Zynga Acquires Mobile Game Developer Natural Motion; Reports Q4 Results

Zynga ZNGA, a leading social game developer, today announced financial results for the fourth quarter and full year ended December 31, 2013. Zynga will hold a conference call to discuss these financial results today, January 30, 2014, at 3:00 p.m. PST (6:00 p.m. EST) in place of the previously announced date of February 6, 2014. The live webcast of Zynga's earnings conference call can be accessed at investor.zynga.com. Following the call, a replay of the webcast will be available through Zynga's website. Recent Business Highlights Outperforms high end of Q4 2013 outlook with bookings of $147M and Adjusted EBITDA of $3M Agrees to acquire leading mobile game and technology developer, NaturalMotion; expanding Zynga's creative pipeline, accelerating planned mobile growth, and bringing in next-generation technology and tools Begins to implement 15% global workforce reduction and expand cost savings plan; expects to generate approximately $33 to $35 million in pre-tax savings for 2014 Achieves victory in patent lawsuit resulting in unanimous verdict of non-infringement in Zynga's favor Recent Product Highlights Words With Friends franchise achieved 33% sequential quarterly growth in bookings, delivering the highest quarterly bookings in the game's five year history Zynga's Casino franchise achieved sequential quarterly growth in bookings for the first time in the past 18 months; Zynga Poker grew mobile monthly active users 8% sequentially Launched new mobile slots product, Hit It Rich! on tablet; currently #1 on the free iPad charts in the Casino category "Over the last 7 months, our teams have been working with a sense of urgency. We finished 2013 in a strong position and expect 2014 to be a growth year. We believe that Q1 will be a solid foundation for that growth and we expect substantial improvements for the remainder of the year across audience, bookings and Adjusted EBITDA. The investments we are making to grow and sustain our franchises are beginning to bear fruit, particularly in Zynga Casino and Words With Friends. We are committed to refining our skills in the art and science of building new hit games and in 2014, we will move aggressively into new genres that align with the timeless, entertainment categories that consumers care about. Our market is growing as measured by device, audience and dollars and we have the privilege to compete in one of the fastest growing parts of the entertainment industry. We have an ambitious agenda and we are moving quickly to add capabilities that are complementary and strategic to our core growth plans," said Don Mattrick, CEO of Zynga. Financial Highlights (in thousands, except per share data) Quarter ended Year ended December 31, 2013 December 31, 2012 December 31, 2013 December 31, 2012 GAAP Results Revenue $ 176,362 $ 311,165 $ 873,266 $ 1,281,267 Net income (loss) $ (25,242) $ (48,561) $ (36,982) $ (209,448) Diluted net income (loss) per share $ (0.03) $ (0.06) $ (0.05) $ (0.28) Non-GAAP Results Bookings $ 146,677 $ 261,269 $ 716,176 $ 1,147,627 Adjusted EBITDA $ 2,603 $ 45,018 $ 46,549 $ 213,233 Non-GAAP net income $ (20,834) $ 6,935 $ (34,073) $ 58,178 Non-GAAP earnings per share $ (0.03) $ 0.01 $ (0.04) $ 0.07 Zynga to Acquire Leading Mobile Game Developer NaturalMotion Zynga also announced today, an agreement to acquire privately-held NaturalMotion, a leading mobile game and technology developer for approximately $527 million in cash and equity, based on Zynga's closing price on January 29, 2014. NaturalMotion is led by a seasoned team of technology innovators, including Chief Executive Officer and Co-Founder Torsten Reil and Vice President of Games Barclay Deeming. NaturalMotion was founded in 2001 and has approximately 260 employees across Oxford, London, Brighton and San Francisco. NaturalMotion's hit mobile games, CSR Racing and Clumsy Ninja, are in the popular consumer categories of Racing and People simulation. NaturalMotion possesses industry leading technology and tools and its proven simulation technologies have powered some of the biggest console games and blockbuster movies. Key Business Terms At closing, NaturalMotion's shareholders and vested option holders will receive an aggregate of $391 