Quarterly Report (10-q)

GLUU

Glu Mobile News

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2020


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number 001-33368

Glu Mobile Inc.

(Exact name of the Registrant as Specified in its Charter)


Delaware	91-2143667
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

875 Howard Street, Suite 100

San Francisco, California 94103

(Address of Principal Executive Offices, including Zip Code)

(415) 800-6100

(Registrant’s Telephone number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.0001 per share	GLUU	Nasdaq Global Select Market

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Shares of Glu Mobile Inc. common stock outstanding as of November 2, 2020: 171,998,037

Table of Contents

GLU MOBILE INC.

FORM 10-Q

Quarterly Period Ended September 30, 2020

TABLE OF CONTENTS


	Page
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (Unaudited)	3

Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	3

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and September 30, 2019	4

Condensed Consolidated Statements of Comprehensive Income/(Loss) for the Three and Nine Months Ended September 30, 2020 and September 30, 2019	5

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and September 30, 2019	6

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and September 30, 2019	7

Notes to Unaudited Condensed Consolidated Financial Statements	8

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35

ITEM 4. CONTROLS AND PROCEDURES	36


PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	37

ITEM 1A. RISK FACTORS	37

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	65

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	65

ITEM 4. MINE SAFETY DISCLOSURES	65

ITEM 5. OTHER INFORMATION	65

ITEM 6. EXHIBITS	65

SIGNATURES	68

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GLU MOBILE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except per share data)


	September 30,		December 31,
	2020		2019
ASSETS
Current assets:
Cash and cash equivalents	$	318,099	$	127,053
Accounts receivable, net		53,592		29,304
Prepaid royalties		14,516		15,347
Deferred royalties		7,937		5,067
Deferred platform commission fees		40,248		29,239
Prepaid expenses and other assets		10,835		8,629
Total current assets		445,227		214,639
Property and equipment, net		16,854		17,643
Operating lease right of use assets		32,512		35,170
Long-term prepaid royalties		20,658		26,879
Other long-term assets		2,939		2,733
Intangible assets, net		2,096		4,758
Goodwill		116,227		116,227
Total assets	$	636,513	$	418,049

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	15,609	$	17,535
Accrued compensation		18,072		11,260
Accrued royalties		16,070		20,802
Short-term operating lease liabilities		4,677		3,528
Deferred revenue		134,311		97,629
Total current liabilities		188,739		150,754
Long-term accrued royalties		20,559		26,842
Long-term operating lease liabilities		35,740		37,351
Other long-term liabilities		1,104		15
Total liabilities		246,142		214,962

Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000 shares authorized at September 30, 2020 and December 31, 2019; no shares issued and outstanding at September 30, 2020 and December 31, 2019		—		—
Common stock, $0.0001 par value; 250,000 shares authorized at September 30, 2020 and December 31, 2019; 171,915 and 147,778 shares issued and outstanding at September 30, 2020 and December 31, 2019		17		15
Additional paid-in capital		825,460		634,721
Accumulated other comprehensive loss		(60)		(37)
Accumulated deficit		(435,046)		(431,612)
Total stockholders’ equity		390,371		203,087
Total liabilities and stockholders’ equity	$	636,513	$	418,049

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

Table of Contents

GLU MOBILE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenue	$	158,531	$	107,077	$	399,121	$	298,502
Cost of revenue:
Platform commissions, royalties and other		56,390		36,758		140,091		102,834
Amortization of intangible assets		888		1,040		2,663		3,348
Total cost of revenue		57,278		37,798		142,754		106,182
Gross profit		101,253		69,279		256,367		192,320
Operating expenses:
Research and development		30,778		22,968		88,729		69,250
Sales and marketing		42,222		46,140		150,168		109,285
General and administrative		7,870		5,879		21,803		17,465
Total operating expenses		80,870		74,987		260,700		196,000
Income/(loss) from operations		20,383		(5,708)		(4,333)		(3,680)
Interest and other income, net		413		271		782		1,591
Income/(loss) before income taxes		20,796		(5,437)		(3,551)		(2,089)
Income tax benefit/(provision)		(7,391)		348		117		170
Net income/(loss)	$	13,405	$	(5,089)	$	(3,434)	$	(1,919)

