- Record Q3 non-GAAP revenues of $83.6
million, up 270% year-over-year and 138%
quarter-over-quarter
- Record Q3 GAAP revenues of $64.8
million
- Record Q3 Adjusted EBITDA of $15.4
million, exceeding guidance
- Record Q3 Adjusted EBITDA margin of
18.4%
- Full year 2014 guidance
raised
- Extended the license agreement with
Kim Kardashian-West for an additional three years
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, 2014.
“Glu’s third quarter was the strongest in the company’s history
as non-GAAP revenue and Adjusted EBITDA set all time records,”
stated Niccolo de Masi, Chief Executive Officer of Glu. “The record
quarter was driven by the strength of Kim Kardashian: Hollywood,
our new releases Dino Hunter: Deadly Shores and Tap Sports:
Baseball, ongoing traction with Deer Hunter 2014 and Eternity
Warriors 3 and the addition of Racing Rivals to our product
portfolio.”
De Masi continued, “We are adding our beat in Q3 to our full
year 2014 guidance. With Contract Killer: Sniper still to launch in
Q4 we anticipate 101% revenue growth year-over-year at the midpoint
of our 2014 full year guidance. Our diversified portfolio and
franchise product strategy position us well for continued growth in
2015. Longer-term, with expected robust free cash flow and a strong
balance sheet, we are focused on extending our leadership in the
action, casual, racing and sports genres by consistently leveraging
our engines and expertise.”
Third Quarter 2014 Financial
Highlights:
- Revenue: Total GAAP revenue was
$64.8 million in the third quarter of 2014 compared to $21.7
million in the third quarter of 2013. Total non-GAAP revenue was
$83.6 million in the third quarter of 2014, an increase of 270%
compared to $22.6 million in the third quarter of 2013. Non-GAAP
revenue excludes changes in deferred revenue.
- Gross Margin: GAAP gross margin
was 58% in the third quarter of 2014 compared to 59% in the third
quarter of 2013. Non-GAAP gross margin was 60% in the third quarter
of 2014 compared to 66% in the third quarter of 2013. Non-GAAP
gross margin excludes changes in deferred revenue, change in
deferred cost of revenues, amortization of intangible assets and
non-cash warrant expense.
- GAAP Operating Income (Loss):
GAAP operating loss was $(106,000) in the third quarter of 2014
compared to a loss of $(7.8) million in the third quarter of
2013.
- Non-GAAP Operating Income
(Loss): Non-GAAP operating income was $14.8 million in the
third quarter of 2014 compared to a loss of $(4.8) million during
the third quarter of 2013. Non-GAAP operating income/(loss)
excludes changes in deferred revenues and deferred cost of
revenues, amortization of intangible assets, non-cash warrant
expense, stock-based compensation expense, restructuring charges,
change in fair value of the Blammo earnout, and transitional
costs.
- Adjusted EBITDA: Adjusted EBITDA
was $15.4 million for the third quarter of 2014 compared to a loss
of $(4.1) million during the third quarter of 2013. Adjusted EBITDA
margin was 18.4% for the third quarter of 2014 compared with
(18.3%) for the third quarter of 2013. Adjusted EBITDA is defined
as non-GAAP operating income/(loss) less depreciation. Adjusted
EBITDA margin is defined as Adjusted EBITDA divided by non-GAAP
revenue.
- GAAP Net Income (Loss) and EPS:
GAAP net income was $10.6 million for the third quarter of 2014
compared to a GAAP net loss of $(8.0) million for the third quarter
of 2013. GAAP EPS was $0.10 for the third quarter of 2014, based on
105.4 million weighted-average diluted shares outstanding, compared
to GAAP EPS of $(0.11) for the third quarter of 2013, based on 71.5
million weighted-average basic shares outstanding.
- Non-GAAP Net Income (Loss) and
EPS: Non-GAAP net income was $17.5 million for the third
quarter of 2014 compared to a loss of $(4.7) million for the third
quarter of 2013. Non-GAAP EPS was $0.17 for the third quarter of
2014 based on 105.4 million weighted-average diluted shares
outstanding, compared to non-GAAP EPS of $(0.07) for the third
quarter of 2013 based on 71.5 million weighted-average basic shares
outstanding.
- Cash Flows Generated (Used) in
Operations: Cash flows generated from operations were $2.5
million for the third quarter of 2014 compared to cash flows used
in operations of $(5.9) million for the third quarter of 2013.
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:
- More than 12 months post global launch,
Deer Hunter 2014 remains a top 100 grossing app in the U.S. App
Store for iPhone.
- In October, we announced the launch of
the first free-to-play Diner Dash game.
