- Q2 revenue of $48.4 million and Q2
Bookings of $50.9 million
- Tap Sports Baseball 2016 is
poised to be the top grossing baseball game on U.S. App Store for
iPhone for the third consecutive year
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 second quarter ended June
30, 2016.
“Our ability to exceed expectations in the quarter was driven by
the strong Tap Sports Baseball 2016 launch as well as the ongoing
success of Cooking Dash 2016, Kim Kardashian: Hollywood and Racing
Rivals,” stated Niccolo de Masi, Chairman and Chief Executive
Officer of Glu.
De Masi continues, “We believe there is significant latent
revenue potential in our genre-leading live games. By learning from
Tencent and deepening monetization of our biggest spenders and most
engaged players, we anticipate it being possible to not only arrest
catalogue declines, but reverse them. Our goal is to achieve
profitability from our catalogue Bookings alone by the end of
2017.
“Over the past 6.5 years Glu has shipped over 85 games. Having
built a diversified portfolio of genre-leaders, we now intend to
double down on turning them into evergreen revenue generators.
Henceforth we shall prioritize adding new modes, systems and
community-enhancing features to our existing games to evolve them
into evergreen games. We believe this new focus will allow us to
grow Bookings significantly in the first half of 2017 and
beyond.
De Masi concluded, “We look forward to launching Nicki Minaj:
The Empire before year end and releasing 4-6 new innovative
evergreen games in 2017."
Second Quarter 2016 Financial
Highlights:
- Revenue: Total revenue was $48.4
million in the second quarter of 2016 compared to $56.2 million in
the second quarter of 2015.
- Bookings: Total Bookings were
$50.9 million in the second quarter of 2016, compared to $57.5
million in the second quarter of 2015. Bookings do not reflect the
deferral of certain game revenue that Glu recognizes over the
estimated useful lives of paying users of Glu’s games and excludes
changes in deferred revenue and litigation settlement proceeds.
Glu’s presentation of Bookings is consistent with Glu’s previous
disclosure of non-GAAP revenue.
- Gross Margin: Gross margin was
57% in the second quarter of 2016 compared to 58% in the second
quarter of 2015. Adjusted gross margin was 63% in the second
quarter of 2016, consistent with the second quarter of 2015.
Adjusted gross margin, which is consistent with Glu’s previous
disclosure of 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.
- Operating Loss: Operating loss
was $(13.5) million in the second quarter of 2016 compared to a
loss of $(6.1) million in the second quarter of 2015.
- Adjusted Operating
Income/(Loss): Adjusted operating loss was $(3.9) million in
the second quarter of 2016 compared to income of $1.0 million
during the second quarter of 2015. Adjusted operating
income/(loss), which is consistent with Glu’s prior disclosure of
non-GAAP operating income/(loss), excludes changes in deferred
revenue and deferred cost of revenue, amortization of intangible
assets, non-cash warrant expense, stock-based compensation expense,
restructuring charges, transitional costs and litigation costs and
settlement proceeds.
- Net Loss and EPS: Net loss was
$(17.9) million for the second quarter of 2016 compared to a net
loss of $(5.5) million for the second quarter of 2015. EPS loss was
$(0.14) for the second quarter of 2016, based on 131.2 million
weighted-average basic and diluted shares outstanding, compared to
an EPS loss of $(0.05) for the second quarter of 2015, based on
116.2 million weighted-average basic and diluted shares
outstanding.
- Adjusted Net Income/(Loss) and
EPS: Adjusted net loss was $(3.9) million for the second
quarter of 2016 compared to net income of $1.8 million for the
second quarter of 2015. Adjusted EPS loss, which is consistent with
Glu’s prior disclosure of non-GAAP net income/(loss), was $(0.03)
for the second quarter of 2016 based on 131.2 million
weighted-average basic and diluted shares outstanding, compared to
Adjusted diluted EPS of $0.01 for the second quarter of 2015 based
on 122.5 million weighted-average diluted shares outstanding.
- Adjusted EBITDA: Adjusted EBITDA
was a $(3.2) million loss for the second quarter of 2016 compared
to a $1.7 million profit during the second quarter of 2015.
Adjusted EBITDA is defined as Adjusted operating income/(loss)
excluding depreciation.
- Cash and Cash Flows: As of
June 30, 2016, Glu had cash and cash equivalents of $158.0 million
and no debt. Cash flows provided by operations were $2.0
million for the second quarter of 2016 compared to $(1.2) million
used for the second quarter of 2015.
