- Revenue increased to $90.2 million from
$68.7 million year-over-year
- Record bookings increased 20%
year-over-year and 15% sequentially to $99.4 million
- Company raises 2018 full year bookings
guidance to a range of $374.0 million to $378.0 million, an $11.0
million increase at the midpoint
- Design Home peaks at #7 top grossing
game on U.S. App Store for iPhone
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, 2018. The company
also provided an outlook for its financial performance in the third
quarter and increased its financial guidance for the full year
2018.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20180731005846/en/
(Graphic: Business Wire)
Second Quarter
2018 Financial Highlights:
Three Months Ended
in millions, except per share
data
June 30, 2018 June 30, 2017
Revenue $90.2 $68.7 Gross margin 62.5% 59.3% Net loss ($4.4)
($23.6) Net loss per share – basic and diluted ($0.03) ($0.17)
Weighted-average common shares outstanding – basic and diluted
140.5
135.1
Cash (used in) / generated from operations excluding royalty
advances $13.4 ($0.5) Cash paid for royalty advances that are
included in cash (used in) / generated from operations ($1.1)
($2.9) Cash, cash equivalents and restricted cash $61.6 $68.9
Additional Financial
Information
Three
Months Ended
Guidance provided forthree
months endedJune 30, 2018
June 30, 2018 June 30, 2017 Low
High Bookings $99.4 $82.5 $90.0 $92.0 Platform
commissions, excluding any impact of deferred platform commissions*
$26.0 $21.2 $23.9 $24.5 Royalties, excluding any impact of deferred
royalties* $7.4 $6.5 $6.8 $6.9 Hosting costs $1.7 $1.7 $1.7 $1.7
User acquisition and marketing expenses $25.3 $27.2 $21.6 $21.9
Adjusted other operating expenses* $29.5 $31.0 $29.5 $29.5
Depreciation $0.9 $0.8 $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.
Nick Earl, Chief Executive Officer, stated, “Glu generated
strong sequential and year over year growth in bookings, adjusted
EBITDA and adjusted EBITDA margin in the second quarter. Our focus
remains on monetizing our existing titles, while continuing to
develop our pipeline of new games that we believe will position us
for strong bookings, adjusted EBITDA margin, and free cash flow
growth as we head into next year.
“Given our record first half results, we have raised our full
year outlook based on the second quarter guidance outperformance
and our increased expectations for the remainder of the year," said
Nick Earl.
Eric R. Ludwig, Chief Operating Officer and Chief Financial
Officer, said, “The better than expected top line performance,
strong profitability on an adjusted EBITDA basis, and significant
free cash flow generation reflect solid execution across Glu. Our
Growth titles drove the record bookings and our Evergreen titles
continue to contribute to our strong results as we optimize these
titles with our live operations and monetization strategies.
Additionally, the guidance we provided today is a testament to the
core business we have built as we plan to achieve record results in
2018 and carry that momentum into 2019."
Financial Outlook as of July 31,
2018:
Glu is providing its financial outlook for the third quarter of
2018 and updating guidance for the full year 2018 as follows:
Third Quarter 2018 Guidance:
In millions Low High
Bookings $94.0 $96.0 Platform commissions, excluding any impact of
deferred platform commissions $23.9 $24.3 Royalties, excluding any
impact of deferred royalties $6.9 $7.0 Hosting costs $1.8 $1.8 User
acquisition and marketing expenses $22.9 $23.2 Adjusted other
operating expenses $30.0 $30.2 Depreciation $1.0 $1.0
Supplemental information: Income tax $0.2 $0.2 Stock-based
compensation $6.0 $6.0 Amortization of intangible assets $1.5 $1.5
Weighted-average common shares outstanding – basic 141.5 141.5
Weighted-average common shares outstanding – diluted 151.9 151.9
Full Year 2018 Guidance:
In millions Low High
Bookings $374.0 $378.0 Platform commissions, excluding any impact
of deferred platform commissions $98.1 $98.7 Royalties, excluding
any impact of deferred royalties $26.1 $26.4 Hosting costs $7.1
$7.1 User acquisition and marketing expenses $91.6 $92.3 Adjusted
other operating expenses $119.1 $119.5 Depreciation $4.0 $4.0
Supplemental information:
Income tax $0.7 $0.7 Stock-based compensation $25.4 $25.4
Transitional costs $0.9 $0.9 Restructuring costs $0.1 $0.1
Amortization of intangible assets $5.9 $5.9 Weighted-average common
shares outstanding – basic 141.0 141.0 Weighted-average common
shares outstanding – diluted 149.8 149.8 Cash and cash equivalent
balance $85.0+
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 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 # 2791249 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, July 31, 2018, and 8:59 p.m. Pacific Time,
August 7, 2018, by calling (855) 859-2056, or (404) 537-3406, with
conference ID # 2791249.
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
benefit/(expense);
- Impairment and amortization of
intangible assets;
- 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 and
litigation settlement proceeds.
