Glu Mobile Inc. (NASDAQ:GLUU), a leading global publisher of
mobile games, today announced financial results for its first
quarter ended March 31, 2009.
For the quarter ended March 31, 2009, Glu reported revenues of
$20.8 million, compared to $20.6 million in the first quarter of
2008. GAAP loss from operations and net loss were $(2.9) million
and $(5.8) million, respectively, compared to GAAP loss from
operations and net loss of $(5.5) million and $(6.0) million,
respectively, in the first quarter of 2008. GAAP loss per basic
share was $(0.19) for the quarter ended March 31, 2009, compared
with a GAAP loss per basic share of $(0.21) in the same period last
year.
For the quarter ended March 31, 2009, non-GAAP income from
operations, which excludes stock-based compensation expense,
amortization of intangibles arising from business combinations,
transitional expenses and MIG earnout expenses, was $1.4 million,
an increase from $0.2 million in the same period last year.
Non-GAAP net loss was $(1.0) million for the quarter ended March
31, 2009, an increase from a loss of $(0.4) million in the same
period last year. Non-GAAP basic loss per share was $(0.03) for the
quarter ended March 31, 2009, a decrease from a non-GAAP basic loss
per share of $(0.01) in the same period last year.
�We were pleased with the company�s performance in the first
quarter, which was highlighted by better-than-expected revenue and
a $1.4 million non-GAAP operating profit, or a 6.7% operating
margin,� said Greg Ballard, chief executive officer of Glu. �We
have made solid progress against our strategy for next-generation
handsets, now offering eight games for the iPhone and twenty-nine
games for the Blackberry app store. Equally important, we expanded
our global partnership with Activision, which will bring five
premier titles to the mobile platform beginning later this
year.�
Ballard concluded, �While we expect the macro environment to
remain challenging as a result of global economic conditions, we
remain focused on our key growth initiatives and believe that Glu
is well positioned to benefit from the growth of the mobile gaming
market opportunity from a long-term perspective.�
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 �Non-GAAP Financial Measures.�
The Company ended the quarter with a cash and equivalent balance
of $14.7 million, and had $4.5 million outstanding on its line of
credit.
�We remain committed to achieving positive cash flow from
operations during 2009 and are confident that we will achieve this
goal based on the expense control initiatives taken last year,�
said Eric R. Ludwig, Glu�s chief financial officer. �We are focused
on continuing to improve the company�s capital structure and
believe we have the resources and ability to invest in our growth
initiatives.�
Business Outlook
The following forward-looking statements reflect expectations as
of May 6, 2009. Results may be materially different and are
affected by many factors, such as: consumer demand for mobile
entertainment; consumer demand for mobile handsets, including the
next-generation platforms; carriers' and distributors' marketing to
consumers, including premium deck placement; continued uncertainty
in the global economic environment; carriers' and other
distributors� maintaining their networks and provisioning systems
to enable consumer purchases; development delays on Glu's products;
competition in the industry; changes in foreign exchange rates;
Glu's effective tax rate and other factors detailed in this release
and in Glu's SEC filings.
