- Q3 non-GAAP revenue of $64.4 million
and Q3 GAAP revenue of $63.3 million
- Q3 Adjusted EBITDA of $8.5
million
- Partnership struck to bring
Tencent’s chart-topping shooter game, WeFire, to North and South
America, EMEA, Australia and New Zealand in 2016
- Over 1 billion total social
following of celebrities with whom the company has exclusive
partnerships; titles featuring these celebrities expected live by
end of 2017 *
- Hired Electronic Arts and Kabam
veteran, Nick Earl, as the President of Global Studios.
Glu Mobile Inc. (NASDAQ:GLUU), a leading global developer and
publisher of free-to-play games for smartphone and tablet devices,
today announced financial results for its third quarter ended
September 30, 2015.
“We were satisfied with our financial results in the third
quarter, including our ability to exceed revenue and EBITDA
expectations,” stated Niccolo de Masi, Chairman and Chief Executive
Officer of Glu. “During the quarter, our results were driven by the
ongoing strength of our catalog as well as the continued
outperformance of our Cooking Dash game.”
de Masi continued, “The supermajority of titles launched in 2015
have underperformed as solid monetization rates were offset by
significantly lower-than-expected install volumes. We have
strengthened our studio with the hiring of a new CTO and President
of Studios, as well as Board with the appointment of Greg Brandeau.
We remain on the lookout for accretive and strategic uses of our
strong balance sheet.”
de Masi concluded, “We believe Glu is well positioned given the
potential promotional power of our exclusive, multi-year celebrity
gaming partnerships. We are proud to announce that Glu has now
signed partnerships with celebrities who in turn have over 1
billion* social followers. We are similarly pleased with the
opportunity to bring Tencent’s chart-topping shooter WeFire to new
territories where Glu has a strong publishing operation.”
Third Quarter 2015 Financial
Highlights:
- Revenue: Total GAAP revenue was
$63.3 million in the third quarter of 2015 compared to $64.8
million in the third quarter of 2014. Total non-GAAP revenue was
$64.4 million in the third quarter of 2015, compared to $83.6
million in the third quarter of 2014. Non-GAAP revenue excludes
changes in deferred revenue and litigation settlement
proceeds.
- Gross Margin: GAAP gross margin
was 53% in the third quarter of 2015 compared to 58% in the third
quarter of 2014. Non-GAAP gross margin was 59% in the third quarter
of 2015 compared to 60% in the third quarter of 2014. Non-GAAP
gross margin excludes changes in deferred revenue and litigation
settlement proceeds, change in deferred cost of revenue,
amortization of intangible assets and non-cash warrant
expense.
- GAAP Operating Income/(Loss):
GAAP operating income was $389,000 in the third quarter of 2015
compared to a loss of $(106,000) in the third quarter of 2014.
- Non-GAAP Operating Income:
Non-GAAP operating income was $7.7 million in the third quarter of
2015 compared to $14.8 million during the third quarter of 2014.
Non-GAAP operating income excludes changes in deferred revenue and
deferred cost of revenue, amortization of intangible assets,
non-cash warrant expense, stock-based compensation expense,
restructuring charges, change in fair value of the Blammo earnout,
transitional costs and litigation costs and settlement
proceeds.
- Adjusted EBITDA: Adjusted EBITDA
was $8.5 million for the third quarter of 2015, compared to $15.4
million during the third quarter of 2014. Adjusted EBITDA is
defined as non-GAAP operating income excluding depreciation.
- GAAP Net Income and EPS: GAAP
net income was $158,000 for the third quarter of 2015 compared to
$10.4 million for the third quarter of 2014. GAAP diluted EPS was
approximately breakeven for the third quarter of 2015, based on
131.5 million weighted-average diluted shares outstanding, compared
to a GAAP diluted EPS of $0.10 for the third quarter of 2014, based
on 105.4 million diluted weighted-average shares outstanding.
- Non-GAAP Net Income and EPS:
Non-GAAP net income was $7.7 million for the third quarter of 2015
compared to $17.3 million for the third quarter of 2014. Non-GAAP
diluted EPS was $0.06 for the third quarter of 2015 based on 131.5
million weighted-average diluted shares outstanding, compared to
non-GAAP diluted EPS of $0.16 for the third quarter of 2014 based
on 105.4 million weighted-average diluted shares outstanding.
- Cash and Cash Flows: As of
September 30, 2015, Glu had cash and cash equivalents of $182.3
million compared to $189.7 million at the end of the prior quarter.
The company continues to have no debt. Cash flows used in
operations were $(7.8) million for the third quarter of 2015
compared to $2.5 million cash generated from operations for the
third quarter of 2014.
