- Revenue of $107.1 million and net loss of $(5.1) million
- Record bookings of $120.4 million, up 20% year over year
- Three Growth Games each achieved all-time quarterly record
bookings
- Disney Sorcerer’s Arena on track for worldwide launch late Q1
2020
- Revises full year 2019 guidance upward
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, 2019. The company
also provided its outlook for its financial performance in the
fourth quarter, increased full year 2019 financial guidance and
provided a preliminary outlook for 2020.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20191106006006/en/
(Graphic: Business Wire)
Nick Earl, Chief Executive Officer, stated, “Glu reported record
third quarter bookings highlighted by double-digit increases in all
three of our Growth Games on a year-over-year basis. We were
extremely encouraged by our ability to drive early results from
Diner DASH Adventures in its first full quarter and to make
progress on our development pipeline, particularly with Disney
Sorcerer’s Arena, which is on track to launch in Q1 2020. These
accomplishments reflect the successful execution of our strategy
and reinforce our belief that we are well positioned for continued
top line growth heading into next year.”
Third Quarter 2019 Financial
Highlights:
Three Months Ended in millions, except
per share data September 30, 2019 September 30, 2018
Revenue
$107.1
$99.3
Gross margin
64.7%
61.2%
Net loss
($5.1)
($0.3)
Net loss per share – basic and diluted
($0.03)
($0.00)
Weighted-average common shares outstanding – basic and diluted
146.2
142.4
Cash generated from operations excluding royalty advances
$3.3
$17.7
Cash paid for royalty advances that are included in cash used in
operations
($0.0)
($0.1)
Cash and cash equivalents
$102.4
$80.8
Additional Financial Information Three Months Ended Guidance
provided for three months endedSeptember 30, 2019 September
30, 2019 September 30, 2018 Low High Bookings
$120.4
$100.7
$110.0
$112.0
Platform commissions, excluding any impact of deferred platform
commissions *
$32.1
$26.1
$29.3
$29.9
Royalties, excluding any impact of deferred royalties*
$7.2
$7.1
$6.6
$6.7
Hosting costs
$2.0
$1.6
$1.6
$1.6
User acquisition and marketing expenses
$40.2
$24.2
$37.0
$37.3
Adjusted other operating expenses*
$30.7
$30.0
$32.5
$32.5
Depreciation
$1.0
$1.0
$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, “Glu delivered strong top and bottom line results
that soundly beat our guidance. The record bookings were led by
strong performances from our three Growth Games, each of which
reached all-time highs in quarterly bookings. We increased our full
year 2019 guidance by the outperformance in the third quarter. We
exit the third quarter with momentum in our core business and
expect a significant sequential bottom line increase in the fourth
quarter.”
Financial Outlook as of November 6,
2019:
Glu is providing its financial outlook for the fourth quarter
and full year 2019 as follows:
Fourth Quarter 2019 Guidance:
in millions Low
High
Bookings
$101.5
$103.5
Platform commissions, excluding any impact of deferred platform
commissions
$26.9
$27.5
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
$0.9
$0.9
Stock-based compensation
$4.2
$4.2
Amortization of intangible assets
$1.0
$1.0
Weighted-average common shares outstanding – basic
147.0
147.0
Weighted-average common shares outstanding – diluted
155.5
155.5
Full Year 2019 Guidance
in millions Low High Bookings
$416.4
$418.4
Platform commissions, excluding any impact of deferred platform
commissions
$109.7
$110.3
Royalties, excluding any impact of deferred royalties
$25.4
$25.5
Hosting costs
$6.9
$6.9
User acquisition and marketing expenses
$117.1
$117.3
Adjusted other operating expenses
$122.2
$122.3
Depreciation
$4.0
$4.0
Supplemental information:
Income tax
$0.8
$0.8
Stock-based compensation
$17.1
$17.1
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
157.3
157.3
Cash and cash equivalent balance
At least $115.0
2020 Bookings Outlook:
- For fiscal 2020, the company expects the following results from
its current live titles:
- High single digit percentage increases on a year-over-year
basis from its three Growth Games.
- A full year of contribution from Diner DASH Adventures.
- Expected declines in catalog titles will be more than offset by
increases in the company’s three Growth Games, and Diner DASH
Adventures.
- As a result, the company expects an overall year-over-year
growth rate in the low-single digit range, excluding new titles,
specifically Disney Sorcerer’s Arena, Originals and Deer Hunter
Next.
- The company's outlook includes only bookings from games that
are live and excludes bookings and variable expenses of platform
fees, royalties, UA spend, and variable compensation on the
above-mentioned new titles.
- Bookings and variable cost contributions from games launched in
2020 will be included in the company’s quarterly and full year
guidance in the quarter following the timing of their global
launch.
- The company believes that this new guidance philosophy will
provide a higher quality view on its outlook and will reduce the
exposure to the timing of global launches.
2020 Adjusted EBITDA Outlook:
- Excluding bookings and variable costs from games launched in
2020, the company expects Adjusted EBITDA to be relatively in line,
in absolute dollars, with the full year 2019 guidance levels.
- Studio headcount costs for these new titles have already been
included in operating expenses in the Adjusted EBITDA outlook.
- Newly launched titles generally have Adjusted EBITDA losses
until they scale to appropriate levels.
- The company expects new games launched in 2020, collectively,
to contribute modestly to Adjusted EBITDA.
- Given the expected timing and margin characteristics of these
2020 launches, the company anticipates a low single digit Adjusted
EBITDA loss in the first half of 2020 when factoring in new titles
and it believes that Adjusted EBITDA will grow significantly
throughout the second half of the year as new titles scale.
