Glu Mobile Inc. (NASDAQ:GLUU), a leading global developer and
publisher of freemium games for smartphone and tablet devices,
today announced financial results for its fourth quarter and full
year ended December 31, 2012.
“The fourth quarter came in at the high end of expectations
across our key metrics,” stated Niccolo de Masi, Chief Executive
Officer of Glu. “Consistent with our guidance, smartphone revenue
was flat compared to Q3 due to the decision to delay the global
launch of approximately half of our Q4 2012 titles. We anticipate
seeing momentum accelerate as new titles launch incorporating our
new monetization systems.”
De Masi continued, “Looking forward, we believe Glu is strongly
positioned to lead in a Social Gaming 2.0 landscape. We will
continue to deliver engaging core gameplay, industry leading
production values, and outstanding global reach. Our new product
roadmap emphasizes deeper and more immersive gameplay designed to
drive higher monetization and lifetime value. Every game we release
in 2013 is designed to have the potential to outperform our best
titles of years past.”
Fourth Quarter 2012 Financial
Highlights:
- Revenue: Total GAAP revenue was
$21.0 million in the fourth quarter of 2012 compared to $15.2
million in the fourth quarter of 2011. Total non-GAAP revenue was
$20.8 million in the fourth quarter of 2012 compared to $20.1
million in the fourth quarter of 2011. Non-GAAP revenue excludes
changes in deferred revenue and amortization of in-process
development contracts.
- Gross Margin: GAAP gross margin
was 85% in the fourth quarter of 2012 compared to 73% in the fourth
quarter of 2011. Non-GAAP gross margin was 90% in the fourth
quarter of 2012 compared to 87% in the fourth quarter of 2011.
Non-GAAP gross margin excludes changes in deferred revenue and
royalties and amortization of intangible assets.
- GAAP Operating Loss: GAAP
operating loss was $(6.7) million in the fourth quarter of 2012
compared to a $(9.8) million loss in the fourth quarter of
2011.
- Non-GAAP Operating Loss:
Non-GAAP operating loss was $(2.5) million in the fourth quarter of
2012 compared to a loss of $(1.2) million during the fourth quarter
of 2011. Non-GAAP operating loss excludes changes in deferred
revenue and royalty expense, amortization of in-process development
contracts, stock-based compensation expense, amortization of
intangible assets, restructuring charges, change in fair value of
the Blammo earnout, transitional costs and impairment of
goodwill.
- Adjusted EBITDA: Adjusted EBITDA
was a $(1.8) million loss for the fourth quarter of 2012 compared
to a $(0.7) million loss during the fourth quarter of 2011.
Adjusted EBITDA is defined as non-GAAP operating income/(loss) less
depreciation.
- GAAP Net Loss and EPS: GAAP net
loss was $(7.1) million for the fourth quarter of 2012 compared to
a GAAP net loss of $(10.0) million for the fourth quarter of 2011.
GAAP EPS was a loss of $(0.11) for the fourth quarter of 2012,
based on 65.7 million weighted-average basic shares outstanding,
compared to a loss of $(0.16) for the fourth quarter of 2011, based
on 63.0 million weighted-average basic shares outstanding.
- Non-GAAP Net Loss and EPS:
Non-GAAP net loss was $(3.2) million for the fourth quarter of 2012
compared to a loss of $(1.4) million for the fourth quarter of
2011. Non-GAAP EPS was a loss of $(0.05) for the fourth quarter of
2012 based on 65.7 million weighted-average basic shares
outstanding, compared to a loss of $(0.02) for the fourth quarter
of 2011 based on 63.0 million weighted-average basic shares
outstanding.
- Cash Flows Used in Operations:
Cash flows used in operations were $(1.6) million for the fourth
quarter of 2012 compared to cash flows used in operations of $(4.3)
million for the fourth quarter of 2011.
Selected Fourth Quarter and Full Year
2012 Operating Highlights and Metrics:
- Our total GAAP smartphone revenue for
the fourth quarter of 2012 of $18.6 million grew 85% from the
fourth quarter of 2011 and comprised 89% of total GAAP
revenue.
- Our total GAAP smartphone revenue for
2012 of $74.4 million grew 112% from 2011 and was 85% of total GAAP
revenue.
- Our non-GAAP smartphone revenue for the
fourth quarter of 2012 of $18.5 million grew 24% from the fourth
quarter of 2011 and was 89% of total non-GAAP revenue.