A reconciliation of GAAP to non-GAAP results has been provided
in the financial statement tables included in this press release.
An explanation of these measures is also included below under the
heading “Use of Non-GAAP Financial Measures.”
Recent Developments and Strategic
Initiatives:
- Today we announced the hiring of new
President of Studios, Nick Earl. Nick is a seasoned gaming veteran,
having most recently held senior studio roles at Electronic Arts
and Kabam.
- Today we announced a partnership to
bring Tencent’s chart-topping shooter game, WeFire, to North and
South America, EMEA, Australia and New Zealand.
- Announced today that we have signed
exclusive partnerships with celebrities totaling over one billion
social followers whose games will be live by the end of 2017*.
- In October, Tim Wilson joined Glu as
Global Chief Technology Officer, bringing to the company a strong
background in global technology and engineering leadership acquired
through his extensive career in gaming, including serving in
multiple CTO positions at Electronic Arts.
- In September, we announced the
availability of Deer Hunter 2016 as well as Deer Hunter VR, the
company’s first title developed exclusively for Oculus.
- In September, Greg Brandeau, former CTO
of Walt Disney Animation Studios and former SVP of Technology for
Pixar Animation Studios, joined Glu’s Board of Directors.
“The ongoing traction with our catalog titles resulted in a
better-than-expected third quarter,” stated Eric R. Ludwig, Chief
Operating Officer and Chief Financial Officer. “We are confident
that the combination of our long-term strategy and strong balance
sheet, positions us well to scale Glu to the next level and
generate greater shareholder value over time.”
Business Outlook as of November 5, 2015:
The following forward-looking statements reflect expectations as
of November 5, 2015. Results may be materially different and are
affected by many factors, such as: consumer demand for mobile
entertainment and specifically Glu’s products; consumer demand for
smartphones, tablets and next-generation platforms; our ability to
improve the monetization of our titles and continue to successfully
launch and update new games; development delays on Glu's products;
continued uncertainty in the global economic environment;
competition in the industry; storefront featuring; changes in
foreign exchange rates; Glu's effective tax rate and other factors
detailed in this release and in Glu's SEC filings.
Fourth Quarter Expectations – Quarter Ending December 31,
2015:
- Non-GAAP revenue is expected to be
between $50.0 million and $52.0 million.
- Non-GAAP gross margin is expected to be
approximately 62.7%.
- Non-GAAP operating expenses are
expected to be between $35.1 million and $35.3 million.
- Adjusted EBITDA, defined as non-GAAP
operating income/(loss) excluding depreciation of approximately
$0.7 million, is expected to range from a loss of $(2.0) million to
$(3.0) million.
- Income tax is expected to be an expense
of approximately $0.2 million.
- Non-GAAP net income/(loss) is expected
to be between $(2.9) million and ($3.9) million, or between $(0.02)
and $(0.03) per weighted-average basic share outstanding, which
excludes approximately $3.5 million of anticipated stock-based
compensation expense and $2.3 million for amortization of
intangibles.
- Weighted-average common shares
outstanding are expected to be approximately 128.0 million basic
and 129.3 million diluted.
2015 Expectations – Full Year Ending December 31,
2015:
- Non-GAAP revenue is expected to be
between $234.3 million and $236.3 million.
- Non-GAAP gross margin is expected to be
approximately 61.5%.
- Adjusted EBITDA is expected to range
from $11.0 million to $12.0 million.
- Non-GAAP net income is expected to be
between $7.6 million and $8.6 million, or between $0.06 and $0.07
per weighted-average diluted share outstanding, which excludes
approximately $11.7 million of anticipated stock-based compensation
expense, $9.7 million for amortization of intangibles and the
proceeds from the settlement of the Hothead Games litigation, net
of costs incurred.
- Weighted-average common shares
outstanding are expected to be approximately 118.8 million basic
and 122.8 million diluted.
- We expect to have cash and short-term
investments at December 31, 2015 of at least $170.0 million with no
debt.
Quarterly Conference Call
Glu will discuss its quarterly results via teleconference today
at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). Please dial
(866) 582-8907, or if outside the U.S., (760) 298-5046, with
conference ID # 50395369 to access the conference call at least
five minutes prior to the 1:30 p.m. Pacific Time start time. A live
webcast and replay of the call will also be available on the
investor relations portion of the company's website at
www.glu.com/investors. An audio replay will be available between
4:30 p.m. Pacific Time, November 5, 2015, and 8:59 p.m. Pacific
Time, November 12, 2015, by calling (855) 859-2056, or (404)
537-3406, with conference ID # 50395369.