- In October, we launched Kim Kardashian:
Hollywood 2.0 with availability on Facebook and in September, we
extended the term of the license agreement with Kim Kardashian-West
for an additional three years.
- In September, we launched Racing Rivals
2.0 with availability on Facebook.
- In August, we launched Tap Sports:
Baseball, in which Glu has partnered with the Major League Baseball
Players Association to include the names and numbers of real-world
baseball stars.
- In August, we completed the acquisition
of Cie Games - creators of Racing Rivals and Car Town.
“Our record results highlight the leverage in Glu’s operating
model evidenced by the record revenue and Adjusted EBITDA margin
during the third quarter,” stated Eric R. Ludwig, Glu’s Chief
Financial Officer and Chief Operating Officer. “We are pleased with
the continued consumer interest in our games, consistently having
four to five titles within the top 100 grossing chart position on
the U.S. App Store for iPhone since the closing of our Cie Games
acquisition. The combination of our robust pipeline of titles,
global scale and strong balance sheet positions Glu to maintain its
momentum for the remainder of the year and into 2015.”
Business Outlook as of October 29, 2014:
The following forward-looking statements reflect expectations as
of October 29, 2014. 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,
2014:
- Non-GAAP revenues are expected to be
between $60.0 million and $65.0 million.
- Non-GAAP gross margin is expected to be
approximately 58%.
- Non-GAAP operating expenses are
expected to be between $32.0 million and $32.9 million.
- Adjusted EBITDA, defined as non-GAAP
operating income (loss) excluding depreciation of approximately
$600,000, is expected to range from $3.5 million to $5.5
million.
- Income tax is expected to be an expense
of approximately $2.2 million.
- Non-GAAP net income is expected to be
between $0.8 million and $2.8 million or between $0.01 and $0.03
per weighted-average diluted share outstanding, which excludes
approximately $2.0 million of anticipated stock-based compensation
expense, $2.6 million for amortization of intangibles and $400,000
of transitional costs related to the Cie Games integration.
- Weighted-average common shares
outstanding are expected to be approximately 103.7 million basic
and 108.1 million diluted.
2014 Expectations – Full Year Ending December 31,
2014:
- Non-GAAP revenues are expected to be
between $225.5 million and $230.5 million.
- Non-GAAP gross margin is expected to be
approximately 63%.
- Adjusted EBITDA is expected to range
from $24.5 million to $26.5 million.
- Non-GAAP net income is expected to be
between $22.1 million and $24.1 million or between $0.23 and $0.25
per weighted-average diluted share outstanding, which excludes
approximately $11.5 million of anticipated stock-based compensation
expense, $5.3 million for amortization of intangibles, $835,000 of
Blammo earnout mark to market charges, $368,000 of restructuring
charges and $1.6 million of transitional costs related to the
PlayFirst and Cie Games acquisitions.
- Weighted-average common shares
outstanding are expected to be approximately 91.9 million basic and
97.2 million diluted.
- We expect to have cash and short-term
investments at December 31, 2014 of at least $70.0 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 # 13866690 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, October 29, 2014, and 8:59 p.m. Pacific
Time, November 5, 2014, by calling (855) 859-2056, or (404)
537-3406, with conference ID # 13866690.
Disclosure Using Social Media Channels
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.
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 revenues, non-GAAP smartphone revenues, non-GAAP
cost of revenues, non-GAAP operating expenses, non-GAAP gross
profit, non-GAAP gross margins, non-GAAP operating income/(loss),
non-GAAP net loss and non-GAAP basic and diluted net loss per
share. These non-GAAP financial measures exclude the following
items from Glu's unaudited consolidated statements of
operations:
- Change in deferred revenues and
deferred cost of revenues;
- Amortization of intangible assets;
- Non-cash warrant expense;
- Stock-based compensation expense;
- Restructuring charges;
- Change in fair value of Blammo
earnout;
- 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 October 29, 2014”
(“Fourth Quarter Expectations – Quarter Ending December 31, 2014”
and “2014 Expectations – Full Year Ending December 31, 2014”), and
the statements that we anticipate 101% revenue growth
year-over-year at the midpoint of our 2014 full year guidance; our
diversified portfolio and franchise product strategy position us
well for continued growth in 2015; longer-term, with expected
robust free cash flow and a strong balance sheet, we are focused on
extending our leadership in the action, casual, racing and sports
genres by consistently leveraging our engines and expertise; and
the combination of our robust pipeline of titles, global scale and
strong balance sheet positions Glu to maintain its momentum for the
remainder of the year and into 2015. 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 October 29, 2014"; 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; and
other risks detailed under the caption "Risk Factors" in our Form
10-Q filed with the Securities and Exchange Commission on August
11, 2014 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 Inc. (NASDAQ: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, DEER HUNTER, DINER DASH, DINO HUNTER: DEADLY
SHORES, ETERNITY WARRIORS, and FRONTLINE COMMANDO, and branded IP
games including KIM KARDASHIAN: HOLLYWOOD, RACING RIVALS, ROBOCOP:
THE OFFICIAL GAME, and HERCULES: THE OFFICIAL GAME, on a wide range
of platforms including the Apple App Store, Google Play, Amazon App
Store, 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 offices outside Seattle
and 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, DEER HUNTER, DINER DASH, DINO HUNTER: DEADLY
SHORES, ETERNITY WARRIORS, FRONTLINE COMMANDO, RACING RIVALS, TAP
SPORTS: BASEBALL, GLU, GLU MOBILE and the 'g' character logo are
trademarks of Glu Mobile Inc. or its subsidiaries.