Net income/(loss) per common share - basic	$	0.08	$	(0.03)	$	(0.02)	$	(0.01)
Net income/(loss) per common share - diluted	$	0.07	$	(0.03)	$	(0.02)	$	(0.01)

Weighted average common shares outstanding:
Basic		171,252		146,210		159,201		145,381
Diluted		181,590		146,210		159,201		145,381

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

Table of Contents

GLU MOBILE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Unaudited)

(in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net income/(loss)	$	13,405	$	(5,089)	$	(3,434)	$	(1,919)
Other comprehensive income/(loss):
Foreign currency translation adjustments		—		22		(23)		7
Other comprehensive income/(loss)		—		22		(23)		7
Comprehensive income/(loss)	$	13,405	$	(5,067)	$	(3,457)	$	(1,912)

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

Table of Contents

GLU MOBILE INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands)


						Accumulated
						Other
				Additional		Compre-				Total
	Common Stock			Paid-In		hensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Loss		Deficit		Equity
Balances at December 31, 2019	147,778	$	15	$	634,721	$	(37)	$	(431,612)	$	203,087
Net loss	-		-		-		-		(8,273)		(8,273)
Stock-based compensation expense	-		-		6,238		-		-		6,238
Issuance of common stock upon exercise of stock options	2,921		-		9,526		-		-		9,526
Issuance of common stock upon exercise of warrants	115		-		-		-		-		-
Taxes paid related to net share settlement of equity awards	320		-		(1,720)		-		-		(1,720)
Issuance of common stock pursuant to Employee Stock Purchase Plan	450		-		1,705		-		-		1,705
Other comprehensive loss	-		-		-		(23)		-		(23)
Balances at March 31, 2020	151,584	$	15	$	650,470	$	(60)	$	(439,885)	$	210,540
Net loss	-		-				-		(8,566)		(8,566)
Stock-based compensation expense	-		-		7,620		-		-		7,620
Issuance of common stock upon exercise of stock options	1,464		-		5,347		-		-		5,347
Taxes paid related to net share settlement of equity awards	411		-		(1,740)		-		-		(1,740)
Issuance of common stock upon follow-on public offering, net of issuance costs	17,250		2		151,771		-		-		151,773
Balances at June 30, 2020	170,709	$	17	$	813,468	$	(60)	$	(448,451)	$	364,974
Net income	-		-				-		13,405		13,405
Stock-based compensation expense	-		-		8,517		-		-		8,517
Issuance of common stock upon exercise of stock options	728		-		2,058		-		-		2,058
Taxes paid related to net share settlement of equity awards	144		-		(723)		-		-		(723)
Issuance of common stock pursuant to Employee Stock Purchase Plan	334		-		2,140		-		-		2,140
Balances at September 30, 2020	171,915	$	17	$	825,460	$	(60)	$	(435,046)	$	390,371