Disclosure Using Social Media Channels and Calculation of
Social Followers
Glu currently announces material information to its investors
using SEC filings, press releases, public conference calls and
webcasts. Glu uses these channels as well as social media
channels to announce information about the company, games,
employees and other issues. Given SEC guidance regarding the
use of social media channels to announce material information to
investors, Glu is notifying investors, the media, its players and
others interested in the company that in the future, it might
choose to communicate material information via social media
channels or, it is possible that information it discloses through
social media channels may be deemed to be material. Therefore, Glu
encourages investors, the media, players and others interested in
Glu to review the information posted on the company forum
(http://ggnbb.glu.com/forum.php) and the company Facebook site
(https://www.facebook.com/glumobile), the company twitter account
(https://twitter.com/glumobile) and Mr. de Masi’s twitter account
(https://twitter.com/niccolodemasi). Investors, the media,
players or other interested parties can subscribe to the company
blog and twitter feed and Mr. de Masi’s twitter feed at the
addresses listed above. Any updates to the list of social
media channels Glu will use to announce material information will
be posted on the Investor Relations page of the company's website
at www.glu.com/investors.
*Glu calculates the aggregate number of social followers of a
particular celebrity licensor by adding the total followers on
Facebook, Twitter, Instagram, Vevo and Vine for such celebrity.
There is fan overlap among these social channels and among Glu’s
various celebrity licensors, and such aggregate numbers have not
been deduplicated.
The more than 1 billion total social followers supporting
celebrity titles that Glu expects to be live by the end of 2017 is
based on the combined Facebook, Twitter, Instagram, Vevo, and Vine
audiences of Katy Perry, Kim Kardashian West, Kendall and Kylie
Jenner, Britney Spears, Nicki Minaj, Jason Statham and additional
yet-to-be announced celebrities as of September 30, 2015.
Use of Non-GAAP Financial Measures
To supplement Glu's unaudited condensed consolidated financial
data presented in accordance with GAAP, Glu uses certain non-GAAP
measures of financial performance. The presentation of these
non-GAAP financial measures is not intended to be considered in
isolation from, as a substitute for, or superior to, the financial
information prepared and presented in accordance with GAAP, and may
be different from non-GAAP financial measures used by other
companies. In addition, these non-GAAP measures have limitations in
that they do not reflect all of the amounts associated with Glu's
results of operations as determined in accordance with GAAP. The
non-GAAP financial measures used by Glu include historical and
estimated non-GAAP revenue, non-GAAP smartphone revenue, non-GAAP
cost of revenue, non-GAAP operating expenses, non-GAAP gross
profit, non-GAAP gross margin, non-GAAP operating income/(loss),
non-GAAP net income/(loss) and non-GAAP basic and diluted net
income/(loss) per share. These non-GAAP financial measures exclude
the following items from Glu's unaudited consolidated statements of
operations:
- Change in deferred revenue and deferred
cost of revenue;
- Amortization of intangible assets;
- Non-cash warrant expense;
- Stock-based compensation expense;
- Restructuring charges;
- Change in fair value of Blammo
earnout;
- Litigation settlement proceeds and
costs;
- Transitional costs;
- Release of tax liabilities and
valuation allowance; and
- Foreign currency exchange gains and
losses primarily related to the revaluation of assets and
liabilities.
In addition, Glu has included in this release “Adjusted EBITDA”
figures which are used to evaluate Glu’s operating performance.
Adjusted EBITDA is defined as non-GAAP operating income/(loss)
excluding depreciation. Adjusted EBITDA margin is defined as
Adjusted EBITDA divided by non-GAAP revenue.
Glu may consider whether significant non-recurring items that
arise in the future should also be excluded in calculating the
non-GAAP financial measures it uses.
Glu believes that these non-GAAP financial measures, when taken
together with the corresponding GAAP financial measures, provide
meaningful supplemental information regarding Glu's performance by
excluding certain items that may not be indicative of Glu's core
business, operating results or future outlook. Glu's management
uses, and believes that investors benefit from referring to, these
non-GAAP financial measures in assessing Glu's operating results,
as well as when planning, forecasting and analyzing future periods.
These non-GAAP financial measures also facilitate comparisons of
Glu's performance to prior periods.