million in cash and approximately 39.8 million shares of Zynga Class A Common Stock Approximately 11.6 million of the 39.8 million shares will be issued to continuing employees and will be subject to vesting over a three-year period Strategic Rationale Transaction is expected to be accretive to non-GAAP earnings and generate bookings in the range of $70 to $80 million and Adjusted EBITDA of $15 to $25 million in 2014 Expands Zynga's creative pipeline into two new consumer categories – Racing and People simulation Accelerates mobile growth, bringing a track record of success and creative and technical talent Provides cutting edge technology and tools, including Euphoria, to fast track Zynga's ability to deliver hit games "We believe that bringing Zynga and NaturalMotion together is the right step at the right time," said Mattrick. "Our acquisition of NaturalMotion will allow us to significantly expand our creative pipeline, accelerate our mobile growth and bring next-generation technology and tools to Zynga that we believe will fast track our ability to deliver more hit games. Their creative portfolio aligns perfectly with our content strategy as Zynga will now have five top brands and capabilities in the Farm, Casino, Words, Racing and People categories. We are confident that we will build upon our market position with complementary strengths to generate long term value for our consumers, our employees and our shareholders." "NaturalMotion set out to make games that wow millions of people, by being obsessed with quality, disrupting and creating genres, and using almost magical technology. When we started talking to Don and his team, it quickly became clear that they shared this vision. Don's background in AAA games and Zynga's expertise in social game play and large-scale game operations will be invaluable to helping us grow our existing CSR and Clumsy Ninja franchises and maximize the breakout potential of our upcoming titles. We've reached our first milestones – creating #1 top-grossing and top-free titles – on our own. We can't wait to see what we can achieve together with Zynga," said Torsten Reil, CEO and Co-Founder, NaturalMotion. Cost Reduction Plan Today Zynga announced a cost reduction plan expected to generate pre-tax savings in the range of $33 million to $35 million in 2014, excluding an estimated $15 million to $17 million pre-tax restructuring charge in Q1. As part of the plan, Zynga expects to complete a workforce reduction of approximately 314 employees or approximately 15% of its current workforce, and implement additional cost reduction measures, including lowering its spend on datacenter infrastructure. Fourth Quarter Business Highlights Average daily bookings per average DAU (ABPU) increased from $0.051 in the fourth quarter of 2012 to $0.060 in the fourth quarter of 2013, up 19% year-over-year. On a consecutive quarter basis, ABPU was up 10% from $0.055 in the third quarter of 2013. Monthly Unique Payers (MUPs) in the fourth quarter of 2013 were 1.3 million, compared to 2.9 million in the fourth quarter of 2012. On a consecutive quarter basis, MUPs were down 16% from 1.6 million in the third quarter of 2013. As of December 31, 2013, Zynga had 3 of the top 10 games on Facebook, based on DAUs as reported by the Facebook API, consisting of its most established games, FarmVille 2, Words With Friends and Zynga Poker. In the fourth quarter of 2013, Words With Friends, achieved record bookings in its five year history. Daily active users (DAUs) in the fourth quarter of 2013 were 27 million, compared to 56 million in the fourth quarter of 2012. On a consecutive quarter basis, DAUs were down 12% from 30 million in the third quarter of 2013. Web DAUs and Mobile DAUs were 14 million and 13 million in the fourth quarter of 2013, respectively. Monthly active users (MAUs) in the fourth quarter of 2013 were 112 million, compared to 298 million in the fourth quarter of 2012. On a consecutive quarter basis, MAUs were down 16% from 133 million in the third quarter of 2013. Web MAUs and Mobile MAUs were 69 million and 43 million in the fourth quarter of 2013, respectively. Monthly unique users (MUUs) in the fourth quarter of 2013 were 80 million, compared to 167 million in the fourth quarter of 2012. On a consecutive