Facebook.

Results
Reported Earnings
$0.00
Earnings Whisper
$0.02
Consensus Estimate
$0.00
Reported Revenue
$181.7 Mil
Revenue Estimate
$169.5 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Zynga Announces Second Quarter 2016 Financial Results

Zynga Inc. (ZNGA), a leading social game developer, today announced financial results for the second quarter ended June 30, 2016. In addition to today’s press release, a copy of our Q2 2016 Quarterly Earnings Letter, which outlines our Q2 2016 financial results and business outlook, is available on our website at http://investor.zynga.com. Zynga management will host a live Q&A session at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) today, August 4, to discuss Zynga’s Q2 2016 performance.

"We are continuing to make great progress in our turnaround. Our Q2 bookings and Adjusted EBITDA were both above the high end of our guidance range, with bookings at $175 million and Adjusted EBITDA at $12 million. In Q2, we launched 4 new games, including the successful release of NaturalMotion’s highly anticipated CSR2. Our top live services saw growth, with Words With Friends, Social Slots and Zynga Poker delivering strong results this quarter. We are tightening our operating model and improving our cost management as we do more with less, particularly in marketing. While we have more work to do in our turnaround, I am encouraged to see the momentum we feel in our products and company show up in our results," said Frank Gibeau, CEO of Zynga.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Financial Highlights</span>

-- GAAP revenue of $182 million and GAAP net loss of $4 million

Bookings of $175 million; above the high end of the guidance range, flat year-over-year and down 4% sequentially

-- Adjusted EBITDA of $12 million; above the guidance range

-- $868 million in cash, cash equivalents and marketable securities

-- GAAP operating expenses of $132 million, down 15%, quarter-over-quarter

Non-GAAP operating expenses of $118 million; down 5% quarter-over-quarter, driven by a 14% reduction in marketing expenses

Three Months Ended
Six Months Ended
(in thousands, except per share data)
June 30, 2016
March 31, 2016
June 30, 2015
June 30, 2016
June 30, 2015
GAAP Results
Revenue
$
181,735
$
186,721
$
199,918
$
368,456
$
383,211
Net income (loss)
$
(4,446
)
$
(26,558 )
$
(26,868 )
$
(31,004 )
$
(73,364 )
Diluted net income (loss) per share
$
(0.01
)
$
(0.03
)
$
(0.03
)
$
(0.04
)
$
(0.08
)
Non-GAAP Results
Bookings
$
174,653
$
181,625
$
174,462
$
356,278
$
341,872
Adjusted EBITDA
$
11,565
$
10,939
$
963
$
22,504
$
3,056
Non-GAAP net income (loss)
$
1,555
$
1,553
$
(7,578
)
$
3,108
$
(14,291 )
Non-GAAP earnings (loss) per share
$
0.00
$
0.00
$
(0.01
)
$
0.00
$
(0.02
)

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Player Metrics</span> (users and payers in millions)

Three Months Ended
June 30,
March 31,
June 30,
Q2’16
Q2’16
2016
2016
2015
Q/Q
Y/Y
Average daily active users (DAUs)
18
19
21
(8
)%
(15 )%
Average mobile DAUs
15
16
17
(7
)%
(11 )%
Average web DAUs
3
3
4
(10 )%
(28 )%
Average monthly active user (MAUs)
61
68
83
(11 )%
(26 )%
Average mobile MAUs
49
55
64
(11 )%
(23 )%
Average web MAUs
12
13
19
(11 )%
(37 )%
Average daily bookings per average DAU (ABPU)
$
0.107
$
0.103
$
0.091
4
%
17
%
Average monthly unique users (MUUs)
50
56
60
(11 )%
(16 )%
Average monthly unique payers (MUPs)
0.9
1.0
1.0
(5
)%
(5
)%
Payer conversion
1.8
%
1.7
%
1.6
%
7
%
13
%

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

For the first and second quarter of 2016, Rising Tide 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.