Cautions Regarding Forward-Looking Statements
This news release contains forward-looking statements, including
those regarding our “Business Outlook as of November 5, 2015”
(“Fourth Quarter Expectations – Quarter Ending December 30, 2015”
and “2015 Expectations – Full Year Ending December 31, 2015”), and
the statements regarding that we have signed exclusive, multi-year
partnerships with celebrities with over 1 billion social followers
and expect games featuring these celebrities to be live by the end
of 2017; the strengthening of our studios with the hiring of a new
CTO and President of Studios and the strengthening of our Board
with the appointment of Greg Brandeau; looking out for accretive
and strategic uses of our strong balance sheet; being well
positioned given the promotional power of our exclusive, multi-year
celebrity gaming partnerships; bringing Tencent’s chart-topping
shooter WeFire to new territories where Glu has a strong publishing
operation; ongoing traction with our catalog titles; and the
combination of our long-term strategy and strong balance sheet
positioning Glu to scale to the next level and generate greater
shareholder value over time. These forward-looking statements are
subject to material risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking
statements. Investors should consider important risk factors, which
include: the risks identified under "Business Outlook as of
November 5, 2015"; the risk that Glu does not realize the
anticipated strategic benefits from our celebrity partnerships; the
risk that the success of WeFire in Asia does not correlate to
strong performance in the markets where we plan to publish the
game; the risk that the number of social followers of our celebrity
partners does not correlate to strong performance for our celebrity
titles; the risk that consumer demand for smartphones, tablets and
next-generation platforms does not grow as significantly as we
anticipate or that we will be unable to capitalize on any such
growth; the risk that we do not realize a sufficient return on our
investment with respect to our efforts to develop free-to-play
games for smartphones, tablets and next-generation platforms, the
risk that we will not be able to maintain our good relationships
with Apple and Google; the risk that our development expenses for
games for smartphones, tablets and next-generation platforms are
greater than we anticipate; the risk that our recently and newly
launched games are less popular than anticipated or decline in
popularity and monetization rate more quickly than we anticipate;
the risk that our newly released games will be of a quality less
than desired by reviewers and consumers; the risk that the mobile
games market, particularly with respect to free-to-play gaming, is
smaller than anticipated; the risk that we may lose a key
intellectual property license; the risk that we are unable to
recruit and retain qualified personnel for developing and
maintaining the games in our product pipeline resulting in reduced
monetization of a game, product launch delays or games being
eliminated from our pipeline altogether and other risks detailed
under the caption "Risk Factors" in our Form 10-Q filed with the
Securities and Exchange Commission on August 7, 2015 and our other
SEC filings. You can locate these reports through our website at
http://www.glu.com/investors. We are under no obligation, and
expressly disclaim any obligation, to update or alter our
forward-looking statements whether as a result of new information,
future events or otherwise.
About Glu Mobile
Glu Mobile (GLUU) is a leading global developer and publisher of
free-to-play games for smartphone and tablet devices. Glu is
focused on creating compelling original IP games such as CONTRACT
KILLER, COOKING DASH, DEER HUNTER, DINER DASH, DINO HUNTER: DEADLY
SHORES, ETERNITY WARRIORS, FRONTLINE COMMANDO, RACING RIVALS, TAP
SPORTS BASEBALL and TAP SPORTS FOOTBALL, and branded IP games
including KIM KARDASHIAN: HOLLYWOOD, ROBOCOP: THE OFFICIAL GAME,
MISSION IMPOSSIBLE: ROGUE NATION and SNIPER X WITH JASON STATHAM on
the App Store, Google Play, Amazon Appstore, Facebook, Mac App
Store, and Windows Phone. Glu’s unique technology platform enables
its titles to be accessible to a broad audience of consumers
globally. Founded in 2001, Glu is headquartered in San Francisco
with major U.S. offices outside Seattle and in Long Beach, and
international locations in Canada, China, India, Japan, Korea, and
Russia. Consumers can find high-quality entertainment wherever they
see the ‘g’ character logo or at www.glu.com.
For live updates, please follow Glu via Twitter at
www.twitter.com/glumobile or become a Glu fan at
www.facebook.com/glumobile.
CONTRACT KILLER, COOKING DASH, DEER HUNTER, DINER DASH, DINO
HUNTER: DEADLY SHORES, ETERNITY WARRIORS, FRONTLINE COMMANDO,
RACING RIVALS, TAP SPORTS BASEBALL, TAP SPORTS FOOTBALL, SNIPER X,
GLU, GLU MOBILE, and the 'g' character logo are trademarks of Glu
Mobile Inc.