quarter basis, MUUs were down 17% from 97 million in the third quarter of 2013. In the fourth quarter of 2013, Zynga recorded a restructuring charge of $7 million related to the closure of certain facilities as part of its continued action to reduce its long-term cost structure. Fourth Quarter 2013 Financial Summary Revenue: Revenue was $176 million for the fourth quarter of 2013, a decrease of 43% compared to the fourth quarter of 2012 and a decrease of 13% compared to the third quarter of 2013. Online game revenue was $152 million, a decrease of 44% compared to the fourth quarter of 2012 and a decrease of 13% compared to the third quarter of 2013. Advertising revenue was $24 million, a decrease of 35% compared to the fourth quarter of 2012 and a decrease of 15% compared to the third quarter of 2013. FarmVille 2, Zynga Poker, and FarmVille accounted for 26%, 21% and 15% of online game revenue, respectively, for the fourth quarter of 2013 compared to 22%, 19% and 18%, respectively, for the third quarter of 2013. Bookings: Bookings were $147 million for the fourth quarter of 2013, a decrease of 44% compared to the fourth quarter of 2012 and a decrease of 4% compared to the third quarter of 2013. Web bookings were $96 million for the fourth quarter of 2013, compared to $207 million for the fourth quarter of 2012 and $106 million for the third quarter of 2013. Mobile bookings were $51 million for the fourth quarter of 2013, compared to $54 million for the fourth quarter of 2012 and $46 million for the third quarter of 2013. Net loss: Net loss was $25 million for the fourth quarter of 2013, down from a net loss of $49 million for the fourth quarter of 2012 and up from a net loss of $68 thousand for the third quarter of 2013. Adjusted EBITDA: Adjusted EBITDA was $3 million for the fourth quarter of 2013 compared to $45 million for the fourth quarter of 2012 and $7 million in the third quarter of 2013. Non-GAAP net income (loss): Non-GAAP net loss was $21 million for the fourth quarter of 2013, compared to non-GAAP net income of $7 million in the fourth quarter of 2012 and non-GAAP net loss of $16 million in the third quarter of 2013. Net loss per share: Diluted net loss per share was $0.03 for the fourth quarter of 2013 compared to a net loss per share of $0.06 for the fourth quarter of 2012 and $0.00 for the third quarter of 2013. Non-GAAP EPS: Non-GAAP EPS was ($0.03) for the fourth quarter of 2013 compared to $0.01 for the fourth quarter of 2012 and ($0.02) for the third quarter of 2013. Cash and cash flow: As of December 31, 2013, cash, cash equivalents and marketable securities were approximately $1.54 billion, compared to $1.52 billion as of September 30, 2013. Cash flow from operations was $8 million for the fourth quarter of 2013, compared to $20 million for the fourth quarter of 2012. Free cash flow was $7 million for the fourth quarter of 2013 compared to $30 million for the fourth quarter of 2012. 2013 Annual Financial Summary Revenue: Revenue was $873 million in 2013, a decrease of 32% on a year-over-year basis. Online game revenue was $759 million, a decrease of 34% on a year-over-year basis. Advertising revenue was $114 million, a decrease of 17% on a year-over-year basis. Bookings: Bookings were $716 million in 2013, a decrease of 38% on a year-over-year basis. Net loss: Net loss was $37 million in 2013, which included $84 million of stock-based expense, $45 million of restructuring expense and a $28 million income tax benefit. Adjusted EBITDA: Adjusted EBITDA was $47 million in 2013, a decrease of 78% year-over-year, primarily due to the decline in bookings. Non-GAAP net loss: Non-GAAP net loss was $34 million in 2013, a decrease of 159% year-over-year, primarily due to the decline in bookings. Net loss per share: Basic and diluted net loss per share was $0.05 for the full year 2013, compared to a net loss per share of $0.28 for the full year 2012. Non-GAAP EPS: Non-GAAP EPS was ($0.04) for the full year 2013, compared to $0.07 for the full year 2012. Cash and Cash flow: As of December 31, 2013, cash, cash equivalents and marketable securities were approximately $1.54 billion, compared to $1.65 billion as of December 31, 2012. Cash flow from operations was $29 million for the year ended December 31, 2013, compared