Glu Mobile Inc. Consolidated Balance
Sheets (in thousands) (unaudited) September
30, December 31, 2014 2013
ASSETS Cash and cash equivalents $ 54,268 $ 28,496 Accounts
receivable, net 34,566 18,305 Prepaid expenses and other current
assets 16,826 7,663
Total current
assets 105,660 54,464 Property and equipment, net 4,853
5,096 Restricted cash 1,990 1,730 Other long-term assets 6,199 637
Intangible assets, net 30,084 5,599 Goodwill 89,494
19,485
Total assets $ 238,280 $ 87,011
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts
payable $ 8,475 $ 10,657 Accrued liabilities 4,400 1,971 Accrued
compensation 8,217 5,378 Accrued royalties 11,510 1,727 Deferred
revenues 34,178 18,224
Total current
liabilities 66,780 37,957 Other long-term liabilities
2,596 2,357
Total liabilities
69,376 40,314 Common stock 11 8
Additional paid-in capital 413,898 298,593 Accumulated other
comprehensive income 229 307 Accumulated deficit (245,234 )
(252,211 )
Stockholders' equity 168,904
46,697
Total liabilities and stockholders'
equity $ 238,280 $ 87,011
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, 2014 2013
2014 2013 Revenues $
64,791 $ 21,722 $ 150,281
$ 70,772 Cost of revenues: Platform
commissions, royalties and other 25,733 7,871 51,367 23,003
Amortization of intangible assets 1,338 1,082
2,333 3,234
Total cost of
revenues 27,071 8,953
53,700 26,237 Gross
profit 37,720 12,769
96,581 44,535
Operating expenses: Research and development 15,355 11,405
48,231 34,259 Sales and marketing 15,327 5,361 32,801 15,512
General and administrative 6,808 3,617 17,865 11,388 Amortization
of intangible assets 127 229 381 1,219 Restructuring charge
209 - 368 1,448
Total operating expenses 37,826
20,612 99,646
63,826 Loss from operations (106
) (7,843 ) (3,065 )
(19,291 ) Interest and other
income/(expense), net: Interest income 7 4 20 11 Other
income/(expense), net (347 ) (159 ) (514 )
129 Interest and other income/(expense), net
(340 ) (155 ) (494
) 140 Loss before income
taxes (446 ) (7,998 ) (3,559
) (19,151 ) Income tax benefit 11,058
30 10,536 2,765
Net income/(loss) $ 10,612 $
(7,968 ) $ 6,977 $
(16,386 ) Net income /(loss) per share:
Basic
$ 0.11 $ (0.11 ) $
0.08 $ (0.24 ) Diluted
$
0.10 $ (0.11 ) $ 0.07
$ (0.24 ) Weighted average common
shares outstanding: Basic
98,628 71,529
87,965 69,246 Diluted
105,438 71,529
93,578 69,246 Stock-based compensation
expense included in: Research and development $ 764 $ 268 $
6,686 $ 1,099 Sales and marketing 201 40 492 200 General and
administrative 989 412 2,321
1,402
Total stock-based compensation
expense $ 1,954 $ 720 $ 9,499 $ 2,701
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,
2013 2013 2013
2013 2014 2014
2014 GAAP revenues 24,605
24,445 21,722 34,841 44,580
40,910 64,791 Change in deferred revenues 111
(1,251 ) 886 8,005 2,377 (5,874 ) 18,762
Non-GAAP Revenues 24,716 23,194
22,608 42,846 46,957
35,036 83,553 GAAP
gross profit 16,069 15,697 12,769
24,034 30,824 28,037 37,720 Change in
deferred revenues 111 (1,251 ) 886 8,005 2,377 (5,874 ) 18,762
Amortization of intangible assets 1,074 1,078 1,082 1,004 554 441
1,338 Non-cash warrant expense - - 427 - - - 1,126 Change in
deferred platform commissions and royalty expense (138 ) 419
(245 ) (1,753 ) (1,209 ) 1,527 (9,122 )
Non-GAAP gross
profit 17,116 15,943 14,919
31,290 32,546 24,131
49,824 GAAP operating expense
21,563 21,651 20,612 27,505
30,117 31,703 37,826 Stock-based compensation
(1,245 ) (736 ) (720 ) (1,584 ) (2,979 ) (4,566 ) (1,954 )
Amortization of intangible assets (495 ) (495 ) (229 ) (117 ) (127
) (127 ) (127 ) Transitional costs - - - - - (682 ) (493 ) Change
in fair value of Blammo earnout (29 ) 47 31 (56 ) (304 ) (531 ) -
Restructuring charge (511 ) (937 ) - - - (159
) (209 )
Non-GAAP operating expense 19,283