Glu Mobile Inc. Consolidated Balance
Sheets (in thousands) (unaudited) September
30, December 31,
2015
2014
ASSETS Cash and cash equivalents $ 182,349 $ 70,912
Accounts receivable, net 25,986 32,231 Prepaid royalties 17,730 864
Prepaid expenses and other current assets 17,704
17,388
Total current assets 243,769 121,395
Property and equipment, net 5,536 6,116 Restricted cash
1,498 1,990 Long-term prepaid royalties 43,299 5,870 Other
long-term assets 1,319 804 Intangible assets, net 20,103 27,524
Goodwill 87,915 87,964
Total
assets $ 403,439 $ 251,663
LIABILITIES
AND STOCKHOLDERS' EQUITY Accounts payable $ 10,561 $ 11,685
Accrued liabilities 1,858 3,812 Accrued compensation 5,520 10,751
Accrued royalties 15,841 12,440 Deferred revenue 34,147
37,333
Total current liabilities 67,927
76,021 Other long-term liabilities 28,912
3,936
Total liabilities 96,839
79,957 Common stock 13 11 Additional paid-in capital
554,876 415,766 Accumulated other comprehensive loss 1 (8 )
Accumulated deficit (248,290 ) (244,063 )
Stockholders' equity 306,600 171,706
Total liabilities and stockholders' equity $ 403,439
$ 251,663
Glu Mobile Inc. Condensed Consolidated Statements
of Operations (in thousands, except per share data)
(unaudited) Three Months Ended Nine Months
Ended September 30, September 30, September
30, September 30, 2015 2014 2015
2014 Revenue $ 63,250 $
64,791 $ 188,870 $ 150,281
Cost of revenue: Platform commissions, royalties and
other 27,445 25,733 75,075 51,367 Amortization of intangible assets
2,360 1,338 7,228
2,333
Total cost of revenue 29,805
27,071 82,303
53,700 Gross profit
33,445 37,720
106,567 96,581
Operating expenses: Research and development 16,304 15,355
52,855 48,231 Sales and marketing 12,302 15,327 37,511 32,801
General and administrative 4,419 6,808 19,254 17,865 Amortization
of intangible assets 31 127 190 381 Restructuring charge -
209 - 368
Total
operating expenses 33,056
37,826 109,810
99,646 Income/(loss) from operations
389 (106 ) (3,243 )
(3,065 ) Interest income and other expense,
net: Interest income 15 7 34 20 Other expense (167 )
(347 ) (644 ) (514 ) Interest income and other
expense, net
(152 ) (340
) (610 ) (494 )
Income/(loss) before income taxes 237
(446 ) (3,853 ) (3,559 )
Income tax benefit/(provision) (79 ) 10,850
(374 ) 10,328
Net income/(loss)
$ 158 $ 10,404 $ (4,227
) $ 6,769 Net income/(loss) per
share: Basic
$ 0.00 $ 0.11 $
(0.04 ) $ 0.08 Diluted
$
0.00 $ 0.10 $ (0.04 )
$ 0.07 Weighted average common shares
outstanding Basic
127,287 98,628 115,775
87,965 Diluted
131,486 105,438 115,775
93,578 Stock-based compensation expense included
in: Research and development $ 868 $ 764 $ 2,464 $ 6,686 Sales
and marketing 277 201 777 492 General and administrative
1,911 989 4,976 2,321
Total stock-based compensation expense $ 3,056
$ 1,954 $ 8,217 $ 9,499
Glu Mobile Inc.
GAAP to Non-GAAP Reconciliation (in thousands, except per
share data) (unaudited) For the Three Months
Ended March 31, June 30, September 30,
December 31, March 31, June 30, September
30, 2014 2014 2014 2014 2015
2015 2015 GAAP revenue $ 44,580
$ 40,910 $ 64,791 $ 72,865 $ 69,470
$ 56,150 $ 63,250 Change in deferred revenue and
litigation settlement proceeds 2,377 (5,874 ) 18,762
3,363 (7,023 ) 1,329 1,174
Non-GAAP
revenue 46,957 35,036 83,553
76,228 62,447 57,479
64,424 GAAP gross profit
30,824 28,037 37,720 40,806
40,726 32,396 33,445 Change in deferred
revenue and litigation settlement proceeds 2,377 (5,874 ) 18,762
3,363 (7,023 ) 1,329 1,174 Amortization of intangible assets 554
441 1,338 2,434 2,434 2,434 2,360 Non-cash warrant expense - -
1,126 66 93 135 1,896 Change in deferred platform commissions and
royalty expense (1,209 ) 1,527 (9,122 ) (108 ) 2,819
(321 ) (780 )
Non-GAAP gross profit 32,546
24,131 49,824 46,561
39,049 35,973 38,095
GAAP operating expense 30,117 31,703
37,826 35,676 38,214 38,540
33,056 Stock-based compensation (2,979 ) (4,566 ) (1,954 )
(2,134 ) (2,129 ) (3,032 ) (3,056 ) Amortization of intangible
assets (127 ) (127 ) (127 ) (127 ) (127 ) (32 ) (31 ) Litigation
costs and settlement proceeds - - - - - (476 ) 390 Transitional
costs - (682 ) (493 ) (255 ) (72 ) - - Change in fair value of
Blammo earnout (304 ) (531 ) - - - - - Restructuring charge -
(159 ) (209 ) (67 ) - - -
Non-GAAP
operating expense 26,707 25,638
35,043 33,093 35,886
35,000 30,359 GAAP operating
income/(loss) 707 (3,666 ) (106