to $196 million for the year ended December 31, 2012. Free cash flow was $10 million for the year ended December 31, 2013 as compared to ($114) million for the year ended December 31, 2012 as reported, or $119 million excluding the purchase of the company's headquarters. Q1 2014 and Full Year Outlook Zynga's outlook for the first quarter of 2014, including the expected impact of the NaturalMotion acquisition is as follows: Revenue is projected to be in the range of $155 million to $165 million Net loss is projected to be in the range of $56 million to $49 million, including a restructuring charge of approximately $15 million to $17 million Diluted net loss per share is projected to be in the range of $0.07 to $0.06, based on a share count of approximately 860 million shares Bookings are projected to be in the range of $138 million to $148 million Adjusted EBITDA is projected to be in the range of $5 million to $10 million Non-GAAP loss per share is projected to $0.01, based on a share count of approximately 860 million shares Zynga's outlook for 2014 including the expected impact of the proposed NaturalMotion acquisition is as follows: Bookings are projected to be in the range of $760 million to $810 million Adjusted EBITDA is projected to be in the range of $65 million to $100 million Non-GAAP EPS is projected to be in the range of $0.01 to $0.03, based on a share count of approximately 985 million shares Conference Call Details Zynga will host a conference call today, January 30, 2014, at 3:00 pm PST (6:00 pm EST) to discuss financial results and the NaturalMotion acquisition. 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. is a leading provider of social game services, which include popular web and mobile franchises such as FarmVille, Words With Friends and Zynga Poker that are played by millions of consumers around the world. For the quarter ended December 31, 2013, Zynga had approximately 112 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. 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 first quarter and full year 2014 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 future operational and strategic plans; the financial and operational impact of our expected acquisition of NaturalMotion, including but not limited to the expected impact on our earnings, bookings and Adjusted EBITDA results in 2014 and our expected ability to expand our creative pipeline, accelerate our mobile growth and fast track our ability to deliver more hit games; the results and structure of our announced cost reduction plan; our ability to strengthen the core of our business and achieve future growth and profits; our ability to successfully transition our business to take advantage of the market opportunity in our industry; our ability to launch successful new games and hit games for web and mobile generally and deliver compelling entertainment experiences. 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, delays or other challenges in the completion of the NaturalMotion acquisition, its integration and the success of its current and future games as part of Zynga, delays or challenges in implementing our reduction in force or other cost-cutting activities, 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. 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 Quarterly Report on Form 10-Q for the three months ended September 30, 2013 and in our Annual Report on Form 10-K for the year ended December 31, 2012, copies 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. Undue reliance should not be placed on the forward-looking statements in this 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. We assume no obligation to update such statements. The results we report in our Annual Report on Form 10-K for the year ended December 31, 2013 could differ from the preliminary results we have announced in this press release. Non-GAAP Financial Measures: We have provided in this release non-GAAP financial information including bookings, Adjusted EBITDA, free cash flow, non-GAAP net income and non-GAAP EPS, as a supplement to the consolidated financial statements, which are prepared in accordance with generally accepted accounting principles ("GAAP"). Management uses these non-GAAP financial measures internally in analyzing our financial results to assess operational performance and liquidity. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. 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. We have provided reconciliations between our historical and first quarter 2014 outlook for non-GAAP financial measures to the most directly comparable GAAP financial measures. However, we have not provided reconciliation of full year 2014 bookings outlook to revenue, Adjusted EBITDA outlook to net income (loss), non-GAAP effective tax rate outlook to GAAP effective tax rate or non-GAAP EPS outlook to GAAP EPS because certain reconciling items necessary to accurately project revenue (including the projected mix of virtual goods sold in our games, and the projected estimated average lives of durable virtual goods for our games) for a full year are not in our control and cannot be reasonably projected due to variability from period to period caused by changes in player behavior and other factors. As revenue and/or net income for the applicable future period is a necessary input to determine all of these comparable GAAP figures, we are not able to provide these reconciliations for the full year 2014. For the same reason, we have also not provided a reconciliation of our outlook for the impact on bookings, Adjust EBITDA and non-GAAP EPS related to the NaturalMotion acquisition. Some limitations of bookings, Adjusted EBITDA, non-GAAP net income, non-GAAP EPS, and free cash flow: Adjusted EBITDA and non-GAAP net income (loss) do not include the impact of stock-based expense, asset impairment charges, acquisition-related contingent consideration 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, interest income, and the net gain from the termination of our lease and purchase of our corporate headquarters building; 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 significant legal settlements; Non-GAAP net income (loss) does not include the net gain from the termination of our lease and purchase of the Company's corporate headquarters building; Non-GAAP EPS gives effect to all dilutive awards based on the treasury stock method that were excluded from the GAAP diluted earnings per share calculation; Free cash flow is derived from net cash provided by operating activities less cash spent on capital expenditures, including the purchase of our corporate headquarters building, 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 (loss), 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, and free cash flow, along with other financial performance measures, including revenue, net income (loss), diluted net loss per share, cash flow from operations and GAAP operating margin 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) December 31, December 31, 2013 2012 Assets Current assets: Cash and cash equivalents $ 465,523 $ 385,949 Marketable securities 659,973 898,821 Accounts Receivable 65,667 106,327 Income tax receivable 6,943 5,607 Deferred tax assets 16,293 30,122 Restricted cash 3,493 28,152 Other current assets 23,507 29,392 Total current assets 1,241,399 1,484,370 Long-term marketable securities 416,474 367,543 Goodwill 227,989 208,955 Other intangible assets, net 18,282 33,663 Property and equipment, net 348,793 466,074 Other long-term assets 26,148 15,715 Total assets $ 2,279,085 $ 2,576,320 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 20,973 $ 23,298 Other current liabilities 68,866 146,883 Deferred revenue 186,663 338,964 Total current liabilities 276,502 509,145 Long-term debt -- 100,000 Deferred revenue 3,252 8,041 Deferred tax liabilities -- 24,584 Other non-current liabilities 122,060 109,047 Total liabilities 401,814 750,817 Stockholders' equity: Common stock and additional paid in capital 2,823,743 2,725,605 Treasury stock -- (295,113) Accumulated other comprehensive income (loss) (1,046) (1,447) Accumulated deficit (945,426) (603,542) Total stockholders' equity 1,877,271 1,825,503 Total liabilities and stockholders' equity $ 2,279,085 $ 2,576,320 ZYNGA INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data, unaudited) Three Months Ended Twelve Months Ended December 31, December 31, 2013 2012 2013 2012 Revenue: Online game $ 152,310 $ 274,337 $ 759,572 $ 1,144,252 Advertising 24,052 36,828 113,694 137,015 Total