19,530 19,694 25,748
26,707 25,638 35,043
GAAP operating income/(loss) (5,494 )
(5,954 ) (7,843 ) (3,471
) 707 (3,666 ) (106 )
Change in deferred revenues 111 (1,251 ) 886 8,005 2,377 (5,874 )
18,762 Non-GAAP cost of revenues adjustment 936 1,497 1,264 (749 )
(655 ) 1,968 (6,658 ) Stock-based compensation 1,245 736 720 1,584
2,979 4,566 1,954 Amortization of intangible assets 495 495 229 117
127 127 127 Transitional costs - - - - - 682 493 Change in fair
value of Blammo earnout 29 (47 ) (31 ) 56 304 531 - Restructuring
charge 511 937 - - - 159
209
Non-GAAP operating income/(loss) (2,167
) (3,587 ) (4,775 ) 5,542
5,839 (1,507 ) 14,781
GAAP net income/(loss) (5,497 )
(2,921 ) (7,968 ) (3,523
) 133 (3,768 ) 10,612 Change in
deferred revenues 111 (1,251 ) 886 8,005 2,377 (5,874 ) 18,762
Non-GAAP cost of revenues adjustment 936 1,497 1,264 (749 ) (655 )
1,968 (6,658 ) Non-GAAP operating expense adjustment 2,280 2,121
918 1,757 3,410 6,065 2,783 Foreign currency exchange loss/(gain)
(129 ) (137 ) 159 130 136 31 347 Release of tax liabilities and
valuation allowance - (3,148 ) - - - -
(8,352 )
Non-GAAP net income/(loss) $ (2,299
) $ (3,839 ) $ (4,741 ) $
5,620 $ 5,401 $ (1,578 )
$ 17,494 Reconciliation of net
income/(loss) and net income/(loss) per share: GAAP net
income/(loss) per share - basic $ (0.08 ) $ (0.04 ) $ (0.11 ) $
(0.05 ) $ 0.00 $ (0.04 ) $ 0.11 GAAP net income/(loss) per share -
diluted $ (0.08 ) $ (0.04 ) $ (0.11 ) $ (0.05 ) $ 0.00 $ (0.04 ) $
0.10 Non-GAAP net income/(loss) per share - basic $ (0.03 ) $ (0.05
) $ (0.07 ) $ 0.07 $ 0.07 $ (0.02 ) $ 0.18 Non-GAAP net
income/(loss) per share - diluted $ (0.03
)
$ (0.05 ) $ (0.07 ) $ 0.07 $ 0.06 $ (0.02 ) $ 0.17 Shares used in
computing Non-GAAP basic net income/(loss) per share 66,397 69,812
71,529 78,071 79,719 85,549 98,628 Shares used in computing
Non-GAAP diluted net income/(loss) per share 66,397 69,812 71,529
81,433 85,398 85,549 105,438
Non-GAAP operating expense
break-out: GAAP research and development expense $
11,630 $ 11,224 $ 11,405 $ 12,618 $
15,579 $ 17,297 $ 15,355 Transitional costs - - -
- - (20 ) - Stock-based compensation (668 ) (163 ) (268 ) (849 )
(2,317 ) (3,605 ) (764 )
Non-GAAP research and development
expense 10,962 11,061 11,137
11,769 13,262 13,672
14,591 GAAP sales and marketing
expense 5,008 5,143 5,361 10,608
9,485 7,989 15,327 Stock-based compensation
(67 ) (93 ) (40 ) (103 ) (101 ) (190 ) (201 )
Non-GAAP sales and
marketing expense 4,941 5,050
5,321 10,505 9,384
7,799 15,126 GAAP general
& administrative expense 3,919 3,852
3,617 4,162 4,926 6,131 6,808
Transitional costs - - - - - (662 ) (493 ) Change in fair value of
Blammo earnout (29 ) 47 31 (56 ) (304 ) (531 ) - Stock-based
compensation (510 ) (480 ) (412 ) (632 ) (561 ) (771 ) (989 )
Non-GAAP general and administrative expense $ 3,380
$ 3,419 $ 3,236 $ 3,474
$ 4,061 $ 4,167 $ 5,326
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,
2013 2013 2013 2013 2014
2014 2014 GAAP net income/(loss)
$ (5,497 ) $ (2,921 )
$ (7,968 ) $ (3,523 )
$ 133 $ (3,768 ) $
10,612 Change in deferred revenues 111 (1,251 ) 886 8,005
2,377 (5,874 ) 18,762 Change in deferred platform commissions and
royalty expense (138 ) 419 (245 ) (1,753 ) (1,209 ) 1,527 (9,122 )
Non-cash warrant expense - - 427 - - - 1,126 Amortization of
intangible assets 1,569 1,573 1,311 1,121 681 568 1,465
Depreciation 731 661 633 682 620 607 617 Stock-based compensation
1,245 736 720 1,584 2,979 4,566 1,954 Change in fair value of
Blammo earnout 29 (47 ) (31 ) 56 304 531 - Transitional costs - - -
- - 682 493 Restructuring charge 511 937 - - - 159 209 Foreign
currency exchange loss/(gain) (129 ) (137 ) 159 130 136 31 347
Interest and other income (3 ) (26 ) (4 ) - (6 ) (7 ) (7 ) Income
tax provision/(benefit) 135 (2,870 )