- The company expects to exit 2020 with an Adjusted EBITDA margin
of at least 15%, inclusive of games launched during the year.
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 # 3779435 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, November 6, 2019, and 8:59 p.m. Pacific
Time, November 13, 2019, by calling (855) 859-2056, or (404)
537-3406, with conference ID # 3779435.
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 November 6, 2019”
(“Fourth Quarter 2019 Guidance,” “Full Year 2019 Guidance,” “2020
Bookings Outlook” and “2020 Adjusted EBITDA Outlook”), and the
statements that Disney Sorcerer’s Arena is on track to launch in Q1
2020, our belief that we are well positioned for continued top line
growth heading into next year and that we exit the third quarter
with momentum in our core business and expect a significant
sequential bottom line increase in the fourth quarter. 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 August 8, 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 Nine Months
Ended September 30, September 30, September
30, September 30,
2019
2018
2019
2018
Revenue
$
107,077
$
99,285
$
298,502
$
270,921
Cost of revenue: Platform commissions,
royalties and other
36,758
34,384
102,377
95,937
Impairment of prepaid royalties and minimum guarantees
-
-
457
99
Impairment and amortization of intangible assets
1,040
4,167
3,348
7,102
Total cost of revenue
37,798
38,551
106,182
103,138
Gross profit
69,279
60,734
192,320
167,783
Operating expenses: Research and development
22,968
23,839
69,250
69,381
Sales and marketing
46,140
28,874
109,285
85,425
General and administrative
5,879
8,095
17,465
23,593
Restructuring charge
-
160
-
240
Total operating expenses
74,987
60,968
196,000
178,639
Loss from operations
(5,708)
(234)
(3,680)
(10,856)
Interest and other income/(expense), net:
271
96
1,591
(521)
Loss before income taxes
(5,437)
(138)
(2,089)
(11,377)
Income tax benefit/(provision)
348
(118)
170
(500)
Net loss
$
(5,089)
$
(256)
$
(1,919)
$
(11,877)
Net loss per common share - basic and diluted
$
(0.03)
$
(0.00)
$
(0.01)
$
(0.08)
Weighted average common shares outstanding - basic and
diluted
146,210
142,378
145,381
140,685
Glu Mobile Inc. Consolidated Balance Sheets (in
thousands) (unaudited) September 30, December
31,
2019
2018
ASSETS Cash and cash
equivalents
$
102,445
$
97,834
Accounts receivable, net
44,797
27,325
Prepaid royalties
14,064
8,520
Deferred royalties
5,477
4,410
Deferred platform commission fees
30,585
25,862
Restricted cash
-
110
Prepaid expenses and other assets
6,331
6,940
Total current assets
203,699
171,001
Property and equipment, net
13,292
13,888
Operating lease right of use assets
36,311
-
Long-term prepaid royalties
28,492
1,667
Other long-term assets
4,297
2,505
Intangible assets, net
5,797
9,145
Goodwill
116,227
116,227
Total assets
$
408,115
$
314,433
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable
$
19,382
$
10,480
Accrued liabilities
859
1,384
Accrued compensation
7,677
17,896
Accrued royalties
21,024
14,139
Accrued restructuring
-
294
Short-term operating lease liabilities
3,672
-
Deferred revenue
102,116
85,736
Total current liabilities
154,730
129,929
Long-term accrued royalties
28,488
1,649
Long-term operating lease liabilities
38,210
-
Other long-term liabilities
357
5,542
Total liabilities
221,785
137,120
Common stock
15
14
Additional paid-in capital
628,709
617,781
Accumulated other comprehensive income
8
1
Accumulated deficit
(442,402
)
(440,483
)
Total stockholders' equity
186,330
177,313
Total liabilities and stockholders' equity
$
408,115
$
314,433
Glu Mobile Inc. GAAP to Adjusted Results
Reconciliation (in thousands) (unaudited)
Three Months Ended June 30, September
30, December 31, March 31, June 30,
September 30,
2018
2018
2018
2019
2019
2019
GAAP platform
commissions
$
23,250
$
25,650
$
24,756
$
25,148
$
24,799
$
28,122
Change in deferred platform
commissions
2,768
413
760
(1,109
)
1,860
3,972
Platform Commissions,
excluding any impact of deferred platform commissions
$
26,018
$
26,063
$
25,516
$
24,039
$
26,659
$
32,094
GAAP royalties (including
impairment of royalties and minimum guarantees)
$
6,631
$
7,141
$
6,784
$
6,605
$
6,245
$
6,643
Change in deferred royalties
767
(70
)
122
(596
)
1,071
592
Royalties, excluding any
impact of deferred royalties
$
7,398
$
7,071
$
6,906
$
6,009
$
7,316
$
7,235
GAAP other operating expenses
(GAAP operating expenses excluding user acquisition and marketing
expenses)
$
34,929
$
36,797
$
38,695
$
38,314
$
29,652
$
34,791
Stock-based compensation
(5,343
)
(5,879
)
(7,062
)
(6,807
)
(2,035
)
(4,080
)
Transitional costs
(13
)
-
(598
)
(998
)
(5
)
(5
)
Restructuring charge
-
(160
)
-
-
-
-
Litigation Costs
-
(717
)
(1,217
)
(28
)
416
-
Adjusted other operating
expenses
$
29,573
$
30,041
$
29,818
$
30,481
$
28,028
$
30,706
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/20191106006006/en/
Investor Relations: Bob Jones / Taylor Krafchik Ellipsis
IR@glu.com 646-776-0886
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