						Accumulated
						Other
				Additional		Compre-				Total
	Common Stock			Paid-In		hensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Income/(Loss)		Deficit		Equity
Balances at December 31, 2018	143,870	$	14	$	617,781	$	1	$	(440,483)	$	177,313
Net income	-		-		-		-		663		663
Stock-based compensation expense	-		-		6,807		-		-		6,807
Issuance of common stock upon exercise of stock options	468		-		1,313		-		-		1,313
Taxes paid related to net share settlement of equity awards	560		1		(3,957)		-		-		(3,956)
Issuance of common stock pursuant to Employee Stock Purchase Plan	278		-		1,665		-		-		1,665
Other comprehensive income	-		-		-		15		-		15
Balances at March 31, 2019	145,176	$	15	$	623,609	$	16	$	(439,820)	$	183,820
Net income	-		-		-		-		2,507		2,507
Stock-based compensation expense	-		-		2,035		-		-		2,035
Issuance of common stock upon exercise of stock options	209		-		469		-		-		469
Taxes paid related to net share settlement of equity awards	399		-		(2,461)		-		-		(2,461)
Other comprehensive loss	-		-		-		(30)		-		(30)
Balances at June 30, 2019	145,784	$	15	$	623,652	$	(14)	$	(437,313)	$	186,340
Net income	-		-		-		-		(5,089)		(5,089)
Stock-based compensation expense	-		-		4,080		-		-		4,080
Issuance of common stock upon exercise of stock options	194		-		450		-		-		450
Taxes paid related to net share settlement of equity awards	311		-		(1,220)		-		-		(1,220)
Issuance of common stock pursuant to Employee Stock Purchase Plan	450		-		1,747		-		-		1,747
Other comprehensive loss	-		-		-		22		-		22
Balances at September 30, 2019	146,739	$	15	$	628,709	$	8	$	(442,402)	$	186,330

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements

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GLU MOBILE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net loss	$	(3,434)	$	(1,919)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		23,011		12,922
Depreciation		4,090		3,153
Non-cash lease expense		3,054		2,335
Amortization of intangible assets		2,663		3,348
Other non-cash adjustments		39		671
Changes in operating assets and liabilities:
Accounts receivable		(24,091)		(17,528)
Prepaid royalties		(4,103)		184
Deferred royalties		(2,870)		(1,067)
Deferred platform commission fees		(11,009)		(4,723)
Prepaid expenses and other assets		(2,510)		(1,168)
Accounts payable and other accrued liabilities		577		9,387
Accrued compensation		6,812		(10,219)
Accrued royalties		(24)		714
Deferred revenue		36,682		16,380
Other long-term liabilities		1,089		(23)
Operating lease liabilities		(760)		(2,202)
Net cash provided by operating activities		29,216		10,245

Cash flows from investing activities:
Purchase of property and equipment		(6,445)		(3,445)
Other investing activities		—		(155)
Net cash used in investing activities		(6,445)		(3,600)

Cash flows from financing activities:
Proceeds from exercise of stock options and purchases under the ESPP		20,776		5,644
Proceeds from follow-on public offering, net of issuance costs		151,773		—
Taxes paid related to net share settlement of equity awards		(4,183)		(7,637)
Net cash provided by/(used in) financing activities		168,366		(1,993)

Effect of exchange rate changes on cash		(91)		(151)
Net increase in cash, cash equivalents and restricted cash		191,046		4,501
Cash, cash equivalents and restricted cash at beginning of period		127,053		97,944
Cash, cash equivalents at end of period	$	318,099	$	102,445

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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GLU MOBILE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar and share amounts in thousands, except per share data)

Note 1 — The Company, Basis of Presentation and Summary of Significant Accounting Policies

Glu Mobile Inc. (the “Company” or “Glu”) was incorporated in the state of Nevada in May 2001 and reincorporated in the state of Delaware in March 2007. The Company develops, publishes, and markets a portfolio of games designed for users of smartphones and tablet devices who download and make purchases within its games through direct-to-consumer digital storefronts, such as the Apple App Store, Google Play Store and others (“Digital Storefronts”). The Company creates games based on its own original brands, as well as third-party licensed brands, properties and other content.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 28, 2020. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, which the Company believes are necessary for a fair statement of the Company’s financial position as of September 30, 2020 and its condensed consolidated results of operations for the three and nine months ended September 30, 2020 and 2019, respectively. These unaudited condensed consolidated financial statements are not necessarily indicative of the results to be expected for the entire year. The condensed consolidated balance sheet presented as of December 31, 2019 has been derived from the audited consolidated financial statements as of that date, and the condensed consolidated balance sheet presented as of September 30, 2020 has been derived from the unaudited condensed consolidated financial statements as of that date. Certain prior year balances have been reclassified to conform to the current year presentation. Such reclassifications did not materially affect revenue, operating income/(loss), net income/(loss), cash flows, total assets, total liabilities or stockholders’ equity.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its unaudited condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Estimates and assumptions reflected in the unaudited condensed consolidated financial statements include, but are not limited to, estimation of the average playing period of paying users associated with durable virtual items, the allowance for doubtful accounts, useful lives of property and equipment and intangible assets, valuation and realizability of deferred tax assets and uncertain tax positions, fair value of stock awards issued, fair value of warrants issued, accounting for business combinations, evaluating goodwill, long-lived assets for impairment, and realization of prepaid royalties and fair value of investments. Actual results may differ from these estimates due to risks and uncertainties, and these differences may be material, including uncertainty in the current economic environment due to the novel strain of coronavirus, SARS-CoV-2 (“COVID-19”) pandemic. Management will continue to actively monitor the impact of the COVID-19 pandemic on the Company’s assumptions and estimates.