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

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Second Quarter 2016 Financial Summary</span>

Revenue: Revenue was $182 million for the second quarter of 2016, a decrease of 3% compared to the first quarter of 2016 and a decrease of 9% compared to the second quarter of 2015. Online game revenue was $136 million, a decrease of 1% compared to the first quarter of 2016 and a decrease of 16% compared to the second quarter of 2015. Advertising and other revenue was $46 million, a decrease of 8% compared to the first quarter of 2016 and an increase of 22% compared to the second quarter of 2015. Zynga Poker, Wizard of Oz Slots, FarmVille 2, Hit It Rich! Slots and Empires & Allies accounted for 19%, 15%, 12%, 11% and 10% of online game revenue, respectively, for the second quarter of 2016 while Zynga Poker, FarmVille 2, FarmVille 2: Country Escape, Hit It Rich! Slots, and Wizard of Oz Slots, accounted for 18%, 18%, 16%, 16%, and 10%, respectively, for the second quarter of 2015.

Bookings: Bookings were $175 million for the second quarter of 2016, a decrease of 4% compared to the first quarter of 2016 and flat compared to the second quarter of 2015.

Net income (loss): Net loss was ($4) million for the second quarter of 2016, compared to net loss of ($27) million for the first quarter of 2016 and net loss of ($27) million for the second quarter of 2015. The quarter-over-quarter decrease in net loss was primarily due to lower costs and expenses (primarily due to a benefit for the change in estimated fair value of the contingent consideration liability for Rising Tide in the second quarter of 2016 and, to a lesser extent, lower marketing costs).

Adjusted EBITDA: Adjusted EBITDA was $12 million for the second quarter of 2016, compared to $11 million in the first quarter of 2016 and $1 million for the second quarter of 2015. The quarter-over-quarter change in adjusted EBITDA was primarily due to lower marketing costs.

Non-GAAP net income (loss): Non-GAAP net income was $2 million for the second quarter of 2016, compared to non-GAAP net income of $2 million in the first quarter of 2016 and non-GAAP net loss of ($8) million in the second quarter of 2015.

Net income (loss) per share: Diluted net loss per share was ($0.01) for the second quarter of 2016, compared to diluted net loss per share of ($0.03) for the first quarter of 2016 and diluted net loss per share of ($0.03) for the second quarter of 2015.

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

Cash and cash flow: As of June 30, 2016, cash, cash equivalents and marketable securities were approximately $868 million, compared to $857 million as of March 31, 2016. Cash flow from operations was $15 million for the second quarter of 2016, compared to ($3) million for the first quarter of 2016 and $4 million for the second quarter of 2015. Free cash flow was $13 million for the second quarter of 2016 compared to ($6) million for the first quarter of 2016 and $1 million for the second quarter of 2015.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Third Quarter Outlook</span>

Zynga’s outlook for the third quarter of 2016 is as follows:

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

-- Net loss is projected to be in the range of ($33) million to ($29) million

Net loss per share is projected to be in the range of ($0.04) to ($0.03) based on a share count projected to be approximately 880 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 $12 million to $16 million

Non-GAAP earnings per share is projected to be $0.01, based on a diluted share count projected to be approximately 901 million shares

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Conference Call Details</span>

In addition to today’s press release, a copy of our Q2 2016 Quarterly Earnings Letter, which outlines our Q2 2016 financial results and business outlook, is available on our website at http://investor.zynga.com.

Zynga will host a live Q&A session today, August 4, at 2:00 pm PDT (5:00 pm EDT) to discuss financial results. Questions may be asked on the call or submitted in advance via email to investors@zynga.com, and Zynga will respond to as many questions as possible.

The live Q&A session can be accessed at http://investor.zynga.com- a replay of which will be available through the website after the call - or via the below conference dial-in number:

Toll-Free Dial-In Number: (800) 537-0745

International Dial-In Number: (253) 237-1142

Conference ID: 42132656

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">About Zynga Inc.</span>

Since its founding in 2007, Zynga’s mission has been to connect the world through games. To-date, more than 1 billion people have played Zynga’s games across Web and mobile, including FarmVille, Zynga Poker, Words With Friends, Hit it Rich! Slots and CSR Racing. Zynga’s games are available on a number of global platforms including Apple iOS, Google Android, Facebook and Zynga.com. The company is headquartered in San Francisco, Calif., and has additional offices in the U.S., Canada, U.K., Ireland and India. Learn more about Zynga at http://blog.zynga.com or follow us on Twitter and Facebook.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Key Operating Metrics</span>

We manage our business by tracking several operating metrics: "DAUs," which measure daily active users of our games, "MAUs," which measure monthly active users of our games, "MUUs," which measure monthly unique users of our games, "MUPs," which measure monthly unique payers in our games, and "ABPU," which measures our average daily bookings per average DAU, each of which is recorded by our internal analytics systems. The numbers for these operating metrics are calculated using internal company data based on tracking of user account activity. We also use third party network logins to help us track whether a player logged under two or more different user accounts is the same individual. We believe that the numbers are reasonable estimates of our user base for the applicable period of measurement; however, factors relating to user activity and systems may impact these numbers.

