SAN FRANCISCO--(BUSINESS WIRE)--Glu Mobile Inc. (NASDAQ:GLUU), a leading global developer and publisher of free-to-play games for smartphone and tablet devices, today announced financial results for its second quarter ended June 30, 2015.
“Glu’s strong execution during the second quarter resulted in better-than-expected revenue and Adjusted EBITDA,” stated Niccolo de Masi, Chairman and Chief Executive Officer of Glu. “During the quarter, our results were underpinned by the continued strength of Kim Kardashian: Hollywood, Racing Rivals, Deer Hunter 2014 and Contract Killer: Sniper. We were also pleased with the robust performance of Tap Sports Baseball 2015 and Cooking Dash 2016 out of the gates.”
de Masi continued, “Our signing of Nicki Minaj and Jason Statham adds arguably the world’s leading rapper, and our first male celebrity to our portfolio. Minaj’s social following is growing rapidly and has reached over 100 million* making her one of the 10 most followed women in the world on social media channels. Statham has over 50 million* social followers and is as such one of the 10 most followed men in the world on social media channels. These partnerships take the total social following of celebrity titles that we expect to be live by the end of 2016 to nearly 650 million*.”
Mr. de Masi closed, “The combination of ongoing traction with our catalog titles and innovative new title launches positions Glu for record annual and second half revenue. As laid out during our May 14, 2015 Analyst Day, we are confident of Glu’s ability to drive double digit year-over-year revenue growth over the next five years.”
Second Quarter 2015 Financial Highlights:
- Revenue: Total GAAP revenue was $56.2 million in the second quarter of 2015 compared to $40.9 million in the second quarter of 2014. Total non-GAAP revenue was $57.5 million in the second quarter of 2015, an increase of 64% compared to $35.0 million in the second quarter of 2014. Non-GAAP revenue excludes changes in deferred revenue.
- Gross Margin: GAAP gross margin was 58% in the second quarter of 2015 compared to 69% in the second quarter of 2014. Non-GAAP gross margin was 63% in the second quarter of 2015 compared to 69% in the second quarter of 2014. Non-GAAP gross margin excludes changes in deferred revenue, change in deferred cost of revenue, amortization of intangible assets and non-cash warrant expense.
- GAAP Operating Loss: GAAP operating loss was $(6.1) million in the second quarter of 2015 compared to a loss of $(3.7) million in the second quarter of 2014.
- Non-GAAP Operating Income/(Loss): Non-GAAP operating income was $1.0 million in the second quarter of 2015 compared to a loss of $(1.5) million during the second quarter of 2014. Non-GAAP operating income/(loss) excludes changes in deferred revenue and deferred cost of revenue, amortization of intangible assets, non-cash warrant expense, stock-based compensation expense, restructuring charges, change in fair value of the Blammo earnout, transitional costs and litigation costs.
- Adjusted EBITDA: Adjusted EBITDA was $1.7 million for the second quarter of 2015, compared to a loss of $(0.9) million during the second quarter of 2014. Adjusted EBITDA is defined as non-GAAP operating income/(loss) less depreciation.
- GAAP Net Loss and EPS: GAAP net loss was $(5.5) million for the second quarter of 2015 compared to a GAAP net loss of $(3.8) million for the second quarter of 2014. GAAP EPS loss was $(0.05) for the second quarter of 2015, based on 116.2 million weighted-average shares outstanding, compared to a GAAP EPS loss of $(0.04) for the second quarter of 2014, based on 85.5 million weighted-average shares outstanding.
- Non-GAAP Net Income/(Loss) and EPS: Non-GAAP net income was $1.8 million for the second quarter of 2015 compared to a loss of $(1.6) million for the second quarter of 2014. Non-GAAP diluted EPS was $0.01 for the second quarter of 2015 based on 122.5 million weighted-average diluted shares outstanding, compared to non-GAAP diluted EPS loss of $(0.02) for the second quarter of 2014 based on 85.5 million weighted-average shares outstanding.
-
Cash and Cash Flows: As of June 30, 2015, Glu had cash and cash
equivalents of $189.7 million, an increase of $124.0 million from the
end of the prior quarter primarily due to the net proceeds we received
during the quarter from the sale of an aggregate of 21.0 million of
our shares of common stock to Red River Investment Limited, a
wholly-owned subsidiary of Tencent Holdings Limited, the world’s
largest gaming company. The company continues to have no debt.