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Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and accounts receivable.

The Company derives its accounts receivable from revenue earned from customers located worldwide. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers. The Company bases its allowance for doubtful accounts on management’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company writes off accounts receivable balances against the allowance when it determines that the amount will not be recovered.

The following table summarizes the revenue from customers in excess of 10% of the Company’s revenue:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Apple	56.7	%	54.9	%	56.5	%	53.5	%
Google	33.8	%	33.2	%	32.9	%	34.0	%

At September 30, 2020, Apple Inc. (“Apple”), Google Inc. (“Google”), and Tapjoy Inc. (“Tapjoy”) accounted for 64.9%, 19.2%, and 10.7%, respectively, of total accounts receivable. At December 31, 2019, Apple, Google, and Tapjoy accounted for 47.2%, 28.5%, and 17.8%, respectively, of total accounts receivable. No other customer or Digital Storefront represented more than 10% of the Company’s total accounts receivable as of these dates.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost and replaces the existing incurred loss impairment model with an expected loss methodology, which will result in earlier recognition of credit losses. The ASU requires a cumulative-effect adjustment to retained earnings transition approach and is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This new accounting standard update simplifies the measurement of goodwill by eliminating the Step 2 impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The new guidance requires an entity to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, limited to the amount of goodwill. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The new guidance becomes effective for goodwill impairment tests in fiscal years beginning after December 15, 2019. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This guidance adds, modifies and removes several disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with Topic 820, Fair Value Measurement. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

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In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

Note 2 — Net Income/(Loss) Per Share

The Company computes basic net income/(loss) per share by dividing its net income/(loss) for the period by the weighted average number of common shares outstanding during the period.

Diluted net income per share for the three months ended September 30, 2020 is computed by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period, including potentially dilutive common stock instruments. Diluted net loss per share for the nine months ended September 30, 2020 and the three months and nine months ended September 30, 2019 has been computed by dividing the net loss by the weighted-average number of common shares outstanding during each period, without consideration for common share equivalents as their effect would have been antidilutive.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net income/(loss)	$	13,405	$	(5,089)	$	(3,434)	$	(1,919)
Shares used to compute net income/(loss) per share:
Weighted average shares used to compute basic net income/(loss) per share		171,252		146,210		159,201		145,381
Dilutive potential common shares		10,338		—		—		—
Weighted average shares used to compute diluted net income/(loss) per share		181,590		146,210		159,201		145,381

Basic net income/(loss) per share	$	0.08	$	(0.03)	$	(0.02)	$	(0.01)
Diluted net income/(loss) per share	$	0.07	$	(0.03)	$	(0.02)	$	(0.01)

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The following equity awards outstanding at the end of each period presented have been excluded from the computation of diluted net income/(loss) per share of common stock for the periods presented because including them would have had an anti-dilutive effect:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Warrants to purchase common stock		—		1,600		1,100		1,600
Options to purchase common stock		693		17,059		11,999		17,059
Restricted stock units ("RSUs")		129		2,469		5,754		2,469
Performance stock options ("PSOs")		1,458		6,583		4,103		6,583
Performance stock units ("PSUs")		3,705		2,972		3,705		2,972
Employee stock purchase plan ("ESPP")		—		450		411		450
Total		5,985		31,133		27,072		31,133