- Our non-GAAP smartphone revenue for
2012 of $74.6 million grew 78% from 2011 and was 85% of total
non-GAAP revenue.
Fourth Quarter and Recent Developments
and Strategic Initiatives:
- We launched four new freemium games:
Death Dome, Contract Killer 2, Dragon Slayer, and Contract Killer
Zombies 2.
- We announced the availability of our
leading freemium titles for Google’s new Nexus devices and Android
4.2, Jelly Bean.
- We announced the availability of Deer
Hunter Reloaded, Small Street and Samurai vs. Zombies Defense for
the Mac, all of which are fully optimized for new features on OS X
Mountain Lion including full screen Retina display and support for
in-app purchasing.
- We hired Matthew Ricchetti as
our President of Studios.
- We partnered with Probability PLC to
expand our mobile portfolio to include real-money gambling and
reach new international audiences.
- In January 2013, we invested in Bee
Cave Games, a new company formed by industry veterans that is
focused on developing social and mobile casino games.
- We launched Glu Publishing and hired a
VP of 3rd Party Development.
Fiscal 2012 Financial
Highlights:
- Revenue: Total GAAP revenue was
$87.5 million for the year ended December 31, 2012 compared to
$66.2 million for the year ended December 31, 2011. Total non-GAAP
revenue was $87.8 million for the year ended December 31, 2012
compared to $72.9 million in the year ended December 31, 2011.
Non-GAAP revenue excludes changes in deferred revenue and
amortization of in-process development contracts.
- Gross Margin: GAAP gross margin
was 85% for the year ended December 31, 2012 compared to 72% for
the year ended December 31, 2011. Non-GAAP gross margin was 90% for
the year ended December 31, 2012 compared to 82% for the year ended
December 31, 2011. Non-GAAP gross margin excludes changes in
deferred revenue and royalties and amortization of intangible
assets.
- GAAP Operating Loss: GAAP
operating loss was $(22.1) million for the year ended December 31,
2012 compared to a $(21.2) million loss for the year ended December
31, 2011.
- Non-GAAP Operating Loss:
Non-GAAP operating loss was $(4.6) million for the year ended
December 31, 2012 compared to a loss of $(3.4) million during the
year ended December 31, 2011. Non-GAAP operating loss excludes
changes in deferred revenue and royalty expense, amortization of
in-process development contracts, stock-based compensation expense,
amortization of intangible assets, restructuring charges, change in
fair value of the Blammo earnout, transitional costs and impairment
of goodwill.
- Adjusted EBITDA: Adjusted EBITDA
was a $(2.3) million loss for the year ended December 31, 2012
compared to a $(1.5) million loss for the year ended December 31,
2011. Adjusted EBITDA is defined as non-GAAP operating
income/(loss) less depreciation.
- GAAP Net Loss and EPS: GAAP net
loss was $(20.5) million for the year ended December 31, 2012
compared to a GAAP net loss of $(21.1) million for the year ended
December 31, 2011. GAAP EPS was a loss of $(0.32) for the year
ended December 31, 2012, based on 64.3 million weighted-average
basic shares outstanding, compared to a loss of $(0.37) for the
year ended December 31, 2011, based on 57.5 million
weighted-average basic shares outstanding.
- Non-GAAP Net Loss and EPS:
Non-GAAP net loss was $(5.1) million for the year ended December
31, 2012 compared to a loss of $(4.0) million for the year ended
December 31, 2011. Non-GAAP EPS was a loss of $(0.08) for the year
ended December 31, 2012 based on 64.3 million weighted-average
basic shares outstanding, compared to a loss of $(0.07) for the
year ended December 31, 2011 based on 57.5 million weighted-average
basic shares outstanding.
- Cash Flows Used in Operations:
Cash flows used in operations were $(6.7) million for the year
ended December 31, 2012 compared to cash flows used in operations
of $(6.7) million for the year ended December 31, 2011.
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.”
“We had a solid fourth quarter performance with non-GAAP
smartphone revenue growing primarily due to the strength of two of
our new sequels Contract Killer 2 and Eternity Warriors 2,” stated
Eric R. Ludwig, Glu’s Chief Financial Officer. “While we expect
first quarter results to be impacted by a combination of
seasonality and further delays in title launches, we remain in
position to benefit from increasing monetization trends as we
implement our new strategy. Given our on-going commitment to
control costs, we are confident in our ability to end 2013 with
approximately $14 million in cash and without the need to raise
additional capital or incur debt.”