Cash flows used in operations were $(1.2) million for the second quarter of 2015 compared to $5.0 million cash generated from operations for the second quarter of 2014.
A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Use of Non-GAAP Financial Measures.”
Recent Developments and Strategic Initiatives:
- In August 2015, we announced an exclusive, multi-year mobile game partnership with Nicki Minaj.
- In August 2015, we announced an exclusive, multi-year mobile game partnership with our first male celebrity, Jason Statham.
- In August 2015, we settled our litigation with Hothead Games in which they have agreed to make payments to Glu, including ongoing payments, the details of which are confidential.
- In July 2015, we announced the availability of Mission Impossible – Rogue Nation.
- In June 2015, we completed the second tranche of the strategic investment from a subsidiary of Tencent Holdings Limited.
- In June 2015, we announced the availability of Cooking Dash 2016 and Terminator Genisys: Revolution.
- In May 2015, we announced the launch of a television commercial and YouTube campaign in support of Kim Kardashian: Hollywood.
“We are pleased with our second quarter results, highlighted by our ability to exceed expectations across all key operating metrics,” stated Eric R. Ludwig, Chief Operating Officer and Chief Financial Officer. “The combination of our exciting pipeline of title launches and significantly strengthened balance sheet, positions the company to maintain its momentum longer-term.”
Business Outlook as of August 4, 2015:
The following forward-looking statements reflect expectations as of August 4, 2015. Results may be materially different and are affected by many factors, such as: consumer demand for mobile entertainment and specifically Glu’s products; consumer demand for smartphones, tablets and next-generation platforms; our ability to improve the monetization of our titles and continue to successfully launch and update new games; development delays on Glu's products; continued uncertainty in the global economic environment; competition in the industry; storefront featuring; changes in foreign exchange rates; Glu's effective tax rate and other factors detailed in this release and in Glu's SEC filings.
Third Quarter Expectations – Quarter Ending September 30, 2015:
- Non-GAAP revenue is expected to be between $58.0 million and $60.0 million.
- Non-GAAP gross margin is expected to be approximately 60.5%.
- Non-GAAP operating expenses are expected to be between $36.8 million and $36.0 million.
- Adjusted EBITDA, defined as non-GAAP operating income/(loss) excluding depreciation of approximately $0.7 million, is expected to range from a loss of $(1.0) million to a profit of $1.0 million.
- Income tax is expected to be an expense of approximately $0.6 million.
- Non-GAAP net income/(loss) is expected to be between $(2.2) million and ($0.2) million, or between $(0.02) and $0.00 per weighted-average basic share outstanding, which excludes approximately $3.0 million of anticipated stock-based compensation expense and $2.4 million for amortization of intangibles.
- Weighted-average common shares outstanding are expected to be approximately 127.5 million basic and 134.1 million diluted.
2015 Expectations – Full Year Ending December 31, 2015:
- Non-GAAP revenue is expected to be between $267.0 million and $282.0 million.
- Non-GAAP gross margin is expected to be approximately 61.3%.
- Adjusted EBITDA is expected to range from $22.5 million to $27.5 million.
- Non-GAAP net income is expected to be between $18.7 million and $23.7 million, or between $0.15 and $0.19 per weighted-average diluted share outstanding, which excludes approximately $12.0 million of anticipated stock-based compensation expense, $9.7 million for amortization of intangibles and the proceeds from the settlement of the Hothead Games litigation, net of costs incurred.
- Weighted-average common shares outstanding are expected to be approximately 119.1 million basic and 125.2 million diluted.
- We expect to have cash and short-term investments at December 31, 2015 of at least $200.0 million with no debt.
Quarterly Conference Call
Glu will discuss its quarterly results via teleconference today at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). Please dial (866) 582-8907, or if outside the U.S., (760) 298-5046, with conference ID # 79332466 to access the conference call at least five minutes prior to the 1:30 p.m. Pacific Time start time. A live webcast and replay of the call will also be available on the investor relations portion of the company's website at www.glu.com/investors. An audio replay will be available between 4:30 p.m. Pacific Time, August 4, 2015, and 8:59 p.m. Pacific Time, August 11, 2015, by calling (855) 859-2056, or (404) 537-3406, with conference ID # 79332466.
Disclosure Using Social Media Channels and Calculation of Social Followers
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), the company twitter account (https://twitter.com/glumobile) and Mr. de Masi’s twitter account (https://twitter.com/niccolodemasi). Investors, the media, players or other interested parties can subscribe to the company blog and twitter feed and Mr. de Masi’s 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.