Note 3 — Revenue from Contracts with Customers

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the three and nine months ended September 30, 2020 and September 30, 2019:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
In-App Purchases (over-time revenue recognition)	$	143,597	$	93,898	$	356,443	$	260,101
Advertisements and offers (point-in-time revenue recognition)		14,919		13,168		42,622		38,362
Other (point-in-time revenue recognition)		15		11		56		39
Total revenue	$	158,531	$	107,077	$	399,121	$	298,502

The Company operates in a single reportable segment. In the table above, revenue is disaggregated by type of revenue stream, indicating whether it is recognized over-time or at a point-in-time.

Contract Balances

The following table provides information about receivables and contract liabilities from contracts with customers:



	September 30, 2020		December 31, 2019
Receivables, which are included in accounts receivable, net	$	53,592	$	29,304
Contract liabilities, which are included in deferred revenue		134,311		97,629

The Company receives payments from customers based on billing terms established in the Company’s contracts. Contract assets relate to the Company’s right to consideration for its completed performance under the contract before the customer pays consideration or before payment is due. At September 30, 2020 and December 31, 2019, there were no contract assets recorded in the Company’s condensed consolidated balance sheets. Accounts receivable are recorded when the right to consideration becomes unconditional.

Deferred revenue relates to payments received in advance of performance under the contract. Deferred revenue is recognized as revenue as the Company performs under the contract. The Company had $97,629 in deferred revenue as of December 31, 2019, of which $1,258 and $97,629 was recognized as revenue in the three and nine months ended September 30, 2020, respectively. The Company had $85,736 in deferred revenue as of December 31, 2018, of which $1,124 and $85,736 was recognized as revenue in the three and nine months ended September 30, 2019, respectively.

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Note 4 — Fair Value Measurements

Fair Value Measurements

The Company accounts for fair value in accordance with Accounting Standard Codification 820, Fair Value Measurements and Disclosures (“ASC 820”). Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a three-tier hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s financial assets as of September 30, 2020 are presented below at fair value and were classified within the fair value hierarchy as follows:


	Level 1		Level 2		Level 3		September 30, 2020
Financial Assets
Cash and cash equivalents	$	318,099	$	—	$	—	$	318,099
Other investments		—		—		1,565		1,565
Total financial assets	$	318,099	$	—	$	1,565	$	319,664

The Company’s financial assets as of December 31, 2019 are presented below at fair value and were classified within the fair value hierarchy as follows:


	Level 1		Level 2		Level 3		December 31, 2019
Financial Assets
Cash and cash equivalents	$	127,053	$	—	$	—	$	127,053
Other investments		—		—		1,565		1,565
Total financial assets	$	127,053	$	—	$	1,565	$	128,618

The Company’s cash and cash equivalents, which were held in operating bank and money market accounts, are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. The carrying value of accounts receivable and payables approximates fair value due to the short time to expected payment or receipt of cash. The carrying value of other investments approximates fair value, and there are no unrealized gains or losses, as there have been no events or changes in circumstances that would have had a significant effect on the fair value of these investments at September 30, 2020 and December 31, 2019.

Note 5 — Balance Sheet Components

Accounts Receivable, net


	September 30,		December 31,
	2020		2019
Accounts receivable	$	53,592	$	29,304
Less: Allowance for doubtful accounts		—		—
Accounts receivable, net	$	53,592	$	29,304

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Accounts receivable includes amounts billed and unbilled as of the respective balance sheet dates, but net of platform commissions paid to the Digital Storefronts. The Company had no bad debts during the three and nine months ended September 30, 2020 and 2019.