Business Outlook as of February 5, 2013:
The following forward-looking statements reflect expectations as
of February 5, 2013. 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; development
delays on Glu's products; continued uncertainty in the global
economic environment; competition in the industry; storefront
featuring; smartphone storefronts, carriers and other distributors
maintaining their networks and provisioning systems to enable
consumer purchases; changes in foreign exchange rates; Glu's
effective tax rate and other factors detailed in this release and
in Glu's SEC filings.
First Quarter Expectations – Quarter Ending March 31,
2013:
- Non-GAAP revenue is expected to be
between $17.0 million and $18.5 million and non-GAAP smartphone
revenue is expected to be between $16.0 million and $17.0
million.
- Non-GAAP gross margin is expected to be
between 89% and 90%.
- Non-GAAP operating expenses are
expected to be between $20.5 million and $20.7 million.
- Adjusted EBITDA, defined as non-GAAP
operating loss excluding depreciation of approximately $800,000, is
expected to range from $(3.3) million to $(4.6) million.
- Income tax expense is expected to be
$(0.2) million.
- Non-GAAP net loss is expected to be
between $(4.3) million and $(5.6) million, or a net loss of $(0.06)
to $(0.08) per weighted-average basic shares outstanding.
- Weighted-average common shares
outstanding are expected to be approximately 66.2 million basic and
70.8 million diluted.
2013 Expectations – Full Year Ending December 31,
2013:
- Non-GAAP revenue is expected to be
between $84.0 million and $92.0 million and non-GAAP smartphone
revenue is expected to be between $80.0 million and $88.0
million.
- Non-GAAP gross margin is expected to be
approximately 91.5%.
- Adjusted EBITDA is expected to range
from $(1.8) million to $(7.5) million.
- Non-GAAP net loss is expected to be
between $(5.9) million and $(11.6) million, or a net loss of
$(0.09) to $(0.17) per weighted-average basic shares
outstanding.
- Weighted-average common shares
outstanding are expected to be approximately 67.3 million basic and
73.0 million diluted.
- We expect to have a cash balance on
December 31, 2013 of approximately $14.0 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
(877) 593-1988, or if outside the U.S., (678) 905-9423, with
conference ID # 87391968 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, February 5, 2013, and 8:59 p.m. Pacific
Time, February 12, 2013, by calling (855) 859-2056, or (404)
537-3406, with conference ID # 87391968.
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 revenues, non-GAAP smartphone revenues, non-GAAP
operating expenses, non-GAAP gross margins, non-GAAP operating
income/(loss), non-GAAP net loss and non-GAAP basic and diluted net
loss per share. These non-GAAP financial measures exclude the
following items from Glu's unaudited consolidated statements of
operations:
- Change in deferred revenues and
royalties;
- Amortization of in-process development
contracts;
- Amortization of intangible assets;
- Stock-based compensation expense;
- Restructuring charges;
- Change in fair value of Blammo
earnout;
- Transitional costs;
- Impairment of goodwill;
- Release of tax liabilities; 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 and
is defined as non-GAAP operating income/(loss) excluding
depreciation.
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 February 5, 2013"
("First Quarter Expectations – Quarter Ending March 31, 2013" and
“2013 Expectations – Full Year Ending December 31, 2013”) and the
statements that: we anticipate seeing momentum accelerate as new
titles launch incorporating our new monetization systems; we
believe Glu is strongly positioned to lead in a Social Gaming 2.0
landscape; we will continue to deliver engaging core gameplay,
industry leading production values, and outstanding global reach;
our new product roadmap is designed to drive higher monetization
and lifetime value; every game we release in 2013 is designed to
have the potential to outperform our best titles of years past;
while we expect first quarter results to be impacted by a
combination of seasonality and further delays in title launches, we
remain in position to benefit from increasing monetization trends
as we implement our new strategy; and that we are confident in our
ability to end 2013 with approximately $14 million in cash and
without the need to raise additional capital or incur debt. 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 February 5, 2013"; 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 freemium 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 our recently and newly launched
games are less popular than anticipated; 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 freemium gaming, is smaller than anticipated; and
other risks detailed under the caption "Risk Factors" in our Form
10-Q filed with the Securities and Exchange Commission on November
9, 2012 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.