*Glu calculates the aggregate number of social followers of a particular celebrity licensor by adding the total followers on Facebook, Twitter, Instagram, Vevo and Vine for such celebrity. There is fan overlap among these social channels and among Glu’s various celebrity licensors, and such aggregate numbers have not been deduplicated.
Nicki Minaj’s social followers as of August 3, 2015 included: 42.3 million on Facebook, 20.0 million on Twitter, 30.4 million on Instagram, 9.1 million on Vevo, and 163.4 thousand on Vine.
Jason Statham’s social followers as of August 3, 2015 included: 51.5 million on Facebook, and 2.5 million on Instagram.
The nearly 650 million total social followers supporting celebrity titles that Glu expects to be live by the end of 2016 is based on the combined Facebook, Twitter, Instagram, Vevo, and Vine audiences of Katy Perry, Kim Kardashian West, Kendall and Kylie Jenner, Britney Spears, Nicki Minaj and Jason Statham as of August 3, 2015.
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 non-GAAP revenue, non-GAAP smartphone revenue, non-GAAP cost of revenue, non-GAAP operating expenses, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income/(loss), non-GAAP net income/(loss) and non-GAAP basic and diluted net income/(loss) per share. These non-GAAP financial measures exclude the following items from Glu's unaudited consolidated statements of operations:
- Change in deferred revenue and deferred cost of revenue;
- Amortization of intangible assets;
- Non-cash warrant expense;
- Stock-based compensation expense;
- Restructuring charges;
- Change in fair value of Blammo earnout;
- Litigation costs;
- Transitional costs;
- Release of tax liabilities and valuation allowance; and
- Foreign currency exchange gains and losses primarily related to the revaluation of assets and liabilities.
In addition, Glu has included in this release “Adjusted EBITDA” figures which are used to evaluate Glu’s operating performance. Adjusted EBITDA is defined as non-GAAP operating income/(loss) excluding depreciation. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by non-GAAP revenue.
Glu may consider whether significant non-recurring 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 “Business Outlook as of August 4, 2015” (“Third Quarter Expectations – Quarter Ending September 30, 2015” and “2015 Expectations – Full Year Ending December 31, 2015”), and the statements regarding the ongoing traction with our catalog titles and innovative new title launches positioning Glu for record second half revenues; our confidence in our ability to drive year-over-year revenue growth over the next five years; our partnerships with Nicki Minaj and Jason Statham taking our total social following of celebrity titles live by the end of 2016 to nearly 650 million, and the combination of our exciting pipeline of title launches and significantly strengthened balance sheet positioning our company to maintain its momentum longer-term. 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 risks identified under "Business Outlook as of August 4, 2015"; the risk that Glu does not realize the anticipated strategic benefits from our partnerships with Nicki Minaj and Jason Statham; the risk that the number of social followers of our celebrity partners does not correlate to strong performance for our celebrity titles; 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 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 complying with Apple’s requirement that our games support 64-bit development will negatively impact revenue and increase expenses; 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 11, 2015 and our other SEC filings. You can locate these reports through our website at http://www.glu.com/investors. We are under no obligation, and expressly disclaim any obligation, to update or alter our forward-looking statements whether as a result of new information, future events or otherwise.
About Glu Mobile
Glu Mobile (NASDAQ:GLUU) is a leading global developer and publisher of free-to-play games for smartphone and tablet devices. Glu is focused on creating compelling original IP games such as CONTRACT KILLER, COOKING DASH, DEER HUNTER, DINER DASH, DINO HUNTER: DEADLY SHORES, ETERNITY WARRIORS, FRONTLINE COMMANDO, RACING RIVALS, and TAP SPORTS BASEBALL, and branded IP games including KIM KARDASHIAN: HOLLYWOOD, MISSION IMPOSSIBLE: ROGUE NATION, ROBOCOP: THE OFFICIAL GAME, and TERMINATOR GENISYS: REVOLUTION, on the App Store, Google Play, Amazon Appstore, Facebook, Mac App Store, and Windows Phone. Glu’s unique technology platform enables its titles to be accessible to a broad audience of consumers globally. Founded in 2001, Glu is headquartered in San Francisco with major U.S. offices outside Seattle and in Long Beach, and international locations in Canada, China, India, Japan, Korea, and Russia. Consumers can find high-quality entertainment wherever they see the ‘g’ character logo or at www.glu.com.