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 July 31, 2018” (“Third
Quarter 2018 Guidance” and “Full Year 2018 Guidance”), and the
statements that our focus remains on monetizing our existing
titles, while continuing to develop our pipeline of new games that
we believe will position us for strong bookings, adjusted EBITDA
margin, and free cash flow growth as we head into next year; we
have increased expectations for the remainder of the year; and we
plan to achieve record results in 2018 and carry that momentum into
2019. 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 titles 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 9, 2018 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 MobileGlu Mobile (NASDAQ: GLUU) is a leading
creator of mobile games. Founded in 2001, Glu is headquartered in
San Francisco with Bay Area studios in Burlingame and San Mateo,
and international locations in 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, 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, TAP
SPORTS, GLU, GLU MOBILE, and the 'g' character logo are trademarks
of Glu Mobile Inc.
Glu Mobile Inc. 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, 2018
2017 2018 2017 Revenue $
90,193 $ 68,679 $ 171,636
$ 125,467 Cost of revenue: Platform
commissions, royalties and other 32,386 24,761 61,553 45,621
Impairment of prepaid royalties and minimum guarantees - - 99 792
Amortization of intangible assets 1,468 3,171
2,935 6,433
Total cost of
revenue 33,854 27,932
64,587 52,846 Gross
profit 56,339 40,747
107,049 72,621
Operating expenses: Research and development 22,832 23,989
45,542 49,022 Sales and marketing 29,741 30,952 56,551 48,240
General and administrative 7,608 8,678 15,498 17,175 Restructuring
charge - 926 80
4,638
Total operating expenses 60,181
64,545 117,671
119,075 Loss from operations
(3,842 ) (23,798 ) (10,622
) (46,454 )
Interest and other income/(expense),
net
(366 ) 53 (617 ) (69 )
Loss before income taxes
(4,208 ) (23,745 ) (11,239
) (46,523 ) Income tax benefit/(provision)
(207 ) 177 (382 ) 189
Net loss $ (4,415 ) $
(23,568 ) $ (11,621 ) $
(46,334 ) Net loss per common share - basic
and diluted $ (0.03 ) $
(0.17 ) $ (0.08 ) $
(0.34 ) Weighted average common shares
outstanding - basic and diluted 140,534 135,065
139,825
134,700 Glu
Mobile Inc. Consolidated Balance Sheets (in
thousands) (unaudited) June 30, December
31, 2018 2017 ASSETS Cash and cash
equivalents $ 61,518 $ 63,764 Accounts receivable, net 38,012
34,673 Prepaid royalties 4,136 2,994 Deferred royalties 4,357 4,364
Deferred platform commission fees 24,690 20,446 Restricted Cash 110
602 Prepaid expenses and other current assets 7,436
10,733
Total current assets 140,259 137,576
Property and equipment, net 13,461 14,630 Long-term prepaid
royalties 6,685 9,302 Other long-term assets 3,156 3,299 Intangible
assets, net 15,329 18,264 Goodwill 116,227
116,227
Total assets $ 295,117 $ 299,298
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts
payable $ 16,744 $ 21,203 Accrued liabilities 1,097 1,154 Accrued
compensation 10,554 20,603 Accrued royalties 10,115 11,782 Accrued
restructuring 435 759 Deferred revenue 81,817
77,403
Total current liabilities 120,762 132,904
Long-term accrued royalties 4,700 7,300 Other long-term liabilities
5,283 5,234
Total liabilities
130,745 145,438 Common stock 14
14 Additional paid-in capital 603,248 589,962 Accumulated other
comprehensive income (loss) 15 (6 ) Accumulated deficit
(438,905 ) (436,110 )
Total stockholders' equity
164,372 153,860
Total liabilities
and stockholders' equity $ 295,117 $ 299,298
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, 2017 2017 2017
2017 2018 2018 GAAP platform
commissions $ 14,307 $ 17,595
$ 21,063 $ 20,787 $
21,729 $ 23,250 Change in deferred platform
commissions 3,479 3,583 1,107
707 1,477 2,768
Platform Commissions, excluding any impact of deferred platform
commissions $ 17,786 $
21,178 $ 22,170 $
21,494 $ 23,206 $
26,018 GAAP royalties (including impairment
of royalties and minimum guarantees) $ 5,489
$ 5,468 $ 6,473 $ 31,311
$ 5,506 $ 6,631 Change in deferred
royalties (145 ) 1,032 (153 )
355 15 767
Royalties,
excluding any impact of deferred royalties $
5,344 $ 6,500 $
6,320 $ 31,666 $
5,521 $ 7,398 GAAP
other operating expenses (GAAP operating expenses excluding user
acquisition and marketing expenses) $ 40,450
$ 37,341 $ 36,138 $
34,516 $ 35,263 $ 34,929
Stock-based compensation (3,541 ) (3,523 ) (3,575 ) (4,424 ) (6,308
) (5,343 ) Transitional costs (1,582 ) (1,924 ) (506 ) (336 ) (919
) (13 ) Restructuring charge (3,712 ) (926 )
(1,402 ) 21 (80 ) -
Adjusted
other operating expenses $ 31,615 $
30,968 $ 30,655 $
29,777 $ 27,956 $
29,573
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 (benefit)/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
the acquisition and integration of Crowdstar and Dairy Free 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180731005846/en/
Investor Relations:EllipsisBob Jones / Taylor Krafchik,
646-776-0886IR@glu.com
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