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:
- In July, we announced the availability
of Rival Fire, the westernized version of Tencent’s popular shooter
game, We Fire.
- In June, we announced the availability
of Gordon Ramsay Dash.
- In May, we announced the availability
of Britney Spears: American Dream.
“The outperformance of Tap Sports Baseball 2016 resulted in a
better-than-expected second quarter,” stated Eric R. Ludwig, Chief
Operating Officer and Chief Financial Officer. “We believe that our
focus on elongating the tail of our evergreen titles will help us
achieve our goal of having our fixed operating costs being covered
by our catalog Bookings by the end of 2017.”
Business Outlook as of August 2, 2016:
The following forward-looking statements reflect expectations as
of August 2, 2016. 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 to create evergreen games
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.
Third Quarter Expectations – Quarter Ending September 30,
2016:
- Bookings are expected to be between
$50.0 million and $52.0 million.
- Adjusted gross margin is expected to be
approximately 62.1%.
- Adjusted operating expenses are
expected to be between $35.7 million and $36.4 million.
- Adjusted EBITDA, defined as Adjusted
operating income/(loss) excluding depreciation of approximately
$0.6 million, is expected to range from a loss of $(3.5) million to
$(4.0) million.
- Income tax is expected to be an expense
of approximately $0.2 million.
- Adjusted net loss is expected to be
between $(4.3) million and $(4.8) million, or between $(0.03) and
$(0.04) per weighted-average basic and diluted share outstanding,
which excludes approximately $2.8 million of anticipated
stock-based compensation expense, $2.7 million for amortization of
intangibles and any potential impairments of prepaid royalties and
guarantees or any change in fair value of strategic
investments.
- Weighted-average common shares
outstanding are expected to be approximately 132.9 million basic
and diluted.
2016 Expectations – Full Year Ending December 31,
2016:
- Bookings are expected to be between
$195.0 million and $202.0 million.
- Adjusted gross margin is expected to be
approximately 61.9%.
- Adjusted EBITDA is expected to range
from a loss of $(16.5) million to $(19.0) million.
- Adjusted net loss is expected to be
between a loss of $(19.3) million and $(21.8) million, or between
$(0.15) and $(0.17) per weighted-average basic and diluted share
outstanding, which excludes approximately $12.7 million of
anticipated stock-based compensation expense, approximately $2.2
million of restructuring charges, $10.1 million for amortization of
intangibles and any potential impairments of prepaid royalties and
guarantees or any change in fair value of strategic
investments.
- Weighted-average common shares
outstanding are expected to be approximately 131.8 million basic
and diluted.
- We expect to have cash and short-term
investments at December 31, 2016 of at least $125.0 million with no
debt.
Glu does not provide guidance on a GAAP basis primarily due to
the fact that Glu is unable to predict, with reasonable accuracy,
future changes in its deferred revenue. The amount of Glu’s
deferred revenue for any given period is difficult to predict due
to differing estimated useful lives of paying users across games,
variability of monthly revenue by game and unpredictability of
revenue from new game releases. Future changes in deferred revenue
are uncertain and could be material to Glu’s results computed in
accordance with GAAP.
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 # 45017918 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, August 2, 2016, and 8:59 p.m. Pacific Time,
August 9, 2016, by calling (855) 859-2056, or (404) 537-3406, with
conference ID # 45017918.
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 Bookings, Adjusted cost of revenue, Adjusted operating
expenses, Adjusted gross profit, Adjusted gross margin, Adjusted
operating income/(loss), Adjusted net income/(loss) and Adjusted
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;
- Litigation settlement proceeds and
costs;
- Transitional costs;
- Change in fair value of strategic
investments; and
- Foreign currency exchange gains and
losses primarily related to the revaluation of assets and
liabilities.
Bookings do not reflect the deferral of certain game revenue
that Glu recognizes over the estimated useful lives of paying users
of Glu’s games and excludes changes in deferred revenue and
litigation settlement proceeds.
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 Adjusted operating income/(loss)
excluding depreciation. Adjusted EBITDA margin is defined as
Adjusted EBITDA divided by Bookings.