For live updates, please follow Glu via Twitter at www.twitter.com/glumobile or become a Glu fan at www.facebook.com/glumobile.
CONTRACT KILLER, COOKING DASH, DEER HUNTER, DINER DASH, DINO HUNTER: DEADLY SHORES, ETERNITY WARRIORS, FRONTLINE COMMANDO, RACING RIVALS, TAP SPORTS BASEBALL, GLU, GLU MOBILE and the 'g' character logo are trademarks of Glu Mobile Inc. or its subsidiaries.
| Glu Mobile Inc. | ||||||||
| Consolidated Balance Sheets | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| June 30, | December 31, | |||||||
| 2015 | 2014 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 189,650 | $ | 70,912 | ||||
| Accounts receivable, net | 25,078 | 32,231 | ||||||
| Prepaid royalties | 17,560 | 864 | ||||||
| Prepaid expenses and other current assets | 16,239 | 17,388 | ||||||
| Total current assets | 248,527 | 121,395 | ||||||
| Property and equipment, net | 5,629 | 6,116 | ||||||
| Restricted cash | 1,990 | 1,990 | ||||||
| Other long-term assets | 8,271 | 6,674 | ||||||
| Intangible assets, net | 22,498 | 27,524 | ||||||
| Goodwill | 87,969 | 87,964 | ||||||
| Total assets | $ | 374,884 | $ | 251,663 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Accounts payable | $ | 11,476 | $ | 11,685 | ||||
| Accrued liabilities | 2,078 | 3,812 | ||||||
| Accrued compensation | 9,970 | 10,751 | ||||||
| Accrued royalties | 14,554 | 12,440 | ||||||
| Deferred revenue | 31,231 | 37,333 | ||||||
| Total current liabilities | 69,309 | 76,021 | ||||||
| Other long-term liabilities | 5,018 | 3,936 | ||||||
| Total liabilities | $ | 74,327 | $ | 79,957 | ||||
| Common stock | 13 | 11 | ||||||
| Additional paid-in capital | 548,981 | 415,766 | ||||||
| Accumulated other comprehensive loss | 11 | (8 | ) | |||||
|
Accumulated deficit |
(248,448 | ) | (244,063 | ) | ||||
| Stockholders' equity | 300,557 | 171,706 | ||||||
|
Total liabilities and stockholders' equity |
$ | 374,884 | $ | 251,663 | ||||
| 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, | ||||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||||||
| Revenue | $ | 56,150 | $ | 40,910 | $ | 125,620 | $ | 85,490 | |||||||||
| Cost of revenue: |
|
||||||||||||||||
| Platform commissions, royalties and other | 21,320 | 12,432 | 47,630 | 25,634 | |||||||||||||
| Amortization of intangible assets | 2,434 | 441 | 4,868 | 995 | |||||||||||||
| Total cost of revenue | 23,754 | 12,873 | 52,498 | 26,629 | |||||||||||||
| Gross profit | 32,396 | 28,037 | 73,122 | 58,861 | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | 18,308 | 17,297 | 36,551 | 32,876 | |||||||||||||
| Sales and marketing | 12,771 | 7,989 | 25,209 | 17,474 | |||||||||||||
| General and administrative | 7,429 | 6,131 | 14,835 | 11,057 | |||||||||||||
| Amortization of intangible assets | 32 | 127 | 159 | 254 | |||||||||||||
| Restructuring charge | - | 159 | - | 159 | |||||||||||||
| Total operating expenses | 38,540 | 31,703 | 76,754 | 61,820 | |||||||||||||
| Loss from operations | (6,144 | ) | (3,666 | ) | (3,632 | ) | (2,959 | ) | |||||||||
| Interest income and other expense, net: | |||||||||||||||||
| Interest income | 12 | 7 | 18 | 13 | |||||||||||||
| Other expense | (186 | ) | (31 | ) | (476 | ) | (167 | ) | |||||||||
| Interest income and other expense, net | (174 | ) | (24 | ) | (458 | ) | (154 | ) | |||||||||
| Loss before income taxes | (6,318 | ) | (3,690 | ) | (4,090 | ) | (3,113 | ) | |||||||||
|
Income tax benefit/(provision) |
809 | (78 | ) | (295 | ) | (522 | ) | ||||||||||
| Net loss | $ | (5,509 | ) | $ | (3,768 | ) | $ | (4,385 | ) | $ | (3,635 | ) | |||||
