- Second quarter revenue of $95.5 million and net income of $2.5
million
- Second quarter record bookings of $101.9 million
- Launched WWE Universe and Diner DASH Adventures globally
- Growth Games bookings collectively grew 12% year-over-year
- Updates Disney Sorcerer’s Arena worldwide launch timing to Q1
2020
- Revises full year 2019 guidance
Glu Mobile Inc. (NASDAQ: GLUU), a leading global developer and
publisher of free-to-play mobile games, today announced financial
results for its second quarter ended June 30, 2019. The company
also provided its outlook for its financial performance in the
third and fourth quarters and updated full year 2019 financial
guidance.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20190801006010/en/
(Graphic: Business Wire)
Nick Earl, Chief Executive Officer, stated, “In the second
quarter, Glu had its highest bookings quarter ever driven by double
digit year-over-year growth in all three of our Growth Games and we
launched two exciting new titles – WWE Universe and Diner DASH
Adventures. We are particularly encouraged by the strong early
performance from Diner DASH Adventures, a Glu original IP game, and
the progress we’ve made on our pipeline of potential Growth Games,
including Disney Sorcerer’s Arena. In the second half of the year,
our focus will be on enhancing our live titles with new features
and continuing to fine-tune our pipeline of potential Growth Games.
We believe that this strategy will help build momentum in the
second half and set us up for strong results in 2020.”
Second Quarter 2019 Financial
Highlights:
Three Months Ended in millions, except per share data June 30, 2019
June 30, 2018 Revenue
$95.5
$90.2
Gross margin
64.6%
62.5%
Net gain/(loss)
$2.5
($4.4)
Net gain/(loss) per share – basic
$0.02
($0.03)
Net gain/(loss) per share – diluted
$0.02
($0.03)
Weighted-average common shares outstanding – basic
145.5
140.5
Weighted-average common shares outstanding – diluted
159.7
140.5
Cash generated from operations excluding royalty advances
$12.5
$13.4
Cash paid for royalty advances that are included in cash used in
operations
($3.2)
($1.1)
Cash and cash equivalents
$99.5
$61.6
Additional Financial Information
Three Months Ended
Guidance provided for three
months ended June 30, 2019
June 30, 2019 June 30, 2018 Low High Bookings
$101.9
$99.4
$100.0
$102.0
Platform commissions, excluding any impact of deferred platform
commissions *
$26.7
$26.0
$25.8
$26.3
Royalties, excluding any impact of deferred royalties*
$7.3
$7.4
$6.5
$6.6
Hosting costs
$1.8
$1.7
$1.4
$1.4
User acquisition and marketing expenses
$30.1
$25.3
$27.5
$27.8
Adjusted other operating expenses*
$28.0
$29.5
$32.8
$32.9
Depreciation
$1.1
$0.9
$1.0
$1.0
* Platform commissions, excluding any impact of deferred platform
commissions, Royalties, excluding any impact of deferred royalties,
and Adjusted other operating expenses are non-GAAP financial
measures. These non-GAAP financial items should be considered in
addition to, but not as a substitute for, the information provided
in accordance with GAAP. Reconciliations for these non-GAAP
financial items to the most directly comparable financial items
based on GAAP are provided in GAAP to Adjusted results
reconciliation table.
Eric R. Ludwig, Chief Operating Officer and Chief Financial
Officer, said, “We delivered a strong financial performance in the
second quarter with record bookings of $101.9 million, strong
adjusted EBITDA and healthy free cash flow. We revised our annual
guidance primarily to reflect the timing of new launches,
contribution from newly launched titles and incremental UA
investment to take advantage of favorable ROI opportunities. The
3-phase plan we laid out in early 2017 is still firmly in place and
we are committed to our strategy of developing Growth Games that
can stack bookings and deliver growing profits over time.”