Please refer to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 and, when filed, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, for our definitions of "DAU," "MAU," "MUU," "MUP" and "ABPU".

MUUs, MUPs and payer conversion in this press release exclude Rising Tide games (Black Diamond Casino and Vegas Diamond Slots) for the three months ended June 30, 2016 and exclude Rising Tide games (Black Diamond Casino and Vegas Diamond Slots) and Zindagi legacy games for the three months ended March 31, 2016 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.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Forward-Looking Statements</span>

This press release contains forward-looking statements, including those statements relating to our outlook for the third quarter of 2016 under the heading "Third Quarter Outlook" and statements relating to, among other things: our continuing to make great progress in our turnaround; and our ability to tighten our operating model and improve our cost management as we do more with less, particularly in marketing.

Forward-looking statements often include words such as "outlook," "project," "plan," "intend," "could," "should," "would," "will," "might," "anticipate," "estimate," "continue," "believe," "may," "target," "expect," or similar expressions, the negative or plural of these words or expressions and statements in the future tense are generally forward-looking. The achievement or success of the matters covered by such forward-looking statements is subject to a number of risks, uncertainties, and assumptions. More information about factors that could affect our operating results is included under the captions "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2015, and, when filed, our Quarterly Report on Form 10-Q for the three months ended June 30, 2016, copies of which may be obtained by visiting our Investor Relations web site at http://investor.zynga.com or the Securities and Exchange Commission’s (the "SEC") web site at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on the date hereof. There is no guarantee that the circumstances described in our forward-looking statements will occur. Except as required by law, we assume no obligation to update any forward-looking statements for any reason to conform these statements to actual results or to changes in our expectations. The results we report in our Quarterly Report on Form 10-Q for the three months ended June 30, 2016 could differ from the preliminary results we have announced in this press release.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Non-GAAP Financial Measures</span>

We have provided in this press release certain non-GAAP financial measures, including bookings, Adjusted EBITDA, non-GAAP net income (loss), free cash flow, non-GAAP provision for (benefit from) income taxes, non-GAAP net income (loss) per share, and non-GAAP diluted share count, to supplement our consolidated financial statements prepared in accordance with GAAP (our "GAAP financial statements"). Management uses these non-GAAP financial measures internally in analyzing our financial results to assess operational performance and liquidity. Our non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for our GAAP financial statements. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key financial metrics we use in making operating decisions and because our investors and analysts use them to help assess the health of our business. In line with our historical practice, the financial information presented herein is provided on a supplemental, non-GAAP basis unless otherwise indicated. We have provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in (i) this press release announcing our financial results for the three months ended June 30, 2016 (which is included as Exhibit 99.1 to our Current Report on Form 8-K, filed with the SEC on August 4, 2016, a copy of which may be obtained by visiting our Investor Relations web site at http://investor.zynga.com or the SEC’s web site at www.sec.gov), (ii) when filed, our Quarterly Report on Form 10-Q for the three months ended June 30, 2016, a copy of which may be obtained by visiting our Investor Relations web site at http://investor.zynga.com or the SEC’s web site at www.sec.gov, and (iii) our second quarter of 2016 earnings slides presentation, dated August 4, 2016, a copy of which may be obtained by visiting our Investor Relations web site at http://investor.zynga.com and (iv) our second quarter of 2016 shareholder letter, dated August 4, 2016, a copy of which may be obtained by visiting our Investor Relations web site at http://investor.zynga.com.

Some limitations of the non-GAAP financial measures included in this press release:

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

Because of these limitations, you should consider the non-GAAP financial measures presented in this press release with our GAAP financial statements. See the GAAP to non-GAAP reconciliations in this press release and in the places listed above for further details.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Key Financial Metrics</span>

We regularly review a number of metrics, including the following key financial and operating metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions.