(30 ) (78 ) 444 78
(11,058 )
Total Non-GAAP Adjusted EBITDA $
(1,436 ) $ (2,926 ) $
(4,142 ) $ 6,224 $
6,459 $ (900 ) $
15,398
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 Revenues and Deferred Cost of Revenues. 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 revenues and any associated
cost of revenues, 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 revenues 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 revenues and deferred cost of
revenues from its operating results is important to facilitate
comparisons to prior periods during which Glu did not delay the
recognition of significant amounts of revenue related to its games
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 quarters of 2013 and
2014, Glu recorded a non-cash charge related to the vesting of
warrants to purchase shares of common stock issued to a brand
holder as part of a third party licensing, development and
publishing arrangement. These charges were computed using the
Black-Scholes valuation model and were recorded in cost of
revenues. 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. Glu adopted ASC 718,
"Compensation – Stock Compensation" beginning in its fiscal year
ended December 31, 2006. Included in the stock compensation expense
is the contingent consideration potentially issuable to the Blammo
employees who were former shareholders of Blammo, which is recorded
as research and development expense over the term of the earn-out
periods, since these employees are primarily employed in product
development. Glu re-measures the fair value of the contingent
consideration each reporting period and only records a compensation
expense for the portion of the earn-out target which is likely to
be achieved. In addition, Glu is exposed to potential continued
fluctuations in the fair market value of the contingent
consideration in each reporting period, since re-measurement is
impacted by changes in Glu’s share price and the assumptions used
by Glu. 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 first and second quarters of 2013 and the second and third
quarters of 2014 and recorded (1) non-cash restructuring charges
due to vacating a portion of its offices in Washington, vacating
its Brazil office and writing-off the cumulative translation
adjustment upon substantial liquidation of its Brazilian entity;
and (2) cash restructuring charges due to the termination of
certain employees in its Brazil, 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 are
achieved. Glu recorded the estimated contingent consideration
liability at acquisition and will adjust 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.
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
second quarter of 2013, Glu recorded a non-cash income tax benefit
related to the release of certain foreign income tax liabilities
upon the expiration of the statute of limitations. Additionally, in
the third quarter of 2014 Glu released 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 benefits do not
reflect its ongoing operations and that investors benefit from a
supplemental non-GAAP financial measure that excludes these
benefits.
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 began, with the quarter ended
December 31, 2008, to present non-GAAP net loss and net loss per
share excluding 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
gains/(losses) recognized during 2013 and the first nine months of
2014 were as follows (in thousands):
March 31, 2013 $ 129 June 30, 2013 137 September 30, 2013
(159 ) December 31, 2013 (130 )
FY 2013 $
(23 ) March 31, 2014 $ (136 ) June 30,
2014 (31 ) September 30, 2014 (347 )
FY 2014 $
(514 )
Investor Relations:ICR, Inc.Seth Potter,
646-277-1230ir@glu.com
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