Glu may consider whether significant 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 August 2, 2016” (“Third
Quarter Expectations – Quarter Ending September 30, 2016” and “2016
Expectations – Full Year Ending December 31, 2016”), and the
statements regarding that Tap Sports Baseball 2016 is poised to be
the top grossing baseball game on U.S. App Store for iPhone for the
third year in a row; our belief that there is significant latent
revenue potential in our genre-leading live games; our belief that
by learning from Tencent and deepening monetization of our biggest
spenders and most engaged players, we anticipate it being possible
to not only arrest catalogue declines, but reverse them; our goal
of achieving profitability from our catalogue Bookings alone by the
end of 2017; our intent to double-down on our genre-leading games
to turn them into evergreen revenue generators; our new focus on
adding new modes, systems and community-enhancing features to our
existing games to evolve them into evergreen games, which we
believe will allow us to grow Bookings significantly in the first
half of 2017 and beyond; that we look forward to launching Nicki
Minaj: The Empire before year end and releasing 4-6 new
innovative evergreen games in 2017; and our belief that our focus
on elongating the tail of our evergreen titles will help us achieve
our goal of having our fixed operating costs being covered by our
catalog Bookings by the end of 2017. 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 August 2, 2016"; the risk that Glu does not realize
the anticipated strategic benefits from our celebrity partnerships;
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 May 6, 2016 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 (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, 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 GORDON RAMSAY DASH, KENDALL & KYLIE,
KIM KARDASHIAN: HOLLYWOOD, BRITNEY SPEARS: AMERICAN DREAM, 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 U.S. offices outside Seattle
and in San Mateo, Portland and Long Beach, and international
locations in Canada, China, India, Japan, 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, 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) June 30,
December 31, 2016 2015 ASSETS
Cash and cash equivalents $ 158,037 $ 180,542
Accounts receivable, net 14,340 17,956 Prepaid royalties 18,403
23,715 Prepaid expenses and other current assets
18,243 14,841
Total current
assets 209,023 237,054 Property and equipment, net 4,777
5,447 Restricted cash 1,162 1,498 Long-term prepaid royalties
57,552 46,944 Other long-term assets 3,889 1,386 Intangible assets,
net 18,106 22,767 Goodwill 87,860
87,890
Total assets $ 382,369
$ 402,986
LIABILITIES AND STOCKHOLDERS'
EQUITY Accounts payable $ 9,165 $ 9,386 Accrued liabilities
1,589 1,654 Accrued compensation 7,998 7,100 Accrued royalties and
license fees 8,442 21,032 Accrued restructuring 970 342 Deferred
revenue 33,238 31,112
Total current liabilities 61,402 70,626 Long-term accrued
royalties 33,309 24,347 Other long-term liabilities
1,357 1,585
Total liabilities
96,068 96,558
Common stock 13 13 Additional paid-in capital 564,733 557,748
Accumulated other comprehensive loss (699 ) (85 ) Accumulated
deficit (277,746 ) (251,248 )
Stockholders' equity 286,301
306,428
Total liabilities and stockholders'
equity $ 382,369 $ 402,986
Glu Mobile Inc. Condensed Consolidated Statements of
Operations (in thousands, except per share data)
(unaudited) Three Months Ended Six
Months Ended June 30, June 30, June
30, June 30, 2016 2015 2016
2015 Revenue $ 48,363 $
56,150 $ 102,892 $ 125,620
Cost of revenue: Platform commissions, royalties and
other 18,639 21,320 39,002 47,630 Amortization of intangible assets
2,336 2,434 4,660
4,868
Total cost of revenue 20,975
23,754 43,662
52,498 Gross profit
27,388 32,396
59,230 73,122
Operating expenses: Research and development 20,721 18,308
41,033 36,551 Sales and marketing 10,935 12,771 23,559 25,209
General and administrative 7,096 7,429 15,081 14,835 Amortization
of intangible assets - 32 - 159 Restructuring charge 2,116
- 2,221 -
Total
operating expenses 40,868
38,540 81,894