| Net loss per share - basic and diluted: | $ | (0.05 | ) | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.04 | ) | |||||
| Weighted average common shares outstanding - basic and diluted | 116,169 | 85,549 | 110,019 | 82,634 | |||||||||||||
| Stock-based compensation expense included in: | |||||||||||||||||
| Research and development | $ | 836 | $ | 3,605 | $ | 1,596 | $ | 5,922 | |||||||||
| Sales and marketing | 282 | 190 | 500 | 291 | |||||||||||||
| General and administrative | 1,914 | 771 | 3,065 | 1,332 | |||||||||||||
| Total stock-based compensation expense | $ | 3,032 | $ | 4,566 | $ | 5,161 | $ | 7,545 | |||||||||
| Glu Mobile Inc. | |||||||||||||||||||||||||
| GAAP to Non-GAAP Reconciliation | |||||||||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||
|
For the Three Months Ended |
|||||||||||||||||||||||||
| March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | ||||||||||||||||||||
| 2014 | 2014 | 2014 | 2014 | 2015 | 2015 | ||||||||||||||||||||
| GAAP revenue | $ | 44,580 | $ | 40,910 | $ | 64,791 | $ | 72,865 | $ | 69,470 | $ | 56,150 | |||||||||||||
| Change in deferred revenue | 2,377 | (5,874 | ) | 18,762 | 3,363 | (7,023 | ) | 1,329 | |||||||||||||||||
| Non-GAAP revenue | 46,957 | 35,036 | 83,553 | 76,228 | 62,447 | 57,479 | |||||||||||||||||||
| GAAP gross profit | 30,824 | 28,037 | 37,720 | 40,806 | 40,726 | 32,396 | |||||||||||||||||||
| Change in deferred revenue | 2,377 | (5,874 | ) | 18,762 | 3,363 | (7,023 | ) | 1,329 | |||||||||||||||||
| Amortization of intangible assets | 554 | 441 | 1,338 | 2,434 | 2,434 | 2,434 | |||||||||||||||||||
| Non-cash warrant expense | - | - | 1,126 | 66 | 93 | 135 | |||||||||||||||||||
| Change in deferred platform commissions and royalty expense | (1,209 | ) | 1,527 | (9,122 | ) | (108 | ) | 2,819 | (321 | ) | |||||||||||||||
| Non-GAAP gross profit | 32,546 | 24,131 | 49,824 | 46,561 | 39,049 | 35,973 | |||||||||||||||||||
| GAAP operating expense | 30,117 | 31,703 | 37,826 | 35,676 | 38,214 | 38,540 | |||||||||||||||||||
| Stock-based compensation | (2,979 | ) | (4,566 | ) | (1,954 | ) | (2,134 | ) | (2,129 | ) | (3,032 | ) | |||||||||||||
| Amortization of intangible assets | (127 | ) | (127 | ) | (127 | ) | (127 | ) | (127 | ) | (32 | ) | |||||||||||||
| Litigation costs | - | - | - | - | - | (476 | ) | ||||||||||||||||||
| Transitional costs | - | (682 | ) | (493 | ) | (255 | ) | (72 | ) | - | |||||||||||||||
| Change in fair value of Blammo earnout | (304 | ) | (531 | ) | - | - | - | - | |||||||||||||||||
| Restructuring charge | - | (159 | ) | (209 | ) | (67 | ) | - | - | ||||||||||||||||
| Non-GAAP operating expense | 26,707 | 25,638 | 35,043 | 33,093 | 35,886 | 35,000 | |||||||||||||||||||
| GAAP operating income/(loss) | 707 | (3,666 | ) | (106 | ) | 5,130 | 2,512 | (6,144 | ) | ||||||||||||||||
| Change in deferred revenue | 2,377 | (5,874 | ) | 18,762 | 3,363 | (7,023 | ) | 1,329 | |||||||||||||||||
| Non-GAAP cost of revenue adjustment | (655 | ) | 1,968 | (6,658 | ) | 2,392 | 5,346 | 2,248 | |||||||||||||||||
| Stock-based compensation | 2,979 | 4,566 | 1,954 | 2,134 | 2,129 | 3,032 | |||||||||||||||||||
| Amortization of intangible assets | 127 | 127 | 127 | 127 | 127 | 32 | |||||||||||||||||||
| Transitional costs | - | 682 | 493 | 255 | 72 | - | |||||||||||||||||||
| Change in fair value of Blammo earnout | 304 | 531 | - | - | - |
- |
|||||||||||||||||||
| Litigation costs | - | - | - | - |
- |
476 |
|||||||||||||||||||
| Restructuring charge | - | 159 | 209 | 67 | - |
- |
|||||||||||||||||||
| Non-GAAP operating income/(loss) | 5,839 | (1,507 | ) | 14,781 | 13,468 | 3,163 | 973 | ||||||||||||||||||