Second Quarter Expectations � Quarter Ending June 30,
2009:
- GAAP revenue is expected to be
between $18.75 million and $19.25 million
- GAAP net loss is expected to be
between $(3.5) million and $(3.9) million, or a loss of between
$(0.12) and $(0.13) per basic share
- Non-GAAP operating income/loss
is expected to be between $(0.2) million and $0.2 million. Non-GAAP
net loss is expected to be between $(1.2) million and $(1.6)
million, or a loss of between $(0.04) and $(0.05) per basic share,
which excludes $1.3 million for amortization of intangibles,
approximately $1.0 million of anticipated stock-based compensation
expense and the non-equity component of the MIG earnout
- Our income tax expense in the
second quarter of 2009 is expected to be approximately $1.1 million
and includes $0.6 million of withholding taxes related to the
repatriation of cash from China
- Weighted average common shares
outstanding for the second quarter of 2009 are expected to be
approximately 29.7 million basic and 30.3 million diluted
Full Year Expectations - Year Ending December 31,
2009:
- GAAP revenue is expected to be
approximately $78.5 to $80.0 million
- GAAP net loss is expected to be
between $(11.4) million and $(13.5) million, or a loss of between
$(0.38) to $(0.45) per basic share
- Non-GAAP operating profit is
expected to be between $2.0 million and $4.0 million. Non-GAAP net
loss/profit is expected to be between a loss of $(2.2) million and
a loss of $(0.1) million, or between a loss of $(0.07) and $0.00
per basic share, which excludes $6.8 million for amortization of
intangibles, approximately $4.1 million of anticipated stock-based
compensation and the non-equity component of the MIG earnout and
$0.5 million related to un-hedged foreign exchange losses expected
primarily on the revaluation of assets and liabilities
- Our income tax expense for the
full year is expected to be approximately $3.0 million
- Weighted average common shares
outstanding for 2009 are expected to be approximately 29.7 million
basic and 30.8 million diluted
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
(888) 803-5681, or if outside the U.S., (706) 643-8823, with
conference ID # 95158216, 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 at
http://www.glu.com/corp/Pages/investors.aspx under the Investor
Calendar and Webcasts menu. An audio replay will be available
between 2:30 p.m. Pacific Time, May 6, 2009, and 8:59 p.m. Pacific
Time, May 14, 2009, by calling (800) 642-1687, or (706) 645-9291,
with conference ID # 95158216.
Use of Non-GAAP Financial Measures
To supplement Glu's unaudited condensed consolidated financial
statements 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 non-GAAP gross profit, non-GAAP operating income/(loss),
non-GAAP net income/(loss) and historical and estimated non-GAAP
basic and diluted earnings/(loss) per share. These non-GAAP
financial measures exclude the following items from Glu's unaudited
consolidated statements of operations:
- Acquired in-process research and
development
- Amortization of intangible
assets
- Stock-based compensation
expense
- Gain/impairment of auction-rate
securities
- Restructuring charge
- MIG earnout expenses
- Transitional expenses
- Foreign currency exchange gains
and losses primarily related to the revaluation of assets and
liabilities
Glu may consider whether other 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" ("Second Quarter
Expectations � Quarter Ending June 30, 2009" and "Full Year
Expectations - Year Ending December 31, 2009"); our belief that we
will continue to make solid progress against our strategy for
next-generation handsets; our expectation that we will bring five
premier Activision titles to the mobile platform beginning later
this year in connection with our expanded partnership with
Activision; our expectation that the macro environment will remain
challenging as a result of global economic conditions; our belief
that we remain well positioned to benefit from the growth of the
mobile gaming market for a long-term perspective; our belief that
the mobile gaming market will grow; our belief that we can achieve
positive cash flow from operations during 2009; our belief that we
can improve our capital structure; and our belief that we have the
resources and ability to invest in our growth initiatives. 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"; the risk that we may fail to
execute our strategy for next-generation handsets and that, even if
we do execute, we may not derive the revenues that we expect; the
risk that we will be unable to publish five premier Activision
titles for the mobile platform on the timeframes that we anticipate
or at all; the risk that the mobile gaming market is not growing at
the rate that we anticipate or that we will be unable to capitalize
on any such growth; the risk that our expense control initiatives
taken last year are insufficient to enable us to achieve positive
cash flow from operations during 2009; the risk that we may be
unable to improve our capital structure; the risk that we may have
insufficient working capital to effectively execute our business
strategy, including exploiting next-generation platforms while
continuing to address our traditional carrier-based business; the
risk that we may unable to repatriate cash from certain foreign
jurisdictions during the second quarter of 2009 or beyond; the risk
that we may fall out of compliance with the financial and other
covenants in our credit facility; the risk that we may lose a key
intellectual property license or key carrier distribution
agreement; the risk that growth of next-generation handsets and
advanced networks does not grow as significantly as we anticipate;
the risk that our development expenses for games for
next-generation handsets are greater than we anticipate; the risk
that our recently and newly launched games are less popular than
anticipated; the risk that changes in wireless carrier plans with
their customers may adversely impact sales of our games; the risk
that sales of our original intellectual property titles will not
continue to favorably impact product mix; the risk that our newly
released games will be of a quality less than desired by reviewers
and consumers; the risk that mobile games market is smaller than
anticipated; and other risks detailed under the caption "Risk
Factors" in our Form 10-K filed with the Securities and Exchange
Commission on March 13, 2009 and our other SEC filings. You can
locate these reports through our website at
http://www.glu.com/corp/Pages.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 (NASDAQ:GLUU) is a leading global publisher of mobile games.
