- Revenue grows 58% year over year to
$81.1 million
- Bookings of $85.7 million exceed high
end of guidance; increases 67% year over year
- Design Home reaches 1 million DAU and
peaks at #15 top grossing game on U.S. App Store for iPhone
- Releases The Swift Life into beta
territories; worldwide launch slated for later this year
Glu Mobile Inc. (NASDAQ:GLUU), a leading global developer and
publisher of free-to-play mobile games, today announced financial
results for its third quarter ended September 30, 2017. In
addition, the company provided its outlook for its financial
performance in the fourth quarter and the full year 2017.
Nick Earl, Chief Executive Officer, stated, “As I reach my
one-year anniversary as CEO of Glu, I am delighted to recognize our
team’s exceptional execution of our growth strategy. Our strong
operating performance in the quarter and year to date reflects our
creative culture and better than expected results from our
portfolio of growth and evergreen titles. Design Home continues to
be a strong growth driver and demonstrates Glu’s ability to combine
our scaled operations and user acquisition strategy with quality
IP."
“While our new strategy is working well and generating improved
financial results, there is still work to be done,” added Earl.
“Our pipeline is active and we remain focused on executing on our
live operations strategy of increasing social interaction and user
engagement. We believe we are on track to reach our primary
financial goal of achieving sustained profitability on an adjusted
EBITDA basis beginning in the first quarter of 2018.”
Third Quarter 2017 Financial
Highlights:
Three Months Ended September 30, $ in thousands, except per
share data 2017 2016 Revenue $81,148
$51,381 Bookings $85,681 $51,279 Gross margin 61% (9%) Net loss
($11,671) ($43,727) Net loss per share – basic and diluted ($0.09)
($0.33) Weighted-average common shares outstanding – basic and
diluted 135,726 133,110 Cash and cash equivalents $62,939 $147,515
Cash used in operations
($925) ($9,792) Cash paid for royalty advances that are included in
cash used in operations
($3,922)
($10,841)
Eric R. Ludwig, Chief Operating Officer and Chief Financial
Officer, said “We are pleased to report better than expected
financial results, an accomplishment we have achieved in every
quarter of 2017. The strong top line performance was driven by
Design Home and outperformance by several of our evergreen titles.
We continue to take a diligent and analytical approach to our user
acquisition investments as we look to capitalize on and maximize
the long-term value of our top games. Our full year guidance
reflects the strong third quarter and our optimism and confidence
in our current portfolio."
Recent Developments and Strategic
Initiatives:
- Design Home Audience Reaches
One Million Daily Active Users: During the quarter, Design Home
reached one million daily active users. Originally launched
worldwide in November 2016, Design Home has achieved remarkable
success, having generated more than 8.7 million downloads and $30.2
million in bookings in the third quarter of 2017. Additionally,
Design Home reached rankings of #34 Top Free and #15 Top Grossing
game in the U.S. App Store for iPhone. Additionally, Design Home
reached #48 Top Free and #29 Top Grossing game in the U.S. Google
Play Store.
- Glu Releases First Look at
Interactive Social App, The Swift Life™: Glu released into beta
territories The Swift Life, a new digital entertainment project in
partnership with multiple Grammy Award-winning artist, Taylor
Swift. Glu expects to launch The Swift Life worldwide later this
year. The Swift Life provides a creative, inclusive and
community-driven place for users to better connect with each other
and Taylor.
Financial Outlook as of November 1,
2017:
Glu is providing its financial outlook for the fourth quarter of
2017 and updating guidance for the full year 2017 as follows:
Fourth Quarter 2017 Guidance:
In millions Low High Bookings $75.0 $77.0
Platform commissions, excluding any impact of deferred platform
commissions $19.4 $19.9 Royalties, excluding any impact of deferred
royalties $4.7 $4.9 Hosting and other costs $2.1 $2.2 Adjusted
operating expenses $54.2 $54.4 Depreciation $0.9 $0.9 Income tax
$0.3 $0.3 Stock-based compensation $5.1 $5.1 Transitional costs
$0.0 $0.0 Restructuring costs $0.0 $0.0 Amortization of intangible
assets $1.5 $1.5 Weighted-average common shares outstanding – basic
and diluted 136,596 136,596
Full Year 2017 Guidance:
In millions Low High Bookings $312.2 $314.2
Platform commissions, excluding any impact of deferred platform
commissions $80.6 $81.0 Royalties, excluding any impact of deferred
platform royalties $22.8 $23.0 Hosting and other costs $7.4 $7.5
Adjusted operating expenses $214.5 $214.8 Depreciation $3.4 $3.4
Income tax ($1.0) ($1.0) Stock-based compensation $15.7 $15.7
Transitional costs $4.0 $4.0 Restructuring costs $6.0 $6.0
Amortization of intangible assets $10.3 $10.3 Weighted-average
common shares outstanding – basic and diluted 135,431 135,431 Cash
and short-term investments At least $60.0
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 and corresponding cost of
revenue. The amount of Glu’s deferred revenue and cost of revenue
for any given period is difficult to predict due to differing
estimated useful lives of paying users across games, variability of
monthly revenue, platform commissions and royalties by game and
unpredictability of revenue from new game releases. Future changes
in deferred revenue and deferred cost of revenue are uncertain and
could be material to Glu’s results computed in accordance with
GAAP. Accordingly, Glu is unable to provide a reconciliation of the
non-GAAP financial measure guidance to the corresponding GAAP
measure without unreasonable effort.