| GAAP net income/(loss) | 133 | (3,768 | ) | 10,404 | 1,379 | 1,124 | (5,509 | ) | |||||||||||||||||
| Change in deferred revenue | 2,377 | (5,874 | ) | 18,762 | 3,363 | (7,023 | ) | 1,329 | |||||||||||||||||
| Non-GAAP cost of revenue adjustment | (655 | ) | 1,968 | (6,658 | ) | 2,392 | 5,346 | 2,248 | |||||||||||||||||
| Non-GAAP operating expense adjustment | 3,410 | 6,065 | 2,783 | 2,583 | 2,328 | 3,540 | |||||||||||||||||||
| Foreign currency exchange loss | 136 | 31 | 347 | 981 | 290 | 186 | |||||||||||||||||||
| Release of tax liabilities and valuation allowance | - | - | (8,352 | ) | 1,531 | - | - | ||||||||||||||||||
| Non-GAAP net income/(loss) | $ | 5,401 | $ | (1,578 | ) | $ | 17,286 | $ | 12,229 | $ | 2,065 | $ | 1,794 | ||||||||||||
| Reconciliation of net income/(loss) and net income/(loss) per share: | |||||||||||||||||||||||||
| GAAP net income/(loss) per share - basic | $ | 0.00 | $ | (0.04 | ) | $ | 0.11 | $ | 0.01 | $ | 0.01 | $ | (0.05 | ) | |||||||||||
| GAAP net income/(loss) per share - diluted | $ | 0.00 | $ | (0.04 | ) | $ | 0.10 | $ | 0.01 | $ | 0.01 | $ | (0.05 | ) | |||||||||||
| Non-GAAP net income/(loss) per share - basic | $ | 0.07 | $ | (0.02 | ) | $ | 0.18 | $ | 0.12 | $ | 0.02 | $ | 0.02 | ||||||||||||
| Non-GAAP net income/(loss) per share - diluted | $ | 0.06 | $ | (0.02 | ) | $ | 0.16 | $ | 0.11 | $ | 0.02 | $ | 0.01 | ||||||||||||
| Shares used in computing Non-GAAP basic net income/(loss) per share | 79,719 | 85,549 | 98,628 | 103,406 | 103,869 | 116,169 | |||||||||||||||||||
| Shares used in computing Non-GAAP diluted net income/(loss) per share | 85,398 | 85,549 | 105,438 | 106,954 | 107,851 | 122,538 | |||||||||||||||||||
| Non-GAAP operating expense break-out: | |||||||||||||||||||||||||
| GAAP research and development expense | $ | 15,579 | $ | 17,297 | $ | 15,355 | $ | 16,053 | $ | 18,243 | $ | 18,308 | |||||||||||||
| Transitional costs | - | (20 | ) | - | - | - | - | ||||||||||||||||||
| Stock-based compensation | (2,317 | ) | (3,605 | ) | (764 | ) | (736 | ) | (760 | ) | (836 | ) | |||||||||||||
| Non-GAAP research and development expense | 13,262 | 13,672 | 14,591 | 15,317 | 17,483 | 17,472 | |||||||||||||||||||
| GAAP sales and marketing expense | 9,485 | 7,989 | 15,327 | 12,275 | 12,438 | 12,771 | |||||||||||||||||||
| Stock-based compensation | (101 | ) | (190 | ) | (201 | ) | (209 | ) | (218 | ) | (282 | ) | |||||||||||||
| Non-GAAP sales and marketing expense | 9,384 | 7,799 | 15,126 | 12,066 | 12,220 | 12,489 | |||||||||||||||||||
| GAAP general & administrative expense | 4,926 | 6,131 | 6,808 | 7,154 | 7,406 | 7,429 | |||||||||||||||||||
| Transitional costs | - | (662 | ) | (493 | ) | (255 | ) | (72 | ) | - | |||||||||||||||
| Change in fair value of Blammo earnout | (304 | ) | (531 | ) | - | - | - | - | |||||||||||||||||
| Stock-based compensation | (561 | ) | (771 | ) | (989 | ) | (1,189 | ) | (1,151 | ) | (1,914 | ) | |||||||||||||
| Litigation costs |
- |
- | - | - | - | (476 | ) | ||||||||||||||||||
| Non-GAAP general and administrative expense | $ | 4,061 | $ | 4,167 | $ | 5,326 | $ | 5,710 | $ | 6,183 | $ | 5,039 | |||||||||||||
| Glu Mobile Inc. | |||||||||||||||||||||||||
| Non-GAAP Adjusted EBITDA | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||
|
For the Three Months Ended |
|||||||||||||||||||||||||
| March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | ||||||||||||||||||||
| 2014 | 2014 | 2014 | 2014 | 2015 | 2015 | ||||||||||||||||||||
| GAAP net income/(loss) | $ | 133 | $ | (3,768 | ) | $ | 10,404 | $ | 1,379 | $ | 1,124 | $ | (5,509 | ) | |||||||||||