Its portfolio of top-rated games includes original titles Glyder,
Bonsai Blast, Super K.O. Boxing!, Stranded and Brain Genius, and
titles based on major brands from partners including Atari,
Activision, Konami, Harrah's, Hasbro, Warner Bros., Microsoft,
PlayFirst, PopCap Games, SEGA and Sony. Founded in 2001, Glu is
based in San Mateo, Calif. and has offices in London, France,
Germany, Spain, Italy, Poland, Russia, China, Brazil, Chile, Canada
and Mexico. Consumers can find high-quality, fresh entertainment
created exclusively for their mobile phones wherever they see the
'g' character logo or at www.glu.com.
GLU MOBILE, GLU, BONSAI BLAST, SUPER K.O. BOXING!, STRANDED,
BRAIN GENIUS and the 'g' character logo are trademarks of Glu
Mobile Inc.
In the financial tables below, Glu has provided a reconciliation
of the most comparable GAAP financial measure to each of the
historical non-GAAP financial measures used in this press
release.
Glu Mobile Inc. Consolidated Balance Sheets (in
thousands) (unaudited) �
March 31, �
December
31, 2009 2008 �
ASSETS Cash and cash
equivalents $ 14,674 $ 19,166 Accounts receivable, net 19,681
19,826 Prepaid royalties 16,212 15,298 Prepaid expenses and other
current assets � 1,885 � � 2,704 �
Total current assets
52,452 56,994 � Property and equipment, net 4,463 4,861 Prepaid
royalties 4,428 4,349 Other long-term assets 1,024 930 Intangible
assets, net 17,367 20,320 Goodwill � 4,603 � � 4,622 �
Total
assets � 84,337 � � 92,076 � �
LIABILITIES AND STOCKHOLDERS'
EQUITY Accounts payable $ 6,065 $ 6,569 Accrued liabilities 906
686 Accrued compensation 2,252 2,184 Accrued royalties 17,644
18,193 Accrued restructuring 651 1,000 Deferred revenues 710 727
Current portion of long-term debt � 15,175 � � 14,000 �
Total
current liabilities 43,403 43,359
Other long-term liabilities
10,744 11,798 Long-term debt, less current portion � 8,326 � �
10,125 �
Total liabilities � 62,473 � � 65,282 � � Common
stock 3 3 Additional paid-in capital 185,521 184,757 Deferred
stock-based compensation - (11 ) Accumulated other comprehensive
income 1,222 1,170 Accumulated deficit � (164,882 ) � (159,125 )
Stockholders' equity � 21,864 � � 26,794 �
Total
liabilities and stockholders' equity
$
84,337 �
$
92,076 �
Glu Mobile Inc. Consolidated Statements of
Operations (in thousands, except per share data)
(unaudited) �
Three Months Ended March 31, �
March 31, 2009 2008 �
Revenues $
20,775 $ 20,592 �
Cost of revenues:
Royalties 5,813 5,488 Amortization of intangible assets � 2,848 � �
1,708 �
Total cost of revenues �
8,661 � �
7,196 �
Gross profit �
12,114 � �
13,396 � �
Operating expenses: Research and
development 6,397 6,520 Sales and marketing 4,112 5,782 General and
administrative 4,485 5,395 Amortization of intangible assets 51 68
Restructuring charge - 75 Acquired in-process research and
development � - � � 1,039 �
Total operating expenses �
15,045 � �
18,879 � �
Loss from operations
(2,931 ) (5,483 ) �
Interest and
other income/(expense), net: Interest income 18 527 Interest
expense (364 ) (10 ) Other income/(expense), net � (461 ) � 94 �
Interest and other income/(expense), net �
(807 ) �
611 � �
Loss before income taxes (3,738
) (4,872 ) Income tax provision � (2,019 ) �
(1,130 )
Net loss $ (5,757 ) $
(6,002 ) �
Net loss per share - basic and
diluted $ (0.19 ) $ (0.21
) �
Weighted average common shares outstanding - basic
and diluted 29,595 29,146 �
Stock-based
compensation expense included in: Research and development $
180 $ 77 Sales and marketing 151 1,301 General and administrative �
433 � � 594 �
Total stock-based compensation expense $ 764 �
$ 1,972 �
Glu Mobile Inc. �
�
�
Three Months Ended
GAAP to Non-GAAP Reconciliation
�
March 31, 2009
(in thousands, except per share data) (unaudited)
GAAP Adjustments Non-GAAP � � Amortization of
intangible assets � 2,848 � (2,848 ) � - �
Total cost of
revenues �
8,661 �
(2,848 ) �
5,813
�
Gross profit �
12,114 �
2,848 � �
14,962 � � Research and development 6,397 (180 ) a 6,217
Sales and marketing 4,112 (807 ) a 3,305 General and administrative
4,485 (433 ) a 4,052 Amortization of intangible assets � 51 � (51 )
� - �
Total operating expenses �
15,045 �
(1,471 ) �
13,574 � � � �
Income/(loss)
from operations �
(2,931 ) 4,319 � �
1,388 � � Interest and other income/(expense), net � (807 )
461 � b � (346 )
Income/(loss) before income taxes �
(3,738 ) 4,780 � �
1,042 � � � �
Net
loss �
(5,757 ) 4,780 � �
(977
) � �
Reconciliation of net loss and net loss per
share: Non-GAAP net loss per share - basic and diluted $ (0.19
) $ (0.03 ) Shares used in computing basic and diluted net loss per
share 29,595 29,595 � a - Excluded amount represents stock-based
compensation expense of $764 and MIG earnout expenses of $656 b -
Excluded amount represents foreign currency exchange losses � � �
Glu Mobile Inc.
�
Three Months Ended
GAAP to Non-GAAP Reconciliation
�
March 31, 2008
(in thousands, except per share data) (unaudited)
GAAP Adjustments Non-GAAP � � Amortization of
intangible assets � 1,708 � (1,708 ) � - �
Total cost of
revenues �
7,196 �
(1,708 ) �
5,488
�
Gross profit �
13,396 �
1,708 � �
15,104 � � Research and development 6,520 (127 ) a 6,393
Sales and marketing 5,782 (1,959 ) a 3,823 General and
administrative 5,395 (749 ) a 4,646 Amortization of intangible
assets 68 (68 ) - Restructuring charge 75 (75 ) - Acquired
in-process research and development � 1,039 � (1,039 ) � - �
Total operating expenses 18,879 (4,017
) 14,862 � � �
Loss from operations �
(5,483 ) 5,725 � �
242 � � Interest and
other income, net � 611 � (83 ) b � 528 �
Loss before income
taxes �
(4,872 ) 5,642 � �
770 � �
� �
Net loss �
(6,002 ) 5,642 � �
(360 ) � �
Reconciliation of net loss and net loss
per share: Non-GAAP net loss per share - basic and diluted $
(0.21 ) $ (0.01 ) Shares used in computing basic and diluted net
loss per share 29,146 29,146 � a - Excluded amount represents
stock-based compensation expense of $1,972, Superscape and MIG
transitional expenses of $241 and MIG earnout expenses of $622 b -
Excluded amount represents impairment of auction-rate securities of
$235 and foreign exchange gains of $318
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:
Acquired In-Process Research and Development. Glu recorded
charges for acquired in-process research and development
(�IPR&D�), included in its GAAP presentation of operating
expense, in connection with the acquisition of Superscape. These
amounts were expensed on the acquisition date as the acquired
technology had not yet reached technological feasibility and had no
future alternative uses. There can be no assurance that acquisition
of business, products or technologies in the future will not result
in substantial charges for acquired IPR&D. Accordingly,
acquired IPR&D are non-recurring and generally unpredictable.