Bookings. Bookings is a non-GAAP financial measure that is equal to revenue recognized during the period plus the change in deferred revenue during the period. We record the sale of virtual goods as deferred revenue and then recognize that revenue over the estimated average life of the purchased virtual goods or as the virtual goods are consumed. Advertising sales, which consist of certain branded virtual goods and sponsorships, are also deferred and recognized over the estimated average life of the branded virtual good, similar to online game revenue. Bookings, as opposed to revenue, is the fundamental top-line metric we use to manage our business, as we believe it is a useful indicator of the sales activity in a given period. Over the long term, the factors impacting our bookings and revenue are the same. However, in the short term, there are factors that may cause revenue to exceed or be less than bookings in any period. We use bookings to evaluate the results of our operations, generate future operating plans and assess the performance of our company.

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss), adjusted for provision for (benefit from) income taxes; other income (expense), net; interest income; gain (loss) from significant legal settlements; restructuring expense, net; depreciation and amortization; impairment of intangible assets; stock-based expense; contingent consideration fair value adjustments; acquisition-related transaction expenses, and change in deferred revenue. We believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

ZYNGA INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)

June 30,
December 31,
2016
2015
Assets
Current assets:
Cash and cash equivalents
$
828,388
$
742,217
Marketable securities
40,050
245,033
Accounts receivable
65,074
79,610
Income tax receivable
1,949
5,233
Restricted cash
2,081
209
Other current assets
28,135
39,988
Total current assets
965,677
1,112,290
Goodwill
627,760
657,671
Other intangible assets, net
50,263
64,016
Property and equipment, net
269,769
273,221
Restricted cash
250
986
Other long-term assets
30,694
16,446
Total assets
$
1,944,413
$
2,124,630
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
11,900
$
29,676
Other current liabilities
62,199
77,691
Deferred revenue
116,765
128,839
Total current liabilities
190,864
236,206
Deferred revenue
100
204
Deferred tax liabilities
5,962
6,026
Other non-current liabilities
79,531
95,293
Total liabilities
276,457
337,729
Stockholders’ equity:
Common stock and additional paid in capital
3,297,066
3,234,551
Treasury stock
--
(98,942
)
Accumulated other comprehensive income (loss)
(100,518
)
(52,388
)
Accumulated deficit
(1,528,592 )
(1,296,320 )
Total stockholders’ equity
1,667,956
1,786,901
Total liabilities and stockholders’ equity
$
1,944,413
$
2,124,630

ZYNGA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data, unaudited)

Three Months Ended
Six Months Ended
June 30, 2016
March 31, 2016
June 30, 2015
June 30, 2016
June 30, 2015
Revenue:
Online game
$
135,823
$
137,057
$
162,161
$
272,880
$
310,124
Advertising and other
45,912
49,664
37,757
95,576
73,087
Total revenue
181,735
186,721
199,918
368,456
383,211
Costs and expenses:
Cost of revenue
56,103
57,139
57,779
113,242
115,401
Research and development
66,233
87,737
90,896
153,970
198,416
Sales and marketing
40,631
46,344
41,119
86,975
72,958
General and administrative
25,374
22,384
37,805
47,758
78,186
Total costs and expenses
188,341
213,604
227,599
401,945
464,961
Income (loss) from operations
(6,606
)
(26,883 )
(27,681 )
(33,489 )
(81,750 )
Interest income
761
705
605
1,466
1,399
Other income (expense), net
1,905
2,100
1,199
4,005
9,558
Income (loss) before income taxes
(3,940
)
(24,078 )
(25,877 )
(28,018 )
(70,793 )
Provision for (benefit from) income taxes
506
2,480
991
2,986
2,571
Net income (loss)
$
(4,446
)
$
(26,558 )
$
(26,868 )
$
(31,004 )
$
(73,364 )
Net income (loss) per share attributable to common stockholders:
Basic and diluted
$
(0.01
)
$
(0.03
)
$
(0.03
)
$
(0.04
)
$
(0.08
)
Weighted average common shares used to compute net income (loss) per share attributable to common stockholders:
Basic and diluted
873,393
871,093
911,699
872,243
905,058
Stock-based expense included in the above line items
Cost of revenue
$
1,127
$
649
$
772
$
1,776
$
1,844
Research and development
20,213
24,203
19,860
44,416
48,177
Sales and marketing
2,206
1,991
1,617
4,197
3,136
General and administrative
3,353
2,765
5,656
6,118
16,210
Total stock-based expense
$
26,899
$
29,608
$
27,905
$
56,507
$
69,367

