UNITED STATES SECURITIES and EXCHANGE COMMISSION Washington, D.C
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 May 4, 2015 Date of Report (Date of earliest event reported) Zynga Inc. (Exact name of registrant as specified in its charter) Delaware 001-35375 42-1733483 (State or other jurisdiction of (Commission (I.R.S. employer incorporation or organization) File No.) identification number) 699 Eighth Street San Francisco, CA 94103 (Address of principal executive offices, including zip code) (855) 449-9642 (Registrant’s telephone number, including area code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions: ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02 Results of Operations and Financial Condition On May 6, 2015, the Company issued a press release announcing its financial results for the quarter ended March 31, 2015 and a reduction in force. A copy of the press release is furnished as Exhibit 99.1 to this Current Report and is incorporated herein by reference. The information furnished in Item 2.02 of this Form 8-K, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any other filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except as expressly set forth by specific reference in such a filing. Item 2.05 Costs Associated with Exit or Disposal Activities. On May 4, 2015, the Audit Committee of the Company’s Board of Directors approved a planned reduction in force of 364 employees and contractors, constituting approximately 18% of the Company’s current workforce, as part of an overall plan to reduce the Company’s cost structure. In conjunction with its plan to reduce overall costs, the Company estimates it will incur approximately $80 million to $90 million in total restructuring expenses, of which approximately $75 million to $85 million will result in future cash expenditures. The Company expects to recognize pre-tax restructuring charges of approximately $18 million to $22 million in the quarter ended June 30, 2015. These second quarter costs will consist of severance and other employee-related costs (approximately $8 million to $12 million), lease, contract termination and other costs (approximately $10 million). The Company expects the remaining restructuring expenses to be incurred in the second half of 2015 and the first quarter of 2016. Item 9.01 Financial Statements and Exhibits. (d) The following exhibit is filed with this report on Form 8-K: Exhibit Number Description 99.1 Press release issued by Zynga Inc., dated May 6, 2015. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Zynga Inc. Date: May 6, 2015 By: /s/ David Lee David Lee Chief Financial Officer and Chief Accounting Officer INDEX TO EXHIBITS Exhibit Number Description 99.1 Press release issued by Zynga Inc., dated May 6, 2015. Exhibit 99.1 Press Release ZYNGA ANNOUNCES FIRST QUARTER 2015 FINANCIAL RESULTS DELIVERS RESULTS ABOVE GUIDANCE RANGE WITH $167.4M IN BOOKINGS AND $2.1M IN ADJUSTED EBITDA ANNOUNCES $100M COST REDUCTION PROGRAM LAUNCHES FIRST MOBILE ACTION STRATEGY GAME, EMPIRES & ALLIES, WORLDWIDE SAN FRANCISCO – May 6, 2015 – Zynga Inc. (NASDAQ: ZNGA), a leading social game developer, today announced financial results for the first quarter ended March 31, 2015. “In Q1, we delivered results above our guidance generating $167 million in bookings and Adjusted EBITDA of $2 million. Our Q1 results reflect the progress we have made in our transition to mobile which now represents 63% of total bookings – up 84% year over year,” said Mark Pincus, CEO of Zynga. “Zynga remains focused on our mission of connecting the world through games, which is even more relevant and possible today. Our execution is focused in three areas – our products, where we’re backing proven teams against the most valuable game categories; our people, to foster creative entrepreneurs; and our plan in order to fund our future with focus and simplicity.” “I’m proud of Mark Skaggs and team for launching Empires & Allies – a great new Action Strategy game with encouraging early player feedback,” continued Pincus. “In terms of our overall products, we have narrowed our focus to five categories: Action Strategy, Social Casino, Invest & Express, Casual and Racing. We now expect to launch between 6 to 8 new mobile games in 2015 with a continued investment in our future pipeline for 2016 and beyond.” Business and Audience Highlights • Outperformed high end of Q1’15 outlook with bookings of $167.4 million, Adjusted EBITDA of $2.1 million and Non-GAAP