Glu believes it is useful to provide, as a supplement to its GAAP
operating results, a non-GAAP financial measure that excludes
acquired IPR&D.
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.
In addition, in accordance with GAAP, Glu generally recognizes
expenses for internally-developed intangible assets as they are
incurred until technological feasibility is reached,
notwithstanding the potential future benefit such assets may
provide. Unlike internally-developed intangible assets, however,
and also in accordance with GAAP, Glu generally capitalizes the
cost of acquired intangible assets and recognizes that cost as an
expense over the useful lives of the assets acquired (other than
goodwill, which is not amortized, and acquired in-process
technology, which is expensed immediately, as required under GAAP).
As a result of their GAAP treatment, there is an inherent lack of
comparability between the financial performance of
internally-developed intangible assets and acquired intangible
assets. Accordingly, Glu believes it is useful to provide, as a
supplement to its GAAP operating results, a non-GAAP financial
measure that excludes the amortization of acquired intangibles.
Stock-Based Compensation Expense. Glu adopted SFAS 123R,
"Share-Based Payment" beginning in its fiscal year 2006. 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 shareholder 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. In addition,
given Glu's adoption of SFAS 123R, "Share-Based Payment" beginning
with its fiscal year ending December 31, 2006, Glu believes that a
non-GAAP financial measure that excludes stock-based compensation
will facilitate the comparison of its year-over-year results.
Gain/Impairment of Auction-Rate Securities. Glu recorded
impairment charges related to its auction-rate securities (�ARS�)
that were deemed to have an other-than-temporary decrease in fair
value based on third-party valuation models and other indicative
factors. The ARS previously held by the company were private
placement securities with long-term nominal maturities for which
the interest rates were reset through a Dutch auction each month.
The monthly auctions historically provided a liquid market for
these securities. The company's previous investments in ARS
represented interests in collateralized debt obligations supported
by pools of residential and commercial mortgages or credit cards,
insurance securitizations and other structured credits, including
corporate bonds. Upon full redemption of the auction-rate
securities by the sponsoring broker Glu reversed all previously
recorded impairments.
Glu believes that the impairment/gain of these investments does
not reflect the company�s ongoing operations and that investors
benefit from a supplemental non-GAAP financial measure that
excludes these impairments.
Restructuring Charge. Glu undertook restructuring activities in
2008 (1) to relocate its operations in France from Nice to Paris
and to terminate certain employees located in Glu's Hong Kong
office and (2) to terminate certain employees and to exit a portion
of the company�s corporate offices. The resulting restructuring
charges principally consisted of costs associated with employee
termination benefits, depreciation (a non-cash charge) and
remaining lease payment obligations. 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 the company's ongoing
operations and that investors benefit from a supplemental non-GAAP
financial measure that excludes these charges.
MIG Earnout Expenses. As part of the acquisition of MIG, Glu
committed to pay additional consideration in the form of cash and
stock to the MIG shareholders and bonus payments in the form of
stock to two officers of MIG, who were also MIG shareholders. Glu
initially recorded the estimated contingent consideration and
bonuses earned by the two officers as stock-based and non-equity
compensation over the two-year vesting period ending December 31,
2009, and has excluded from its non-GAAP financial measures the
impact of the non-equity component of the additional consideration.
In the quarter ended December 31, 2008, Glu restructured these
payments into debt obligations that become due at various times
through December 31, 2010. Glu believes that these earnout expenses
affect comparability from period to period and that investors
benefit from a supplemental non-GAAP financial measure that
excludes these charges.
Transitional Costs. Glu has incurred various costs related to
the transition and integration of Superscape and MIG into Glu's
operations. Glu recorded these non-recurring 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.
Foreign currency exchange gains and losses. Foreign 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 losses in the
quarter ended December 31, 2008 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 loss and 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 the
company's core operating results in different periods without this
variability. Foreign exchange gains/(losses) recognized for the
three months and year ended were as follows (in thousands):
March 31, 2008 � $ 318 June 30, 2008 (66) September 30, 2008
(1,301) December 31, 2008 � (1,984)
FY2008 $
(3,033) � March 31, 2009 $ (461)
FY2009 (YTD)
$ (461)
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