Financial Outlook as of August 1,
2019:
Glu is providing its financial outlook for the third quarter,
fourth quarter and full year 2019 as follows:
Third Quarter 2019 Guidance:
in millions Low High Bookings
$110.0
$112.0
Platform commissions, excluding any impact of deferred platform
commissions
$29.3
$29.9
Royalties, excluding any impact of deferred royalties
$6.6
$6.7
Hosting costs
$1.6
$1.6
User acquisition and marketing expenses
$37.0
$37.3
Adjusted other operating expenses
$32.5
$32.5
Depreciation
$1.0
$1.0
Supplemental information:
Income tax
($0.4)
($0.4)
Stock-based compensation
$4.4
$4.4
Amortization of intangible assets
$1.0
$1.0
Weighted-average common shares outstanding – basic
146.2
146.2
Weighted-average common shares outstanding – diluted
156.3
156.3
Fourth Quarter 2019 Guidance:
in millions
Low
High
Bookings
$101.5
$103.5
Platform commissions, excluding any impact of deferred platform
commissions
$26.8
$27.4
Royalties, excluding any impact of deferred royalties
$4.9
$5.0
Hosting costs
$1.6
$1.6
User acquisition and marketing expenses
$23.8
$24.0
Adjusted other operating expenses
$33.1
$33.2
Depreciation
$1.0
$1.0
Supplemental information:
Income tax
$0.8
$0.8
Stock-based compensation
$5.2
$5.2
Amortization of intangible assets
$1.0
$1.0
Weighted-average common shares outstanding – basic
147.0
147.0
Weighted-average common shares outstanding – diluted
159.0
159.0
Full Year 2019 Guidance:
in millions
Low
High
Bookings
$406.0
$410.0
Platform commissions, excluding any impact of deferred platform
commissions
$106.8
$108.0
Royalties, excluding any impact of deferred royalties
$24.8
$25.0
Hosting costs
$6.5
$6.5
User acquisition and marketing expenses
$113.9
$114.4
Adjusted other operating expenses
$124.1
$124.2
Depreciation
$4.1
$4.1
Supplemental information:
Income tax
$0.6
$0.6
Stock-based compensation
$18.4
$18.4
Transitional costs
$1.0
$1.0
Amortization of intangible assets
$4.4
$4.4
Weighted-average common shares outstanding – basic
145.8
145.8
Weighted-average common shares outstanding – diluted
158.6
158.6
Cash and cash equivalent balance
At least $115.0M
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 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Please dial
(866) 582-8907 (domestic), or (760) 298-5046 (international), with
conference ID # 2015319 to access the conference call at least five
minutes prior to the 2:00 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
5:00 p.m. Pacific Time, August 1, 2019, and 8:59 p.m. Pacific Time,
August 8, 2019, by calling (855) 859-2056, or (404) 537-3406, with
conference ID # 2015319.
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;
- Non-cash warrant expense;
- Impairment and amortization of intangible assets;
- Stock-based compensation expense;
- Restructuring charges;
- Transitional costs; and
- Litigation 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.
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 August 1, 2019”
(“Third Quarter 2019 Guidance,” “Fourth Quarter 2019 Guidance” and
“Full Year 2019 Guidance”), and the statements that our games in
development, including Disney Sorcerer’s Arena, are potential
Growth games, and that we believe our strategy of focusing on
enhancing our live titles with new features and continuing to
fine-tune the potential Growth games we have in development will
help build momentum in the second half and set us up for strong
results in 2020 and that we are committed to our strategy of
developing Growth Games that can stack bookings and deliver profits
over time. These forward-looking statements are subject to material
risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Investors
should consider important risk factors, which include: the 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 Games that provide
predictable bookings and year over year growth; 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 10, 2019 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 creator of mobile games.
Founded in 2001, Glu is headquartered in San Francisco with
additional locations in San Mateo, Toronto and Hyderabad. With a
history spanning over a decade, Glu’s culture is rooted in taking
smart risks and fostering creativity to deliver world-class
interactive experiences for our players. Glu’s diverse portfolio
features top-grossing and award-winning original and licensed IP
titles including, Cooking DASH, Covet Fashion, Deer Hunter, Design
Home, Diner DASH Adventures, MLB Tap Sports Baseball and Kim
Kardashian: Hollywood available worldwide on various platforms
including the App Store and Google Play. For more information,
visit www.glu.com or follow Glu on Twitter, Facebook and
Instagram.
COOKING DASH, COVET FASHION, DEER HUNTER, DESIGN HOME, DINER
DASH, 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 Six Months
Ended June 30, June 30, June 30, June
30,
2019
2018
2019
2018
Revenue
$
95,540
$
90,193
$
191,425
$
171,636
Cost of revenue: Platform commissions, royalties and
other
32,806
32,386
65,619
61,553
Impairment of prepaid royalties and minimum guarantees
-
-
457
99
Amortization of intangible assets
1,056
1,468
2,308
2,935
Total cost of revenue
33,862
33,854
68,384
64,587
Gross profit
61,678
56,339
123,041
107,049
Operating expenses: Research and development
19,736
22,832
46,282
45,542
Sales and marketing
35,040
29,741
63,145
56,551
General and administrative
4,951
7,608
11,586
15,498
Restructuring charge
-
-
-