2008 Equity Inducement Plan
In connection with the hiring of our new VP of 3rd Party
Development, Glu has agreed that its Compensation Committee will
award our new VP of 3rd Party Development a non-qualified stock
option to purchase 150,000 shares of Glu's common stock pursuant to
Glu's 2008 Equity Inducement Plan. Glu's historical policy with
respect to new hire stock option grants is to award a newly hired
employee his or her stock option on the second Tuesday of the month
following his or her employment start date; accordingly, the grant
date for our new VP of 3rd Party Development’s option grant will be
February 12, 2013. The stock option will have a six-year term, vest
on a four-year schedule (25% of the underlying shares will vest on
the first anniversary of our new VP of 3rd Party Development’s hire
date, and 2.083% of the underlying shares will vest monthly
thereafter), and have an exercise price equal to the closing price
of Glu's common stock on the NASDAQ Global Market on the February
12, 2013 grant date.
Glu's Compensation Committee adopted the 2008 Equity Inducement
Plan, which is a non-stockholder approved plan, to facilitate the
granting of stock options as an inducement to new employees to join
Glu. NASDAQ Marketplace Rule 5635(c)(iv) requires a public
announcement of equity awards made under this type of plan.
About Glu Mobile
Glu Mobile (NASDAQ:GLUU) is a leading global developer and
publisher of freemium games for smartphone and tablet devices. Glu
is focused on creating compelling original IP games such as BLOOD
& GLORY, DEER HUNTER, FRONTLINE COMMANDO, GUN BROS, and SAMURAI
VS. ZOMBIES DEFENSE on a wide range of platforms including iOS,
Android™, Windows Phone, Google Chrome and MAC OS. 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 a major office outside Seattle,
and international locations in Canada, China 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.
BLOOD & GLORY, CONTRACT KILLER, CONTRACT KILLER ZOMBIES,
DEATH DOME, DEER HUNTER, DRAGON SLAYER, FRONTLINE COMMANDO, GUN
BROS, SAMURAI VS ZOMBIES DEFENSE, SMALL STREET, GLU, GLU MOBILE 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)
December 31,2012 December 31,2011
ASSETS Cash and cash equivalents $ 22,325 $ 32,212
Accounts receivable, net 11,881 11,821 Prepaid royalties - 483
Prepaid expenses and other current assets 2,487
1,881
Total current assets 36,693 46,397
Property and equipment, net 5,026 3,934 Other long-term
assets 227 404 Intangible assets, net 10,889 10,078 Goodwill
19,440 21,991
Total assets $ 72,275
$ 82,804
LIABILITIES AND STOCKHOLDERS'
EQUITY Accounts payable $ 7,785 $ 6,894 Accrued liabilities
2,410 939 Accrued compensation 5,989 5,404 Accrued royalties 2,781
3,865 Accrued restructuring 4 887 Deferred revenues 9,031
7,139
Total current liabilities 28,000
25,128 Other long-term liabilities 5,388 8,503
Total liabilities 33,388 33,631
Common stock 6 6 Additional paid-in capital 271,016
260,744 Accumulated other comprehensive income 167 266 Accumulated
deficit (232,302 ) (211,843 )
Stockholders'
equity 38,887 49,173
Total
liabilities and stockholders' equity $ 72,275 $ 82,804
Glu Mobile Inc.Consolidated
Statements of Operations(in thousands, except per share
data)(unaudited) Three Months Ended
Twelve Months Ended December 31,2012
December 31,2011 December 31,2012
December 31,2011 Revenues
$ 20,981 $ 15,174 $
87,493 $ 66,185 Cost of
revenues: Royalties and other cost of revenues 2,052 2,576