76,754 Loss from operations
(13,480 ) (6,144 ) (22,664
) (3,632 ) Interest and other
expense, net: Interest income 25 12 45 18 Other expense
(4,478 ) (186 ) (4,030 ) (476 ) Interest and
other (expense), net
(4,453 )
(174 ) (3,985 )
(458 ) Loss before income taxes
(17,933 ) (6,318 ) (26,649
)
(4,090 ) Income tax benefit/(provision) (16 )
809 151 (295 )
Net loss
$ (17,949 ) $ (5,509 )
$ (26,498 ) $ (4,385 )
Net loss per share - basic and diluted $
(0.14 ) $ (0.05 ) $
(0.20 ) $ (0.04 )
Weighted average common shares outstanding - basic and
diluted 131,198 116,169 130,185
110,019 Stock-based compensation expense included
in: Research and development $ 837 $ 836 $ 2,031 $ 1,596 Sales
and marketing 191 282 483 500 General and administrative
1,933 1,914 3,992 3,065
Total stock-based compensation expense $ 2,961
$ 3,032 $ 6,506 $ 5,161
Glu Mobile
Inc. GAAP to Adjusted Results 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, 2015
2015 2015 2015 2016 2016
GAAP gross profit 40,726 32,396 33,445
35,596 31,841 27,388 Change in deferred
revenue and litigation settlement proceeds (7,023 ) 1,329 1,174
(3,135 ) (530 ) 2,575
Amortization of intangible assets in cost
of revenue
2,434 2,434 2,360 2,325 2,324 2,336 Non-cash warrant benefit /
(expense) 93 135 1,896 (116 ) 9 (32 ) Change in deferred platform
commissions and royalty expense 2,819 (321 )
(780 ) 1,497 (676 ) (348 )
Adjusted gross profit 39,049
35,973 38,095
36,167 32,968
31,919 GAAP operating expense
38,214 38,540 33,056 38,654
41,026 40,868 Stock-based compensation (2,129 )
(3,032 ) (3,056 ) (3,469 ) (3,545 ) (2,961 )
Amortization of intangible assets in cost
of revenue
(127 ) (32 ) (31 ) (11 ) - - Litigation costs and settlement
proceeds - (476 ) 390 - - - Transitional costs (72 ) - - - - -
Restructuring charge - - -
(1,075 ) (106 ) (2,116 )
Adjusted
operating expense 35,886
35,000 30,359
34,099 37,375
35,791 GAAP operating income/(loss)
2,512 (6,144 ) 389 (3,058
) (9,185 ) (13,480 ) Change in
deferred revenue and litigation settlement proceeds (7,023 ) 1,329
1,174
(3,135 ) (530 ) 2,575
Amortization of intangible assets in cost
of revenue
2,434 2,434
2,360
2,325 2,324 2,336
Non-cash warrant benefit /(expense)
93 135
1,896
(116 ) 9 (32 ) Change in deferred platform commissions and royalty
expense 2,819 (321 )
(780)
1,497 (676 ) (348 ) Stock-based compensation 2,129 3,032
3,056
3,469 3,545 2,961
Amortization of intangible assets in
operating expenses
127 32
31
11 - - Transitional costs 72 -
-
- - - Litigation costs and settlement proceeds - 476
(390
)
- - - Restructuring charge - -
-
1,075 106 2,116
Adjusted operating income/(loss) 3,163
973 7,736
2,068 (4,407 )
(3,872 ) GAAP net income/(loss)
1,124 (5,509 ) 158 (2,958
) (8,550 ) (17,949 ) Change in
deferred revenue and litigation settlement proceeds (7,023 ) 1,329
1,174 (3,135 ) (530 ) 2,575
Amortization of intangible assets in cost
of revenue
2,434 2,434 2,360 2,325 2,324 2,336 Non-cash warrant benefit
/(expense) 93 135 1,896 (116 ) 9 (32 ) Change in deferred platform
commissions and royalty expense 2,819 (321 ) (780 ) 1,497 (676 )
(348 ) Stock-based compensation 2,129 3,032 3,056 3,469 3,545 2,961
Amortization of intangible assets in
operating expenses
127 32 31 11 - - Transitional costs 72 - - - - - Litigation costs
and settlement proceeds - 476 (390 ) - - - Restructuring charge - -
- 1,075 106 2,116 Change in fair value of strategic investments - -
- - (300 ) 4,660 Foreign currency exchange (gain)/loss 290
186 167 149
(148 ) (182 )
Adjusted net income/(loss) $
2,065 $ 1,794 $
7,672 $ 2,317 $
(4,220 ) $ (3,863 )
Reconciliation of net income/(loss) and net income/(loss) per
share: GAAP net income/(loss) per share - basic $ 0.01 $ (0.05
) $ 0.00 $ (0.02 ) $ (0.07 ) $ (0.14 ) GAAP net income/(loss) per
share - diluted $ 0.01 $ (0.05 ) $ 0.00 $ (0.02 ) $ (0.07 ) $ (0.14
) Adjusted net income/(loss) per share - basic $ 0.02 $ 0.02 $ 0.06
$ 0.02 $ (0.03 ) $ (0.03 ) Adjusted net income/(loss) per share -
diluted $ 0.02 $ 0.01 $ 0.06 $ 0.02 $ (0.03 ) $ (0.03 ) Shares used
in computing adjusted basic net income/(loss) per share 103,869
116,169 127,287 127,775 129,171 131,198 Shares used in computing
adjusted diluted net income/(loss) per share 107,851 122,538