) 5,130 2,512 (6,144 )
389 Change in deferred revenue and litigation settlement
proceeds 2,377 (5,874 ) 18,762 3,363 (7,023 ) 1,329 1,174 Non-GAAP
cost of revenue adjustment (655 ) 1,968 (6,658 ) 2,392 5,346 2,248
3,476 Stock-based compensation 2,979 4,566 1,954 2,134 2,129 3,032
3,056 Amortization of intangible assets 127 127 127 127 127 32 31
Transitional costs - 682 493 255 72 - - Change in fair value of
Blammo earnout 304 531 - - - - - Litigation costs and settlement
proceeds - - - - - 476 (390 ) Restructuring charge - 159
209 67 - - -
Non-GAAP
operating income/(loss) 5,839 (1,507
) 14,781 13,468 3,163
973 7,736 GAAP net
income/(loss) 133 (3,768 ) 10,404
1,379 1,124 (5,509 ) 158 Change
in deferred revenue and litigation settlement proceeds 2,377 (5,874
) 18,762 3,363 (7,023 ) 1,329 1,174 Non-GAAP cost of revenue
adjustment (655 ) 1,968 (6,658 ) 2,392 5,346 2,248 3,476 Non-GAAP
operating expense adjustment 3,410 6,065 2,783 2,583 2,328 3,540
2,697 Foreign currency exchange loss 136 31 347 981 290 186 167
Release of tax liabilities and valuation allowance - -
(8,352 ) 1,531 - - -
Non-GAAP
net income/(loss) $ 5,401 $ (1,578
) $ 17,286 $ 12,229 $
2,065 $ 1,794 $ 7,672
Reconciliation of net income/(loss) and net income/(loss) per
share: GAAP net income/(loss) per share - basic $ 0.00 $ (0.04
) $ 0.11 $ 0.01 $ 0.01 $ (0.05 ) $ 0.00 GAAP net income/(loss) per
share - diluted $ 0.00 $ (0.04 ) $ 0.10 $ 0.01 $ 0.01 $ (0.05 ) $
0.00 Non-GAAP net income/(loss) per share - basic $ 0.07 $ (0.02 )
$ 0.18 $ 0.12 $ 0.02 $ 0.02 $ 0.06 Non-GAAP net income/(loss) per
share - diluted $ 0.06 $ (0.02 ) $ 0.16 $ 0.11 $ 0.02 $ 0.01 $ 0.06
Shares used in computing Non-GAAP basic net income/(loss) per share
79,719 85,549 98,628 103,406 103,869 116,169 127,287 Shares used in
computing Non-GAAP diluted net income/(loss) per share 85,398
85,549 105,438 106,954 107,851 122,538 131,486
Non-GAAP
operating expense break-out: GAAP research and development
expense $ 15,579 $ 17,297 $ 15,355 $
16,053 $ 18,243 $ 18,308 $ 16,304
Transitional costs - (20 ) - - - - - Stock-based compensation
(2,317 ) (3,605 ) (764 ) (736 ) (760 ) (836 ) (868 )
Non-GAAP
research and development expense 13,262
13,672 14,591 15,317
17,483 17,472 15,436
GAAP sales and marketing expense 9,485
7,989 15,327 12,275 12,438
12,771 12,302 Stock-based compensation (101 ) (190 )
(201 ) (209 ) (218 ) (282 ) (277 )
Non-GAAP sales and marketing
expense 9,384 7,799 15,126
12,066 12,220 12,489
12,025 GAAP general &
administrative expense 4,926 6,131 6,808
7,154 7,406 7,429 4,419 Transitional
costs - (662 ) (493 ) (255 ) (72 ) - - Change in fair value of
Blammo earnout (304 ) (531 ) - - - - - Stock-based compensation
(561 ) (771 ) (989 ) (1,189 ) (1,151 ) (1,914 ) (1,911 ) Litigation
costs - - - - - (476 ) 390
Non-GAAP general and administrative expense $
4,061 $ 4,167 $ 5,326 $
5,710 $ 6,183 $ 5,039 $
2,898
Glu Mobile Inc. Non-GAAP Adjusted
EBITDA (in thousands) (unaudited)
For the Three Months Ended
March 31, June 30, September 30, December
31, March 31, June 30, September 30,
2014 2014 2014 2014 2015
2015 2015 GAAP net income/(loss)
$ 133 $ (3,768 ) $
10,404 $ 1,379 $ 1,124 $
(5,509 ) $ 158 Change in deferred
revenue and litigation settlement proceeds 2,377 (5,874 ) 18,762
3,363 (7,023 ) 1,329 1,174 Change in deferred platform commissions
and royalty expense (1,209 ) 1,527 (9,122 ) (108 ) 2,819 (321 )
(780 ) Non-cash warrant expense - - 1,126 66 93 135 1,896
Amortization of intangible assets 681 568 1,465 2,561 2,561 2,466
2,391 Depreciation 620 607 617 669 706 732 718 Stock-based
compensation 2,979 4,566 1,954 2,134 2,129 3,032 3,056 Change in
fair value of Blammo earnout 304 531 - - - - - Transitional costs -
682 493 255 72 - - Litigation costs and settlement proceeds - - - -
- 476 (390 ) Restructuring charge - 159 209 67 - - - Foreign
currency exchange loss 136 31 347 981 290 186 167 Interest income
and other expense (6 ) (7 ) (7 ) (3 ) (6 ) (12 ) (15 ) Income tax
provision/(benefit) 444 78
(10,850 ) 2,773 1,104 (809 )
79
Total Non-GAAP Adjusted EBITDA $
6,459 $ (900 ) $
15,398 $ 14,137 $
3,869 $ 1,705 $
8,454
In addition to the reasons stated above, which are generally
applicable to each of the items Glu excludes from its non-GAAP
financial measures, Glu believes it is appropriate to exclude
certain items for the following reasons:
Change in Deferred Revenue and Deferred Cost of Revenue. At the
date we sell certain premium games and micro-transactions, Glu has
an obligation to provide additional services and incremental
unspecified digital content in the future without an additional
fee. In these cases, we recognize the revenue and any associated
cost of revenue, including platform commissions and royalties, on a
straight-line basis over the estimated life of the paying user.
Internally, Glu’s management excludes the impact of the changes in
deferred revenue and deferred cost of revenue related to its
premium and free-to-play games in its non-GAAP financial measures
when evaluating the company’s operating performance, when planning,
forecasting and analyzing future periods, and when assessing the
performance of its management team. Glu believes that excluding the
impact of the changes in deferred revenue and deferred cost of
revenue from its operating results is important to facilitate
comparisons to prior periods and to understand Glu’s
operations.
Amortization of Intangible Assets. When analyzing the operating
performance of an acquired entity, Glu's management focuses on the
total return provided by the investment (i.e., operating profit
generated from the acquired entity as compared to the purchase
price paid) without taking into consideration any allocations made
for accounting purposes. Because the purchase price for an
acquisition necessarily reflects the accounting value assigned to
intangible assets (including acquired in-process technology and
goodwill), when analyzing the operating performance of an
acquisition in subsequent periods, Glu's management excludes the
GAAP impact of acquired intangible assets to its financial results.
Glu believes that such an approach is useful in understanding the
long-term return provided by an acquisition and that investors
benefit from a supplemental non-GAAP financial measure that
excludes the accounting expense associated with acquired intangible
assets.
Non-cash Warrant Expense. In the third and fourth quarters of
2014 and the first nine months of 2015, Glu recorded a non-cash
charge related to the vesting of warrants to purchase shares of
common stock issued to brand holders as part of third party
licensing, development and publishing arrangements. These charges
were computed using the Black-Scholes valuation model and were
recorded in cost of revenue. When evaluating the performance of its
consolidated results, Glu does not consider non-cash warrant
expense as it places a greater emphasis on overall stockholder
dilution rather than the accounting charges associated with the
vesting of any warrants. As the non-cash warrant expense impacts
comparability from period to period Glu believes that investors
benefit from a supplemental non-GAAP financial measure that
excludes these charges.
Stock-Based Compensation Expense. The Company applies the fair
value provisions of ASC 718, Compensation-Stock Compensation (“ASC
718”). ASC 718 requires the recognition of compensation expense,
using a fair-value based method, for costs related to all
share-based payments. Included in the stock compensation expense
was the contingent consideration that was subsequently issued to
the Blammo employees who were former shareholders of Blammo, which
was recorded as research and development expense over the term of
the earn-out periods, since these employees were primarily employed
in product development. Glu re-measured the fair value of the
contingent consideration each reporting period and only recorded a
compensation expense for the portion of the earn-out target which
was achieved. When evaluating the performance of its consolidated
results, Glu does not consider stock-based compensation charges.
Likewise, Glu's management team excludes stock-based compensation
expense from its short and long-term operating plans. In contrast,
Glu's management team is held accountable for cash-based
compensation and such amounts are included in its operating plans.
Further, when considering the impact of equity award grants, Glu
places a greater emphasis on overall stockholder dilution rather
than the accounting charges associated with such grants. Glu
believes it is useful to provide a non-GAAP financial measure that
excludes stock-based compensation in order to better understand the
long-term performance of its business.