ZYNGA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

Three Months Ended
Six Months Ended
June 30, 2016
March 31, 2016
June 30, 2015
June 30, 2016
June 30, 2015
Operating activities:
Net income (loss)
$
(4,446
)
$
(26,558
)
$
(26,868 )
$
(31,004
)
$
(73,364
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization
10,835
10,812
13,340
21,647
31,062
Stock-based expense
26,899
29,608
27,905
56,507
69,367
(Gain) loss from sales of investments, assets and other, net
231
11
406
242
(5,650
)
Accretion and amortization on marketable securities
52
259
1,797
311
3,884
Deferred income taxes
148
1,422
243
1,570
1,241
Changes in operating assets and liabilities:
Accounts receivable, net
7,319
7,217
(3,233
)
14,536
6,857
Income tax receivable
177
595
(331
)
772
(1,529
)
Other assets
(2,630
)
(1,812
)
(1,105
)
(4,442
)
(8,792
)
Accounts payable
(1,498
)
(12,818
)
11,699
(14,316
)
12,762
Deferred revenue
(7,082
)
(5,096
)
(25,457 )
(12,178
)
(41,340
)
Other liabilities
(15,459 )
(6,945
)
5,806
(22,404
)
(37,298
)
Net cash provided by (used in) operating activities
14,546
(3,305
)
4,202
11,241
(42,800
)
Investing activities:
Purchases of marketable securities
--
--
--
--
(101,091 )
Sales and maturities of marketable securities
85,902
118,900
256,112
204,802
490,667
Acquisition of property and equipment
(1,293
)
(2,654
)
(3,127
)
(3,947
)
(5,239
)
Business acquisitions, net of cash acquired
(1,720
)
(12,500
)
--
(14,220
)
--
Proceeds from sale of property and equipment
1,179
398
--
1,577
--
Proceeds from sale of equity method investment
--
--
--
--
10,507
Net cash provided by (used in) investing activities
84,068
104,144
252,985
188,212
394,844
Financing activities:
Taxes paid related to net share settlement of equity awards
(746
)
(919
)
(405
)
(1,665
)
(1,413
)
Repurchases of common stock
--
(112,392 )
--
(112,392 )
--
Proceeds from employee stock purchase plan and exercise of stock options
409
2,476
945
2,885
4,335
Acquisition-related contingent consideration payment
--
--
--
--
(10,790
)
Net cash provided by (used in) financing activities
(337
)
(110,835 )
540
(111,172 )
(7,868
)
Effect of exchange rate changes on cash and cash equivalents
(1,340
)
(770
)
246
(2,110
)
(51
)
Net increase (decrease) in cash and cash equivalents
96,937
(10,766
)
257,973
86,171
344,125
Cash and cash equivalents, beginning of period
731,451
742,217
217,455
742,217
131,303
Cash and cash equivalents, end of period
$
828,388
$
731,451
$
475,428
$
828,388
$
475,428

ZYNGA INC.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(In thousands, except per share data, unaudited)