net loss of $6.7 million in the first quarter of 2015. • Continued to make progress in our transition to mobile, with mobile bookings now 63% of total bookings in the first quarter of 2015 – up 84% year over year. • Grew average daily bookings per average DAU (ABPU) 18% year over year. • Drove mobile audience growth, with first quarter mobile daily users up 18% year over year and 9% sequentially and mobile monthly audience up 29% year over year and 9% sequentially. • Ongoing efforts to grow and sustain Zynga’s core franchises – FarmVille, Zynga Casino and Words With Friends – resulted in 28% aggregate growth year over year in terms of first quarter bookings across the franchises. • Zynga Casino franchise delivered bookings growth of 55% year over year and 14% sequentially. • In the first quarter 2015, we entered into the mobile Action Strategy and mobile Match 3 categories with the geo-lock launches of Dawn of Titans, Empires & Allies and FarmVille: Harvest Swap. 1 Financial Highlights (in thousands, except per share data) Quarter ended March 31, 2015 March 31, 2014 GAAP Results Revenue $ 183,293 $ 168,020 Net income (loss) $ (46,496) $ (61,183) Diluted net income (loss) per share $ (0.05) $ (0.07) Non-GAAP Results Bookings $ 167,410 $ 161,358 Adjusted EBITDA $ 2,093 $ 13,846 Non-GAAP net income (loss) $ (6,713) $ (6,258) Non-GAAP net income (loss) per share $ (0.01) $ (0.01) Cost Reduction Plan Today, Zynga announced a cost reduction plan expected to generate pre-tax savings of approximately $100 million, excluding an estimated $18 million to $22 million pre-tax restructuring charge in the second quarter of 2015. As part of the plan, Zynga expects to complete a reduction of approximately 18% of our current workforce across its studios, including contractors, and implement additional cost reduction measures, including lowering costs and eliminating spend on outside and centralized services. Zynga expects the workforce reduction to be complete in the fourth quarter of this year and generate approximately $45 million in annualized savings. Zynga expects the reduction in centralized services costs and spend to be complete by the third quarter of 2016 and generate approximately $55 million in annualized savings. All savings estimates exclude restructuring charges. “For our people, we need to create an empowered, entrepreneurial culture that fosters more creativity and innovation. Over the years we’ve seen that tighter, more nimble teams can drive faster innovation and deliver more player value,” said Pincus. “As a result, today we announced a cost reduction program to focus, simplify and align us against our most promising opportunities. We expect these cost reductions to generate $100 million in annualized savings. We are reducing our workforce by 364 people or approximately 18%, decreasing our outside services and reducing our central functions. This was a hard but necessary decision and I believe this plan puts us in the best long term position for success.” Launches First Mobile Action Strategy Game, Empires & Allies, Worldwide on the App Store and on Google Play On May 5, 2015, Zynga launched Empires & Allies, its first mobile Action Strategy game, to global audiences. Empires & Allies is a new, modern military strategy game where players design their perfect army and deploy the weapons of modern war in a never-ending battle to save the world. Developed by a seasoned team of developers, and led by real-time strategy (RTS) and social games pioneer Mark Skaggs, Empires & Allies gives players new levels of strategic choice and control in every battle. First Quarter Operational Metrics The company tracks operating metrics using internal systems which rely on internal company data and third party data. In the first quarter of 2015, the company modified its calculation to take into account our business’s transition to mobile and updates to our operating metrics which utilize additional third party data to help us identify whether a player logged in under two or more accounts is the same individual. As a result of these changes, we revised the definitions for DAUs, MAUs, MUUs, and MUPs in the first quarter of 2015. We rely on the veracity of data provided by individuals and reported by third parties to calculate our metrics and reduce duplication of data. For comparative purposes, these key operating metrics have been revised for the first quarter of 2014 and fourth quarter of 2014 to reflect the updated definitions.