8,940 12,920 Amortization of intangible assets 1,073
1,552 3,783 5,447
Total cost of revenues 3,125
4,128 12,723
18,367 Gross profit 17,856
11,046 74,770
47,818 Operating expenses:
Research and development 13,566 12,660 54,275 39,073 Sales and
marketing 6,272 3,930 20,893 14,607 General and administrative
3,356 3,814 14,744 14,002 Amortization of intangible assets 495 495
1,980 825 Restructuring charge 838 (92 ) 1,371 545 Impairment of
goodwill - - 3,613
-
Total operating expenses 24,527
20,807 96,876
69,052 Loss from operations
(6,671 ) (9,761 ) (22,106
) (21,234 ) Interest and other
income/(expense), net: Interest income/(expense) 4 10 21 (29 )
Other income/(expense), net 260 (116 )
(368 ) 776 Interest and other income/(expense), net
264 (106 )
(347 ) 747 Loss before
income taxes (6,407 ) (9,867 )
(22,453 ) (20,487 ) Income tax
benefit/(provision) (660 ) (152 ) 1,994
(614 )
Net loss $ (7,067 )
$ (10,019 ) $ (20,459 )
$ (21,101 ) Net loss per share -
basic and diluted $ (0.11 ) $
(0.16 ) $ (0.32 ) $
(0.37 ) Weighted average common shares
outstanding - basic and diluted 65,678 62,973
64,318 57,518 Stock-based compensation
expense included in: Research and development $ 1,223 $ 800 $
3,491 $ 1,387 Sales and marketing 43 95 386 351 General and
administrative 560 475 1,945
1,372
Total stock-based compensation
expense $ 1,826 $ 1,370 $ 5,822 $ 3,110
Glu Mobile Inc.GAAP to Non-GAAP
Reconciliation(in thousands, except per share
data)(unaudited)
For the Three Months Ended
March 31,2011 June 30,2011
September 30,2011 December
31,2011 March 31,2012
June 30,2012 September 30,2012
December 31,2012 GAAP revenues
Featurephone $ 10,478 $ 8,253 $ 7,248 $ 5,112 $ 4,165 $ 3,710 $
2,924 $ 2,336 Smartphone 5,948 9,427
9,657 10,062 17,379
19,911 18,423 18,645
Total GAAP revenues 16,426
17,680 16,905
15,174 21,544
23,621 21,347
20,981 Change in deferred revenues and
amortization of in-process development contracts Featurephone
change in deferred revenue (63 ) (6 ) 5 (20 ) (7 ) 17 (21 ) 17
Smartphone change in deferred revenue and amortization of
in-process development contracts 798 240
875 4,897 57
534 (167 ) (167 )
Total change in
deferred revenues and amortization of in-process development
contracts 735 234
880 4,877
50 551 (188
) (150 ) Non-GAAP
Revenues Featurephone 10,415 8,247 7,253 5,092 4,158 3,727
2,903 2,353 Smartphone 6,746 9,667
10,532 14,959 17,436
20,445 18,256 18,478
Total non-GAAP Revenues 17,161
17,914 17,785
20,051 21,594
24,172 21,159
20,831 GAAP gross profit 11,769
13,856 11,147 11,046 18,234
20,552 18,128 17,856 Change in deferred
revenues and amortization of in-process development contracts 735
234 880 4,877 50 551 (188 ) (150 ) Amortization of intangible
assets 817 703 2,375 1,552 753 932 1,025 1,073 Change in deferred
royalty expense 33 20 1
(99 ) 60 67 (30 )
(121 )
Non-GAAP gross profit 13,354
14,813 14,403
17,376 19,097
22,102 18,935
18,658 GAAP operating expense
14,347 15,436 18,462 20,807
24,269 25,769 22,311 24,527 Stock-based
compensation (397 ) (505 ) (838 ) (1,370 ) (3,836 ) (3,038 ) 2,878
(1,826 ) Amortization of intangible assets - - (330 ) (495 ) (495 )
(495 ) (495 ) (495 ) Transitional costs - - (981 ) (326 ) (173 )
(30 ) (192 ) (94 ) Change in fair value of Blammo earnout - - 178
(117 ) (645 ) (386 ) 954 (90 ) Impairment of goodwill - - - - - -
(3,613 ) - Restructuring charge (490 ) (147 )
- 92 - (320 ) (213
) (838 )
Non-GAAP operating expense