Three Months Ended
Six Months Ended
June 30, 2016
March 31, 2016
June 30, 2015
June 30, 2016
June 30, 2015
Reconciliation of Revenue to Bookings
Revenue
$
181,735
$
186,721
$
199,918
$
368,456
$
383,211
Change in deferred revenue
(7,082
)
(5,096
)
(25,456 )
(12,178 )
(41,339 )
Bookings
$
174,653
$
181,625
$
174,462
$
356,278
$
341,872
Reconciliation of Net income (loss) to Adjusted EBITDA
Net income (loss)
$
(4,446
)
$
(26,558 )
$
(26,868 )
$
(31,004 )
$
(73,364 )
Provision for (benefit from) income taxes
506
2,480
991
2,986
2,571
Other income (expense), net
(1,905
)
(2,100
)
(1,199
)
(4,005
)
(9,558
)
Interest income
(761
)
(705
)
(605
)
(1,466
)
(1,399
)
Restructuring expense, net
1,710
468
12,855
2,178
16,316
Depreciation and amortization
10,835
10,812
13,340
21,647
31,062
Acquisition-related transaction expenses
199
--
--
199
--
Contingent consideration fair value adjustment
(14,390 )
2,030
--
(12,360 )
9,400
Stock-based expense
26,899
29,608
27,905
56,507
69,367
Change in deferred revenue
(7,082
)
(5,096
)
(25,456 )
(12,178 )
(41,339 )
Adjusted EBITDA
$
11,565
$
10,939
$
963
$
22,504
$
3,056
Reconciliation of Net income (loss) to Non-GAAP net income (loss)
Net income (loss)
$
(4,446
)
$
(26,558 )
$
(26,868 )
$
(31,004 )
$
(73,364 )
Restructuring expense, net
1,710
468
12,855
2,178
$
16,316
Amortization of intangible assets from acquisitions
7,465
7,379
6,160
14,844
$
12,424
Acquisition-related transaction expenses
199
--
--
199
$
--
Contingent consideration fair value adjustment
(14,390 )
2,030
--
(12,360 )
$
9,400
Stock-based expense
26,899
29,608
27,905
56,507
$
69,367
Change in deferred revenue
(7,082
)
(5,096
)
(25,456 )
(12,178 )
$
(41,339 )
Tax effect of non-GAAP adjustments to net income (loss)
(8,800
)
(6,278
)
(2,174
)
(15,078 )
$
(7,095
)
Non-GAAP net income (loss)
$
1,555
$
1,553
$
(7,578
)
$
3,108
$
(14,291 )
GAAP diluted shares
873,393
871,093
911,699
872,243
905,058
Non-GAAP diluted shares
893,636
882,350
911,699
891,849
905,058
Non-GAAP earnings (loss) per share:
$
0.00
$
0.00
$
(0.01
)
$
0.00
$
(0.02
)
Reconciliation of Cash provided by operating activities to free cash flow
Net cash provided by (used in) operating activities
14,546
(3,305
)
4,202
11,241
(42,800 )
Acquisition of property and equipment
(1,293
)
(2,654
)
(3,127
)
(3,947
)
(5,239
)
Free cash flow
$
13,253
$
(5,959
)
$
1,075
$
7,294
$
(48,039 )
Reconciliation of GAAP to Non-GAAP provision for (benefit from) income taxes
GAAP provision for (benefit from) income taxes
506
2,480
991
2,986
2,571
Restructuring expense, net
582
85
1,369
667
1,750
Amortization of intangible assets from acquisitions
3,203
1,347
643
4,550
1,332
Acquisition-related transaction expenses
61
--
--
61
--
Contingent consideration fair value adjustment
(4,159
)
371
--
(3,788
)
1,035
Stock-based expense
11,916
5,405
2,847
17,321
7,411
Change in deferred revenue
(2,803
)
(930
)
(2,685
)
(3,733
)
(4,433
)
Non-GAAP provision for (benefit from) income taxes
$
9,306
$
8,758
$
3,165
$
18,064
$
9,666

ZYNGA INC.

RECONCILIATION OF GAAP TO NON-GAAP THIRD QUARTER 2016 OUTLOOK

(In thousands, except per share data, unaudited)

Third Quarter 2016
Reconciliation of Revenue to Bookings
Revenue range
$ 170,000 - 180,000
Change in deferred revenue
10,000
Bookings range
$ 180,000 - 190,000
Reconciliation of Net income (loss) to Adjusted EBITDA
Net income (loss) range
$ (33,000) - (29,000)
Provision for (benefit from) income taxes
0 - 2,000
Other income (expense), net
(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
$ 12,000 - 16,000
Reconciliation of Net income (loss) to Non-GAAP net income (loss)
Net income (loss) range
$ (33,000) - (29,000)
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)
(6,000) - (7,000)
Non-GAAP net income (loss) range
$ 5,000 - 6,000
GAAP diluted shares
880,000
Non-GAAP diluted shares
901,000
Net income (loss) per share range
$ (0.04) - (0.03)
Non-GAAP earnings (loss) per share range
$
0.01

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">CONTACTS</span>

Investor Relations

investorrelations@zynga.com

Stephanie Hess

Vice President of Communications

shess@zynga.com

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