Note 6 — Goodwill and Intangible Assets

Intangible Assets

The Company’s intangible assets were acquired primarily in various acquisitions as well as in connection with the purchase of certain trademarks, brand assets and licensed content. The carrying amounts and accumulated amortization expense of the acquired intangible assets at September 30, 2020 and December 31, 2019 were as follows:


		September 30, 2020						December 31, 2019
	Estimated	Gross		Accumulated		Net		Gross		Accumulated		Net
	Useful	Carrying		Amortization		Carrying		Carrying		Amortization		Carrying
	Life	Value		Expense		Value		Value		Expense		Value
Intangible assets amortized to cost of revenue:
Titles, content and technology	3 - 5 yrs	$	21,117	$	(19,021)	$	2,096	$	21,117	$	(16,359)	$	4,758
Customer contracts and related relationships	5 yrs		700		(700)		—		700		(700)		—
Trademarks	7 yrs		5,000		(5,000)		—		5,000		(5,000)		—
		$	26,817	$	(24,721)	$	2,096	$	26,817	$	(22,059)	$	4,758

Acquisition-related intangibles included in the above table are finite-lived and are being amortized on a straight-line basis over their estimated useful lives, which approximate the pattern in which the economic benefits of the intangible assets are realized. The Company has included amortization of acquired intangible assets directly attributable to revenue-generating activities in cost of revenue.

During the three months ended September 30, 2020 and 2019, the Company recorded amortization expense in cost of revenue of $888 and $1,040, respectively. During the nine months ended September 30, 2020 and 2019, the Company recorded amortization expense in cost of revenue of $2,663 and $3,348, respectively.

As of September 30, 2020, total expected future amortization related to intangible assets was as follows:


	Amortization
	to Be Included in
	Cost of
Year Ending December 31,	Revenue
2020 (remaining 3 months)	$	596
2021		1,500
Total intangible assets	$	2,096

Goodwill

The Company had $116,227 in goodwill as of September 30, 2020 and December 31, 2019, respectively. There were no indicators of impairment as of September 30, 2020.

Note 7 – Leases

The Company currently leases real estate space under non-cancelable operating lease agreements for its corporate headquarters in San Francisco, California and its operations in Toronto, Canada, Hyderabad, India, Foster City, California, Burlingame, California and Orlando, Florida. These operating leases have remaining lease terms ranging from 2 months to 7.17 years, some of which include the option to extend the lease, with the longest extension option being 6 years.

The Company does not include any of its renewal options when calculating its lease liability as the Company is not reasonably certain whether it will exercise these renewal options at this time. Rent expense for the three months

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ended September 30, 2020 and 2019 was $1,719 and $1,599, respectively. Rent expense for the nine months ended September 30, 2020 and 2019 was $4,602 and $3,603, respectively.

The future minimum lease payments to be paid under noncancelable leases in effect at September 30, 2020, are as follows:


	Operating
Year Ending December 31,	Leases
2020 (remaining 3 months)		1,839
2021		7,113
2022		7,018
2023		6,980
2024 and thereafter		27,667
Total lease payments	$	50,617
Less: imputed interest		(10,200)
Total	$	40,417

Supplemental information related to the Company’s leases for the nine months ended September 30, 2020 is as follows:

h
	September 30, 2020
Weighted average remaining lease term	6.84	yrs
Weighted average discount rate	6.7	%


	Nine Months Ended
	September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	$	2,911


		Nine Months Ended
	September 30, 2020
Right of use assets obtained in exchange for new lease obligations:
Operating leases	$	407

Note 8 — Commitments and Contingencies

Minimum Guaranteed Royalties and Developer Commitments

The Company has entered into license and publishing agreements with various celebrities, athletes, sports and entertainment organizations, and other well-known brands and properties to develop and publish games for mobile devices. Pursuant to some of these agreements, the Company is required to make minimum guaranteed royalty payments regardless of revenue generated by the applicable game, which may not be dependent on any deliverables. The significant majority of these minimum guaranteed royalty payments are recoupable against future royalty obligations that would otherwise become payable, or in certain circumstances, where not recoupable, are capitalized and amortized over the lesser of (1) the estimated life of the title incorporating licensed content or (2) the term of the license agreement.

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At September 30, 2020, future unpaid minimum guaranteed royalty commitments were as follows:



		Future

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company