Revenue 176,362 311,165 873,266 1,281,267 Costs and expenses: Cost of revenue 58,876 77,056 248,358 352,169 Research and development 78,475 131,847 413,001 645,648 Sales and marketing 24,763 32,446 104,403 181,924 General and administrative 41,725 32,206 162,918 189,004 Impairment of intangible assets -- -- 10,217 95,493 Total costs and expenses 203,839 273,555 938,897 1,464,238 Income (loss) from operations (27,477) 37,610 (65,631) (182,971) Interest income 915 1,230 4,148 4,749 Other income (expense), net 1,079 (1,111) (3,386) 18,647 Income (loss) before income taxes (25,483) 37,729 (64,869) (159,575) Provision for income taxes (241) 86,290 (27,887) 49,873 Net income (loss) $ (25,242) $ (48,561) $ (36,982) $ (209,448) Net income (loss) per share: Basic and diluted $ (0.03) $ (0.06) $ (0.05) $ (0.28) Weighted average common shares used to compute net income (loss) per share: Basic and diluted 820,435 771,533 799,794 741,177 Stock-based expense included in the above line items: Cost of revenue $ 819 $ 1,018 $ 468 $ 12,116 Research and development 15,024 15,395 61,931 200,640 Sales and marketing (248) 3,528 8,079 24,684 General and administrative 3,732 (5,079) 13,915 44,546 Total stock-based expense $ 19,327 $ 14,862 $ 84,393 $ 281,986 ZYNGA INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) Three Months Ended Twelve Months Ended December 31, December 31, 2013 2012 2013 2012 Operating activities Net income (loss) $ (25,242) $ (48,561) $ (36,982) $ (209,448) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 32,142 33,430 129,047 141,479 Stock-based expense 19,327 14,862 84,393 281,986 Accretion and amortization on marketable securities 3,265 5,165 17,575 17,223 Net gain on termination of lease and purchase of building -- -- -- (19,886) (Gain) loss from sales of investments, assets and other, net 710 724 8,147 563 Tax benefits from stock-based awards (452) 15,972 (11,244) 21,652 Excess tax benefits from stock-based awards 452 (15,972) 11,244 (21,652) Deferred income taxes (513) 14,550 (18,766) (43,841) Impairment of intangible assets -- -- 10,217 95,493 Changes in operating assets and liabilities: Accounts receivable, net 904 (726) 40,806 34,338 Income tax receivable (867) 1,157 (1,336) 12,976 Other assets 3,738 10,988 3,932 19,908 Accounts payable 403 (14,272) (2,325) (21,312) Deferred revenue (29,685) (49,896) (157,090) (133,640) Other liabilities 3,550 52,358 (48,944) 19,928 Net cash provided by operating activities 7,732 19,779 28,674 195,767 Investing activities Purchase of corporate headquarters building -- -- -- (233,700) Purchases of marketable securities (252,977) (298,815) (1,074,919) (1,826,137) Sales of marketable securities 118,702 73,711 353,603 223,828 Maturities of marketable securities 191,820 206,218 891,238 647,916 Acquisition of property and equipment (469) (6,250) (7,813) (98,054) Proceeds from sale of property and equipment 3,057 -- 3,057 -- Business acquisitions, net of cash acquired -- -- (18,054) (205,510) Restricted cash -- 443 227 6,979 Equity method investment -- (10,000) -- (10,000) Other investing activities, net (91) -- 137 (2,256) Net cash (used in) provided by investing activities 60,042 -34,693 147,476 (1,496,934) Financing activities Repurchase of common stock -- (11,756) (9,302) (11,756) Proceeds from debt, net of issuance costs -- -- -- 99,780 Taxes paid related to net share settlement of equity awards (356) (238) (1,387) (26,307) Proceeds from exercise of stock options and warrants 11,793 2,670 18,223 16,960 Proceeds from employee stock purchase plan -- -- 7,892 4,489 Excess tax benefits from stock-based awards (452) 15,972 (11,244) 21,652 Repayment of debt -- -- (100,000) -- Net cash provided by financing activities 10,985 6,648 (95,818) 104,818 Effect of exchange rate changes on cash and cash equivalents 47 (144) (757) (45) Net increase in cash and cash equivalents 78,806 (8,410) 79,575 (1,196,394) Cash and cash equivalents, beginning of period 386,718 394,359 385,949 1,582,343 Cash and cash equivalents, end of period $ 465,524 $ 385,949 $ 465,524 $ 385,949 ZYNGA INC. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (In thousands, except per share data, unaudited) Three months ended Twelve months ended December 31, December 31, 2013 2012 2013 2012 Reconciliation of Revenue to Bookings Revenue $ 176,362 $ 311,165 $ 873,266 $ 1,281,267 Change in deferred revenue (29,685) (49,896) (157,090) (133,640) Bookings $ 146,677 $ 261,269 $ 716,176 $ 1,147,627 Reconciliation of Net income (loss) to Adjusted EBITDA Net income (loss) $ (25,242) $ (48,561) $ (36,982) $ (209,448) Provision for (benefit from) income taxes (241) 86,290 (27,887) 49,873 Other income (expense), net (1,079) 1,111 3,386 (18,647) Interest income (915) (1,230) (4,148) (4,749) Restructuring expense 7,366 7,862 44,683 7,862 Legal settlement -- 1,150 -- 3,024 Depreciation and amortization 32,142 33,430 129,047 141,479 Impairment of intangible assets -- -- 10,217 95,493 Acquisition-related contingent consideration 930 -- 930 -- Stock-based compensation 19,327 14,862 84,393 281,986 Change in deferred revenue (29,685) (49,896) (157,090) (133,640) Adjusted EBITDA $ 2,603 $ 45,018 $ 46,549 $ 213,233 Reconciliation of Net income to Non-GAAP net income Net income (loss) $ (25,242) $ (48,561) $ (36,982) $ (209,448) Impairment of intangible assets -- -- 10,217 95,493 Acquisition-related contingent consideration 930 -- 930 -- Stock-based compensation 19,327 14,862 84,393 281,986 Amortization of intangible assets from acquisitions 726 4,845 10,341 39,843 Change in deferred revenue (29,685) (49,896) (157,090) (133,640) Restructuring expense 7,366 7,862 44,683 7,862 Legal settlements -- 1,150 -- 3,024 Gain on purchase of corporate headquarters building -- -- -- (19,886) Tax effect of non-GAAP adjustments to net income 5,744 76,673 9,435 (7,056) Non-GAAP net income $ (20,834) $ 6,935 $ (34,073) $ 58,178 Reconciliation of GAAP diluted shares to Non-GAAP diluted shares GAAP diluted shares 820,435 771,533 799,794 741,177 Other dilutive equity awards (1) -- 49,964 -- 88,155 Non-GAAP diluted shares 820,435 821,497 799,794 829,332 Non-GAAP net income per share: $ (0.03) $ 0.01 $ (0.04) $ 0.07 Reconciliation of Cash provided by operating activities to Free cash flow Net cash provided by operating activities 7,732 19,779 28,674 195,767 Acquisition of property and equipment (469) (6,250) (7,813) (98,054) Purchase of building -- -- -- (233,700) Excess tax benefits from stock-based awards (452) 15,972 (11,244) 21,652 Free cash flow $ 6,811 $ 29,501 $ 9,617 $ (114,335) Reconciliation of GAAP to Non-GAAP provision for (benefit from) income taxes GAAP provision for (benefit from) income taxes (241) 86,290 (27,887) 49,873 Net gain on termination of lease and purchase of building -- -- -- (10,679) Stock-based expense (798) 22,274 2,768 104,196 Amortization of intangible assets from acquisitions 5 4,955 539 18,938 Acquisition-related contingent consideration 345 -- 345 -- Impairment of intangible assets -- -- 2,043 37,867 Change in deferred revenue (5,318) (51,042) (17,634) (90,901) Restructuring expense 22 972 2,504 972 Legal settlements -- 1,176 -- 1,671 Other -- (55,008) -- (55,008) Non-GAAP provision for (benefit from) income taxes $ (5,985) $ 9,617 $ (37,322) $ 56,929 (1) Gives effect to all dilutive awards based on the treasury stock method. ZYNGA INC. RECONCILIATION OF GAAP TO NON-GAAP FIRST QUARTER 2014 OUTLOOK (In thousands, except per share data, unaudited) First Quarter 2014 Reconciliation of Revenue to Bookings Revenue range $ 155,000 – 165,000 Change in deferred revenue (17,000) Bookings range $ 138,000 – 148,000 Reconciliation of Net loss to Adjusted EBITDA Net loss range $ (56,000) – (49,000) Income tax expense 1,000 Other income, net (1,000) Interest income (1,000) Restructuring expense 17,000 – 15,000 Depreciation and amortization 30,000 Stock-based expense 25,000 Acquisition-related transaction expenses 7,000 Change in deferred revenue (17,000) Adjusted EBITDA range $ 5,000 – 10,000 Reconciliation of Net loss to Non-GAAP Net Loss Net loss range $ (56,000) – (49,000) Stock-based expense 25,000 Amortization of intangible assets from acquisitions 8,000 Restructuring expense 17,000 – 15,000 Acquisition-related transaction expenses 7,000 Change in deferred revenue (17,000) Tax effect of non-GAAP adjustments to net loss 6,000 – 5,000 Non-GAAP net income (loss) range $ (10,000) – (6,000) GAAP and Non-GAAP diluted shares 860,000 Net income (loss) per share range $ (0.07) – (0.06) Non-GAAP net income (loss) per share $ (0.01) CONTACT: Investors - Darren Yip