Quarterly Conference Call
Information:
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 (domestic), or (760) 298-5046 (international), with
conference ID # 1477338 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 1, 2017, and 8:59 p.m. Pacific
Time, November 8, 2017, by calling (855) 859-2056, or (404)
537-3406, with conference ID # 1477338.
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) and the company twitter
account (https://twitter.com/glumobile). Investors, the media,
players or other interested parties can subscribe to the company
blog and 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, platform commissions, excluding any impact of
deferred platform commissions, royalties, excluding any impact of
deferred royalties, and adjusted operating expenses. These non-GAAP
financial measures exclude the following items from Glu's unaudited
consolidated statements of operations:
- Change in deferred platform
commissions;
- Change in deferred royalties;
- Impairment and amortization of
intangible assets;
- Non-cash warrant expense
- Stock-based compensation expense;
- Restructuring charges; and
- Transitional costs.
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. Adjusted
EBITDA equals non-GAAP operating income/(loss) excluding
depreciation.
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 “Financial Outlook as of November 1, 2017”
(“Fourth Quarter 2017 Guidance” and “Full Year 2017 Guidance”) and
statements including words such as “anticipate,” “believe,”
“estimate,” “expect” “may,” “will,” “plan,” “intend,” “could,”
“continue,” “remain” and similar expressions or variations, as well
as statements in the future tense, are forward-looking statements.
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 risk that Glu
will be unable to attract and retain creative leaders with a
successful track record; 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 be unable build
successful growth titles that provide predictable bookings and year
over year growth; the risk that we do not realize a sufficient
return on our strategic investment in user acquisition for Design
Home; 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, 2017 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 mobile games. Glu is focused on creating
compelling original IP games such as CONTRACT KILLER, COOKING DASH,
COVET FASHION, DEER HUNTER, DESIGN HOME, QUIZUP, and RACING RIVALS,
and branded IP games including RESTAURANT DASH WITH GORDON RAMSAY,
KENDALL & KYLIE, MLB TAP SPORTS BASEBALL 2017 and KIM
KARDASHIAN: HOLLYWOOD on the App Store, Google Play and Amazon
Appstore. Founded in 2001, Glu is headquartered in San Francisco
with U.S. offices in Burlingame and San Mateo, and international
locations in Canada, 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 and on Instagram at
www.instagram.com/glumobile, or become a Glu fan at
www.facebook.com/glumobile.
CONTRACT KILLER, COOKING DASH, COVET FASHION, DEER HUNTER,
QUIZUP, RACING RIVALS, TAP SPORTS, GLU, GLU MOBILE, and the 'g'
character logo are trademarks of Glu Mobile Inc.
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,
2017 2016 2017 2016
Revenue $ 81,148 $ 51,381
$ 206,615 $ 154,272 Cost of
revenue: Platform commissions, royalties and other 28,898
18,918 74,519 57,771 Impairment of prepaid royalties and minimum
guarantees 464 29,836 1,256 29,984 Impairment and amortization of
intangible assets 2,363 7,320
8,796 11,981
Total cost of revenue
31,725 56,074
84,571 99,736 Gross
profit/(loss) 49,423 (4,693
) 122,044 54,536
Operating expenses: Research and development 22,004
20,080 71,025 61,113 Sales and marketing 29,776 10,104 78,015
33,663 General and administrative 8,698 7,011 25,873 22,091
Restructuring charge 1,402 57
6,040 2,279
Total operating expenses
61,880 37,252
180,953 119,146 Loss
from operations (12,457 ) (41,945 )
(58,909 ) (64,610 ) Interest
and other expense, net: Interest income 5 12 25 58 Other
income/(expense) (276 ) (1,665 ) (365 )
(5,695 ) Interest and other income/(expense), net
(271 ) (1,653 )
(340 ) (5,637 ) Loss
before income taxes (12,728 ) (43,598
) (59,249
)
(70,247 ) Income tax benefit/(provision) 1,057
(129 ) 1,246 21
Net loss
$ (11,671 ) $ (43,727 )
$ (58,003 ) $ (70,226 )
Net loss per common share - basic and diluted
$ (0.09 ) $ (0.33 )
$ (0.43 ) $ (0.54 )
Weighted average common shares outstanding - basic and
diluted 135,726 133,110 135,047
131,160 Stock-based compensation expense included
in: Research and development $ 1,521 $ 1,135 $ 4,520 $ 3,165
Sales and marketing 283 263 823 747 General and administrative
1,771 1,692 5,296
5,684
Total stock-based compensation expense $ 3,575