Restructuring Charges. Glu undertook restructuring activities in
the second, third and fourth quarters of 2014 and recorded cash
restructuring charges due to the termination of certain employees
in its China, Europe and U.S. offices. Glu recorded the severance
costs as an operating expense when it communicated the benefit
arrangement to the employee and no significant future services,
other than a minimum retention period, were required of the
employee to earn the termination benefits. Glu believes that these
restructuring charges do not reflect its ongoing operations and
that investors benefit from a supplemental non-GAAP financial
measure that excludes these charges.
Change in Fair Value of Blammo Earnout. As part of the
acquisition of Blammo, Glu committed to issue additional
consideration in the form of Glu’s common stock to the former,
non-employee Blammo shareholders if certain revenue targets were
achieved. Glu recorded the estimated contingent consideration
liability at acquisition and adjusted the fair value of the
liability each reporting period. When analyzing the operating
performance of an acquired entity, Glu’s management focuses on the
total return provided by the investment (i.e., operating profit
generated from the acquired entity as compared to the purchase
price paid including the final amounts paid for contingent
consideration) without taking into consideration any expenses
recognized post-acquisition related to the change in fair value of
the contingent consideration. Because the final purchase price paid
for an acquisition necessarily reflects the accounting value
assigned to both the consideration, including the contingent
consideration, paid and to the intangible assets (including
goodwill) acquired, when analyzing the operating performance of an
acquisition in subsequent periods, the Company’s management
excludes the GAAP impact of any adjustments to the fair value of
these acquisition-related balances to its financial results. Glu
believes that the fair value adjustments affect comparability from
period to period and that investors benefit from a supplemental
non-GAAP financial measure that excludes these charges.
Litigation Settlement Proceeds and Costs. These proceeds and
expenses consist primarily of one-time settlement payments received
from, and legal fees incurred in connection with, intellectual
property infringement matters. The Company has treated the
settlement proceeds as a multiple element arrangement and has
allocated a significant portion of the proceeds to revenue as
deemed royalty revenue for the settlement of past infringement. The
residual proceeds have been allocated to contra general and
administrative expenses and offset legal fees incurred. The Company
excludes these proceeds and costs from its non-GAAP measures as
these proceeds and costs are isolated, unpredictable and not
expected to recur regularly, and the Company believes that these
non-recurring proceeds and costs have no direct correlation to the
operation of the Company’s ongoing core business.
Transitional Costs. GAAP requires expenses to be recognized for
various types of events associated with a business acquisition such
as legal, accounting and other deal related expenses. Glu has
incurred various costs related to the acquisition and integration
of PlayFirst and Cie Games into Glu’s operations. Glu recorded
these non-recurring acquisition and transitional costs as operating
expenses when they were incurred. Glu believes that these
acquisition and transitional costs affect comparability from period
to period and that investors benefit from a supplemental non-GAAP
financial measure that excludes these expenses.
Release of tax liabilities and valuation allowance. In the third
and fourth quarters of 2014 Glu adjusted a portion of its deferred
tax asset valuation allowance as a result of the deferred tax
liabilities recorded in connection with the Cie Games acquisition.
Glu believes that these non-recurring, one-time tax adjustments do
not reflect its ongoing operations and that investors benefit from
a supplemental non-GAAP financial measure that excludes these
adjustments.
Foreign currency exchange gains and losses. Foreign currency
exchange gains and losses represent the net gain or loss that Glu
has recorded for the impact of currency exchange rate movements on
cash and other assets and liabilities denominated in foreign
currencies related to the revaluation of assets and liabilities.
Accordingly, foreign currency exchange gains and losses are
generally unpredictable and can cause Glu’s reported results to
vary significantly. Due to the unusual magnitude of these gains and
losses, and the fact that Glu has not engaged in hedging or taken
other actions to reduce the likelihood of incurring a sizeable net
gain or loss in future periods, Glu excludes foreign exchange gains
and losses for comparability purposes. Glu believes that these
gains and losses do not reflect its ongoing operations and that
investors benefit from a supplemental non-GAAP financial measure
that excludes these items, enabling investors to compare Glu’s core
operating results in different periods without this variability.
Foreign exchange losses recognized during 2014 and 2015 were as
follows (in thousands):
March 31, 2014 $ (136 ) June 30, 2014 (31 ) September
30, 2014 (347 ) December 31, 2014 (981 )
FY 2014
$ (1,495 ) March 31, 2015 $ (290
) June 30, 2015 (186 ) September 30, 2015 (167 )
FY
2015 $ (643 )
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151105006788/en/
Investor Relations:ICR, Inc.Seth Potter,
646-277-1230ir@glu.com
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