| Change in deferred revenue | 2,377 | (5,874 | ) | 18,762 | 3,363 | (7,023 | ) | 1,329 | |||||||||||||||||
| Change in deferred platform commissions and royalty expense | (1,209 | ) | 1,527 | (9,122 | ) | (108 | ) | 2,819 | (321 | ) | |||||||||||||||
| Non-cash warrant expense | - | - | 1,126 | 66 | 93 | 135 | |||||||||||||||||||
| Amortization of intangible assets | 681 | 568 | 1,465 | 2,561 | 2,561 | 2,466 | |||||||||||||||||||
| Depreciation | 620 | 607 | 617 | 669 | 706 | 732 | |||||||||||||||||||
| Stock-based compensation | 2,979 | 4,566 | 1,954 | 2,134 | 2,129 | 3,032 | |||||||||||||||||||
| Change in fair value of Blammo earnout | 304 | 531 | - | - | - | - | |||||||||||||||||||
| Transitional costs | - | 682 | 493 | 255 | 72 | - | |||||||||||||||||||
| Litigation costs | - | - | - |
- |
- | 476 | |||||||||||||||||||
| Restructuring charge | - | 159 | 209 | 67 | - | - | |||||||||||||||||||
| Foreign currency exchange loss | 136 | 31 | 347 | 981 | 290 | 186 | |||||||||||||||||||
| Interest and other expense | (6 | ) | (7 | ) | (7 | ) | (3 | ) | (6 | ) | (12 | ) | |||||||||||||
| Income tax provision/(benefit) | 444 | 78 | (10,850 | ) | 2,773 | 1,104 | (809 | ) | |||||||||||||||||
| Total Non-GAAP Adjusted EBITDA | $ | 6,459 | $ | (900 | ) | $ | 15,398 | $ | 14,137 | $ | 3,869 | $ | 1,705 | ||||||||||||
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 Revenue and Deferred Cost of Revenue. 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 the revenue and 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 revenue and deferred cost of revenue 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 revenue and deferred cost of revenue from its operating results is important to facilitate comparisons to prior periods and to understand Glu’s operations.
Amortization of Intangible Assets. When analyzing the operating performance of an acquired entity, Glu's management focuses on the total return provided by the investment (i.e., operating profit generated from the acquired entity as compared to the purchase price paid) without taking into consideration any allocations made for accounting purposes. Because the purchase price for an acquisition necessarily reflects the accounting value assigned to intangible assets (including acquired in-process technology and goodwill), when analyzing the operating performance of an acquisition in subsequent periods, Glu's management excludes the GAAP impact of acquired intangible assets to its financial results. Glu believes that such an approach is useful in understanding the long-term return provided by an acquisition and that investors benefit from a supplemental non-GAAP financial measure that excludes the accounting expense associated with acquired intangible assets.
Non-cash Warrant Expense. In the third and fourth quarters of 2014 and the first half of 2015, Glu recorded a non-cash charge related to the vesting of warrants to purchase shares of common stock issued to brand holders as part of third party licensing, development and publishing arrangements. These charges were computed using the Black-Scholes valuation model and were recorded in cost of revenue. When evaluating the performance of its consolidated results, Glu does not consider non-cash warrant expense as it places a greater emphasis on overall stockholder dilution rather than the accounting charges associated with the vesting of any warrants. As the non-cash warrant expense impacts comparability from period to period Glu believes that investors benefit from a supplemental non-GAAP financial measure that excludes these charges.