$ 3,090 $ 10,639 $ 9,596
Glu Mobile Inc. Consolidated Balance
Sheets (in thousands) (unaudited) September
30, December 31, 2017 2016
ASSETS Cash and cash equivalents $ 62,939 $ 102,102 Accounts
receivable, net 34,192 21,477 Prepaid royalties 9,049 12,465
Restricted Cash 602 - Prepaid expenses and other current assets
30,982 18,986
Total current
assets 137,764 155,030 Property and equipment, net 6,425
5,640 Restricted cash - 1,312 Long-term prepaid royalties 34,113
31,288 Other long-term assets 3,032 3,506 Intangible assets, net
19,799 25,896 Goodwill 117,447 116,832
Total assets $ 318,580 $ 339,504
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $
21,305 $ 16,298 Accrued liabilities 1,557 1,788 Accrued
compensation 15,537 12,495 Accrued royalties 12,710 8,623 Accrued
restructuring 1,138 271 Deferred revenue 74,394
44,865
Total current liabilities 126,641
84,340 Long-term accrued royalties 6,425 20,836 Other long-term
liabilities 669 1,514
Total
liabilities 133,735 106,690
Common stock 13 13 Additional paid-in capital 581,385 571,243
Accumulated other comprehensive income (10 ) 246 Accumulated
deficit (396,543 ) (338,688 )
Stockholders'
equity 184,845 232,814
Total
liabilities and stockholders' equity $ 318,580 $ 339,504
Glu
Mobile Inc. Supplemental Financial Information (in
thousands) (unaudited)
June 30,
September 30, December 31, March 31, June
30, September 30, 2016 2016 2016
2017 2017 2017 GAAP gross
profit/(loss) $ 27,388 $ (4,693
) $ 25,907 $ 31,874 $
40,747 $ 49,423 Impairment and amortization of
intangible assets 2,336 7,320 2,811 3,262 3,171 2,363 Non-cash
warrant benefit/(expense) (32 ) (6 ) (26 ) 62 - - Change in
deferred revenue 2,575 (102 ) 11,464 12,248 13,863 4,533 Change in
deferred platform commissions (588 ) 96 (3,126 ) (3,479 ) (3,583 )
(1,107 ) Change in deferred royalties 240 (294 ) (200 ) 145 (1,032
) 153
GAAP operating expense $ 40,868
$ 37,252 $ 43,287 $
54,528 $ 64,545 $ 61,880
Stock-based compensation (2,961 ) (3,090 ) (3,667 ) (3,541 ) (3,523
) (3,575 ) Transitional costs - - (802 ) (1,582 ) (1,924 ) (506 )
Restructuring charge (2,116 ) (57 ) - (3,712 ) (926 ) (1,402 )
GAAP research and development expense $
20,721 $ 20,080 $ 20,766
$ 25,032 $ 23,989 $
22,004 Transitional costs - - (83 ) (1,115 ) (1,821 ) (90 )
Stock-based compensation (837 ) (1,135 ) (1,401 ) (1,441 ) (1,558 )
(1,521 )
GAAP sales and marketing expense $
10,935 $ 10,104 $ 14,387
$ 17,287 $ 30,952 $
29,776 Transitional costs
- - (39 ) (53 ) 53 -
Stock-based compensation (191 ) (263 ) (344 ) (362 ) (178 ) (283 )
GAAP general & administrative expense $
7,096 $ 7,011 $ 8,134 $
8,497 $ 8,678 $ 8,698
Transitional costs - - (680 ) (414 ) (156 ) (417 ) Stock-based
compensation (1,933 ) (1,692 ) (1,922 ) (1,738 ) (1,787 ) (1,771 )
Other supplemental financial information Depreciation
$ 720 $ 768 $ 804 $ 790 $ 830 $ 827 Foreign currency exchange
(gain)/loss (182 ) 1,035 294 129 (48 ) (78 ) Loss/(income) from
change in fair value of strategic investments 4,660 630 (255 ) - -
- Income tax provision/(benefit) 16 129 (280 ) (12 ) (177 ) (1,057
) Interest (income)/expense (25 ) (12 ) 74 (7 ) (13 ) (5 )
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 Platform Commissions and Deferred Royalties.
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 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 platform commissions and deferred royalties 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 platform commissions and deferred
royalties from its operating results is important to facilitate
comparisons to prior periods and to understand Glu’s
operations.
Impairment and Amortization of Intangible Assets. When analyzing
the operating performance of an acquired entity or intangible
asset, 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. Glu recorded a non-cash expense/
(benefit) 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/(benefits) 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/(benefit) 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/(benefit) 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, second and third quarters of 2017 and the first, second
and third quarters of 2016 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 first, second and third quarters of 2017 and the second
and third quarters 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.
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 Crowdstar and Dairy Free 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171101006553/en/
Investor Relations:JM Strategic Communications GroupBob
Jones / Taylor Krafchik, 646-776-0886IR@glu.com
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