131,486 129,381 129,171 131,198
Adjusted operating
expense break-out: GAAP research and development expense
$ 18,243 $ 18,308 $
16,304 $ 20,001 $ 20,312
$ 20,721 Stock-based compensation (760 )
(836 ) (868 ) (1,099 ) (1,194 )
(837 )
Adjusted research and development expense
17,483 17,472
15,436 18,902
19,118 19,884 GAAP
sales and marketing expense 12,438 12,771
12,302 10,729 12,624 10,935 Stock-based
compensation (218 ) (282 ) (277 ) (305
) (292 ) (191 )
Adjusted sales and marketing
expense 12,220 12,489
12,025 10,424
12,332 10,744 GAAP
general & administrative expense 7,406 7,429
4,419 6,838 7,984 7,096 Transitional
costs (72 ) - - - - - Stock-based compensation (1,151 ) (1,914 )
(1,911 ) (2,065 ) (2,059 ) (1,933 ) Litigation costs -
(476 ) 390 - -
-
Adjusted general and administrative
expense $ 6,183 $ 5,039
$ 2,898 $ 4,773
$ 5,925 $ 5,163
Glu Mobile Inc. Adjusted EBITDA (in thousands)
(unaudited) For the Three Months Ended
March 31, June 30, September 30,
December 31, March 31, June
30, 2015 2015 2015 2015 2016
2016 GAAP net income/(loss) $
1,124 $ (5,509 ) $ 158
$ (2,958 ) $ (8,550 )
$ (17,949 ) Change in deferred revenue and
litigation settlement proceeds (7,023 ) 1,329 1,174 (3,135 ) (530 )
2,575 Change in deferred platform commissions and royalty expense
2,819 (321 ) (780 ) 1,497 (676 ) (348 ) Non-cash warrant expense /
(benefit) 93 135 1,896 (116 ) 9 (32 ) Amortization of intangible
assets 2,561 2,466 2,391 2,336 2,324 2,336 Depreciation 706 732 718
706 656 720 Stock-based compensation 2,129 3,032 3,056 3,469 3,545
2,961 Transitional costs 72 - - - - - Litigation costs and
settlement proceeds - 476 (390 ) - - - Restructuring charge - - -
1,075 106 2,116 Foreign currency exchange (gain)/loss 290 186 167
149 (148 ) (182 ) Change in fair value of strategic investments - -
- - (300 ) 4,660 Interest and other expense (6 ) (12 ) (15 ) (15 )
(21 ) (25 ) Income tax provision/(benefit) 1,104
(809 ) 79 (234 ) (166 )
16
Total Adjusted EBITDA $ 3,869
$ 1,705 $ 8,454 $
2,774 $ (3,751 ) $
(3,152 )
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 first and second quarters of
2016 and the full year 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. Glu 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. 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 2016 and the fourth quarter of
2015 and recorded cash restructuring charges due to the termination
of certain employees in Asia and certain 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. Additionally, Glu
recorded restructuring charges upon exiting portions of certain
facilities in Asia and the U.S. in the second quarter of 2016. 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.
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. Glu 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. Glu 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 Glu believes that these proceeds and costs have no
direct correlation to the operation of its 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 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.
Change in Fair Value of Strategic Investments. From time to
time, Glu makes strategic investments. Glu’s management excludes
the impact of any losses and gains on such investments when
evaluating Glu’s operating performance, when planning, forecasting
and analyzing future periods, and when assessing the performance of
its management team. In addition, Glu believes that excluding the
impact of such losses and gains on these investments from its
operating results is important to facilitate comparisons to prior
periods.
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 gains/(losses) recognized during 2015 and the
first and second quarters of 2016 were as follows (in
thousands):
March 31, 2015 $ (290 ) June 30, 2015 (186 )
September 30, 2015 (167 ) December 31, 2015 (149 )
FY
2015 $ (792 ) March 31, 2016 $ 148
June 30, 2016 182
FY 2016 $ 330
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version on businesswire.com: http://www.businesswire.com/news/home/20160802006910/en/
Investor Relations:ICR, Inc.Seth Potter,
646-277-1230ir@glu.com
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