Zynga finally filed for its IPO today, and we now we get to take a look at its financials. At a high level, the company made nearly $600 million in revenues last year, and $90 million in profits. It grew at an incredible pace, with revenues growing 392 percent in 2010, up from $121.5 million in 2009 (and up from $19 million in 2008).
In just the first quarter of 2011 alone, the company’s revenues reached $235 million (or a $940 million revenue run-rate), and that was up 134 percent from the first quarter of 2010. What is particularly amazing about all of these revenue growth numbers is that Zynga started paying Facebook 30 percent of all Facebook Credits-related revenues starting in July, 2010, and only barely skipped a beat. Sequential revenue growth slowed from 32 percent in Q3 2010 to 15 percent in Q4 2010, but then accelerated again to 20 percent growth in Q1 2011.
The good news for investors is that Zynga actually makes a profit. After a $53 million loss in 2009, it swing to a $90 million net profit in 2010. And profits grew 84 percent in the first quarter of 2011 to $11.8 million.
Zynga makes almost all of its money from the sale of virtual goods (95 percent of Q1 2011 revenues), and the rest is advertising. Advertising revenue grew 321 percent in the first quarter to $13 million, while online gaming revenue grew 127 percent to $222 million.
Zynga also reports a non-GAAP (Generally Accepted Accounting Principles) measure, which it calls Bookings. In this sense, it is joiningother recent Net IPO filers like Groupon, which also put forth their own non-GAAP measure of revenues. In Zynga’s case, Bookings make it look even bigger. For instance, total Bookings in 2010 were $838.9 million, or 40 percent higher than its $597.5 million in revenues.
Zynga defers the recognition of all of its revenues, which is actually a more conservative accounting approach and is a godo thing. But it still wants to get credit for what it could have recognized, so it reports Bookings as well. It’s kind of like a way for Zynga to pat itself on the back in its financials.
Here is how Zynga explains Bookings in the S-1:
Bookings is a non-GAAP financial measure that we define as the total amount of revenue from the sale of virtual goods in our online games and advertising that would have been recognized in a period if we recognized all revenue immediately at the time of the sale. We record the sale of virtual goods as deferred revenue and then recognize revenue over the estimated average life of the purchased virtual goods or as the virtual goods are consumed.
Advertising revenue is treated the same way.
Some other key metrics investors will want to keep an eye on (all numbers are as of March 31, 2011):
- Total Q1 Revenues: $235.4 million
- Online Game Revenue: $222.4 million
- Online Advertising Revenue: $13 million
- Cash and Cash Equivalents: $996 million
- Operating cash flow: $103 million
- Cash flow from financing activities: $225 million
- Daily Active Users: 62 million
- Monthly Active Users: 236 million
- Monthly Unique Users: 146 million
- Employees: 2,268
The difference between active users and unique users is that active users are counted per game, whereas a unique user might play more than one game. In other words, there is an overlap in active users. In March, 2011, 146 million people played one or more Zynga games. So Zynga makes about $1.60 per user per quarter.
Zynga’s cash flows from “financing activities” was twice as big in Q1 than from operating activities, which is interesting. In the filing, Zynga discloses that it sold $287.2 million worth of marketable securities in the first quarter, primarily related to a $485 million financing which it raised during the quarter (but it also repurchased $261 million worth of stock in the same period).