Stock-Based Compensation Expense. The Company applies the fair value provisions of ASC 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires the recognition of compensation expense, using a fair-value based method, for costs related to all share-based payments. Included in the stock compensation expense was the contingent consideration that was subsequently issued to the Blammo employees who were former shareholders of Blammo, which was recorded as research and development expense over the term of the earn-out periods, since these employees were primarily employed in product development. Glu re-measured the fair value of the contingent consideration each reporting period and only recorded a compensation expense for the portion of the earn-out target which was achieved. When evaluating the performance of its consolidated results, Glu does not consider stock-based compensation charges. Likewise, 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 second, third and fourth quarters of 2014 and recorded cash restructuring charges due to the termination of certain employees in its China, Europe and 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. 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.
Change in Fair Value of Blammo Earnout. As part of the acquisition of Blammo, Glu committed to issue additional consideration in the form of Glu’s common stock to the former, non-employee Blammo shareholders if certain revenue targets were achieved. Glu recorded the estimated contingent consideration liability at acquisition and adjusted the fair value of the liability each reporting period. When analyzing the operating performance of an acquired entity, 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 including the final amounts paid for contingent consideration) without taking into consideration any expenses recognized post-acquisition related to the change in fair value of the contingent consideration. Because the final purchase price paid for an acquisition necessarily reflects the accounting value assigned to both the consideration, including the contingent consideration, paid and to the intangible assets (including goodwill) acquired, when analyzing the operating performance of an acquisition in subsequent periods, the Company’s management excludes the GAAP impact of any adjustments to the fair value of these acquisition-related balances to its financial results. Glu believes that the fair value adjustments affect comparability from period to period and that investors benefit from a supplemental non-GAAP financial measure that excludes these charges.
Litigation Proceeds and Costs. These proceeds and expenses consist primarily of one-time settlement payments received from, and legal fees incurred in connection with, intellectual property infringement matters. The Company excludes these proceeds and costs from its non-GAAP measures as these proceeds and costs are isolated, unpredictable and not expected to recur regularly, and the Company believes that these non-recurring proceeds and costs have no direct correlation to the operation of the Company’s ongoing core business.
Transitional Costs. GAAP requires expenses to be recognized for various types of events associated with a business acquisition such as legal, accounting and other deal related expenses. Glu has incurred various costs related to the acquisition and integration of PlayFirst and Cie Games into Glu’s operations. Glu recorded these non-recurring 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.
Release of tax liabilities and valuation allowance. In the third and fourth quarters of 2014 Glu adjusted a portion of its deferred tax asset valuation allowance as a result of the deferred tax liabilities recorded in connection with the Cie Games acquisition. Glu believes that these non-recurring, one-time tax adjustments do not reflect its ongoing operations and that investors benefit from a supplemental non-GAAP financial measure that excludes these adjustments.
Foreign currency exchange gains and losses. Foreign currency exchange gains and losses represent the net gain or loss that Glu has recorded for the impact of currency exchange rate movements on cash and other assets and liabilities denominated in foreign currencies related to the revaluation of assets and liabilities. Accordingly, foreign currency exchange gains and losses are generally unpredictable and can cause Glu’s reported results to vary significantly. Due to the unusual magnitude of these gains and losses, and the fact that Glu has not engaged in hedging or taken other actions to reduce the likelihood of incurring a sizeable net gain or loss in future periods, Glu began, with the quarter ended December 31, 2008, to present non-GAAP net loss and net loss per share excluding foreign exchange gains and losses for comparability purposes. Glu believes that these gains and losses do not reflect its ongoing operations and that investors benefit from a supplemental non-GAAP financial measure that excludes these items, enabling investors to compare Glu’s core operating results in different periods without this variability. Foreign exchange losses recognized during 2014 and 2015 were as follows (in thousands):
| March 31, 2014 | $ | (136 | ) | ||
| June 30, 2014 | (31 | ) | |||
| September 30, 2014 | (347 | ) | |||
| December 31, 2014 | (981 | ) | |||
| FY 2014 | $ | (1,495 | ) | ||
| March 31, 2015 | $ | (290 | ) | ||
| June 30, 2015 | (186 | ) | |||
| FY 2015 | $ | (476 | ) | ||