80
Total operating expenses
59,727
60,181
121,013
117,671
Income/(Loss) from operations
1,951
(3,842
)
2,028
(10,622
)
Interest and other income/(expense), net:
556
(366
)
1,320
(617
)
Income/(Loss) before income taxes
2,507
(4,208
)
3,348
(11,239
)
Income tax provision
-
(207
)
(178
)
(382
)
Net income/(loss)
$
2,507
$
(4,415
)
$
3,170
$
(11,621
)
Net income/(loss) per common share - basic
$
0.02
$
(0.03
)
$
0.02
$
(0.08
)
Net income/(loss) per common share - diluted
$
0.02
$
(0.03
)
$
0.02
$
(0.08
)
Weighted average common shares outstanding - basic
145,451
140,534
144,951
139,821
Weighted average common shares outstanding - diluted
159,682
140,534
159,556
139,821
Glu Mobile Inc. Consolidated Balance Sheets (in
thousands) (unaudited)
June 30,
December 31,
2019
2018
ASSETS Cash and cash equivalents
$ 99,498
$ 97,834
Accounts receivable, net
40,184
27,325
Prepaid royalties
9,830
8,520
Deferred royalties
4,885
4,410
Deferred platform commission fees
26,614
25,862
Restricted cash
-
110
Prepaid expenses and other assets
5,213
6,940
Total current assets
186,224
171,001
Property and equipment, net
13,329
13,888
Operating lease right of use assets
29,650
-
Long-term prepaid royalties
15,346
1,667
Other long-term assets
4,227
2,505
Intangible assets, net
6,836
9,145
Goodwill
116,227
116,227
Total assets
$ 371,839
$ 314,433
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable
$ 23,792
$ 10,480
Accrued liabilities
1,000
1,384
Accrued compensation
7,529
17,896
Accrued royalties
13,560
14,139
Accrued restructuring
-
294
Short-term operating lease liabilities
3,796
-
Deferred revenue
88,820
85,736
Total current liabilities
138,497
129,929
Long-term accrued royalties
15,336
1,649
Long-term operating lease liabilities
31,274
-
Other long-term liabilities
392
5,542
Total liabilities
185,499
137,120
Common stock
15
14
Additional paid-in capital
623,652
617,781
Accumulated other comprehensive (loss)/income
(14)
1
Accumulated deficit
(437,313)
(440,483)
Total stockholders' equity
186,340
177,313
Total liabilities and stockholders' equity
$ 371,839
$ 314,433
Glu Mobile Inc. GAAP to Adjusted Results
Reconciliation (in thousands) (unaudited)
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
2018
2018
2018
2018
2019
2019
GAAP platform commissions
$
21,729
$
23,250
$
25,650
$
24,756
$
25,148
$
24,799
Change in deferred platform commissions
1,477
2,768
413
760
(1,109
)
1,860
Platform Commissions, excluding any impact of deferred platform
commissions
$
23,206
$
26,018
$
26,063
$
25,516
$
24,039
$
26,659
GAAP royalties (including impairment of royalties and
minimum guarantees)
$
5,506
$
6,631
$
7,141
$
6,784
$
6,605
$
6,245
Change in deferred royalties
15
767
(70
)
122
(596
)
1,071
Royalties, excluding any impact of deferred royalties
$
5,521
$
7,398
$
7,071
$
6,906
$
6,009
$
7,316
GAAP other operating expenses (GAAP operating expenses
excluding user acquisition and marketing expenses)
$
35,263
$
34,929
$
36,797
$
38,695
$
38,314
$
29,652
Stock-based compensation
(6,308
)
(5,343
)
(5,879
)
(7,062
)
(6,807
)
(2,035
)
Transitional costs
(919
)
(13
)
-
(598
)
(998
)
(5
)
Restructuring charge
(80
)
-
(160
)
-
-
-
Litigation Costs
-
-
(717
)
(1,217
)
(28
)
416
Adjusted other operating expenses
$
27,956
$
29,573
$
30,041
$
29,818
$
30,481
$
28,028
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.
Non-cash Warrant expense. Glu recorded non-cash charges related
to the warrants to purchase shares of common stock issued to
certain brand holders as part of third party licensing, development
and publishing arrangements. These charges were recorded in cost of
revenue. When evaluating the performance of its consolidated
results, Glu does not consider non-cash warrant charges as it
places a greater emphasis on overall stockholder dilution rather
than the accounting charges associated with 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.
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.
Stock-Based Compensation Expense. Glu applies the fair value
provisions of Accounting Standard Codification Topic 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 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 2017 and the first quarter of
2018. 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 incurred
various costs related to the divestiture of its Moscow studio and
termination of certain game related contracts. Glu recorded these
transitional costs as operating expenses when they were incurred.
Glu believes that these transitional costs affect comparability
from period to period and that investors benefit from a
supplemental non-GAAP financial measure that excludes these
expenses.
Litigation costs. Glu incurred legal costs related to the
complaint filed by the former Chief Executive Officer of Crowdstar
in the Superior Court of the State of California for the County of
Santa Clara against Glu, Time Warner Inc., Intel Capital
Corporation, Middlefield Ventures Inc., Rachel Lam, and Jose Blanc.
Glu believes that these legal costs have no direct correlation to
the operation of its ongoing core business and affect comparability
from period to period and, as a result, that investors benefit from
a supplemental non-GAAP financial measure that excludes these
expenses.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190801006010/en/
Investor Relations: Bob Jones / Taylor Krafchik Ellipsis
IR@glu.com 646-776-0886
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