13,460 14,784
16,491 18,591
19,120 21,500
21,630 21,184 GAAP
operating loss (2,578 ) (1,580 )
(7,315 ) (9,761 ) (6,035
) (5,217 ) (4,183 )
(6,671 ) Change in deferred revenues and amortization
of in-process development contracts 735 234 880 4,877 50 551 (188 )
(150 ) Non-GAAP cost of revenues adjustment 850 723 2,376 1,453 813
999 995 952 Stock-based compensation 397 505 838 1,370 3,836 3,038
(2,878 ) 1,826 Amortization of intangible assets - - 330 495 495
495 495 495 Transitional costs - - 981 326 173 30 192 94 Change in
fair value of Blammo earnout - - (178 ) 117 645 386 (954 ) 90
Impairment of goodwill - - - - - - 3,613 - Restructuring charge
490 147 - (92 )
- 320 213 838
Non-GAAP operating income/(loss) (106
) 29 (2,088 )
(1,215 ) (23 )
602 (2,695 )
(2,526 ) GAAP net loss (3,172
) (1,752 ) (6,158 )
(10,019 ) (6,841 ) (2,988
) (3,563 ) (7,067 ) Change in
deferred revenues and amortization of in-process development
contracts 735 234 880 4,877 50 551 (188 ) (150 ) Non-GAAP cost of
revenues adjustment 850 723 2,376 1,453 813 999 995 952 Non-GAAP
operating expense adjustment 887 652 1,971 2,216 5,149 4,269 681
3,343 Foreign currency exchange loss/(gain) (198 ) (363 ) (344 )
116 373 (205 ) 460 (263 ) Release of tax liabilities -
- - - -
(2,427 ) - -
Non-GAAP
net income/(loss) $ (898 ) $
(506 ) $ (1,275 ) $
(1,357 ) $ (456 ) $
199 $ (1,615 ) $
(3,185 ) Reconciliation of net loss
and net loss per share: GAAP net loss per share - basic and
diluted $ (0.06 ) $ (0.03 ) $ (0.10 ) $ (0.16 ) $ (0.11 ) $ (0.05 )
$ (0.06 ) $ (0.11 ) Non-GAAP net income/(loss) per share - basic
and diluted $ (0.02 ) $ (0.01 ) $ (0.02 ) $ (0.02 ) $ (0.01 ) $
0.00 $ (0.03 ) $ (0.05 ) Shares used in computing Non-GAAP basic
net income/(loss) per share 52,048 54,587 60,461 62,973 63,229
63,802 64,562 65,678 Shares used in computing Non-GAAP diluted net
income/(loss) per share 52,048 54,587 60,461 62,973 63,229 69,490
64,562 65,678
Non-GAAP operating expense break-out:
GAAP research and development expense $ 7,166
$ 8,439 $ 10,808 $ 12,660
$ 15,033 $ 15,697 $ 9,979
$ 13,566 Transitional costs - - (219 ) (23 ) (68 ) (1
) (45 ) (70 ) Stock-based compensation (100 ) (131 )
(356 ) (800 ) (3,260 ) (2,396 )
3,388 (1,223 )
Non-GAAP research and development
expense 7,066 8,308
10,233 11,837
11,705 13,300
13,322 12,273 GAAP
sales and marketing expense 3,757 3,344
3,576 3,930 4,375 4,701 5,545
6,272 Transitional costs - - (2 ) (5 ) - - (15 ) (24 )
Stock-based compensation (66 ) (94 ) (96 )
(95 ) (115 ) (155 ) (73 ) (43 )
Non-GAAP sales and marketing expense 3,691
3,250 3,478
3,830 4,260 4,546
5,457 6,205
GAAP general & administrative expense 2,934
3,506 3,748 3,814 4,366 4,556
2,466 3,356 Transitional costs - - (760 ) (298 ) (105
) (29 ) (132 ) - Change in fair value of Blammo earnout - - 178
(117 ) (645 ) (386 ) 954 (90 ) Stock-based compensation (231
) (280 ) (386 ) (475 ) (461 )
(487 ) (437 ) (560 )
Non-GAAP general and
administrative expense $ 2,703 $
3,226 $ 2,780 $
2,924 $ 3,155 $
3,654 $ 2,851 $
2,706
Glu Mobile Inc.Non-GAAP Adjusted
EBITDA(in thousands, except per share
data)(unaudited) For the Three Months Ended
March 31,2011 June 30,2011 September
30,2011 December 31,2011 March
31,2012 June 30,2012 September
30,2012 December 31,2012 GAAP
net loss $ (3,172 ) $ (1,752
) $ (6,158 ) $ (10,019
) $ (6,841 ) $ (2,988
) $ (3,563 ) $ (7,067
) Change in deferred revenues and amortization of in-process
development contracts 735 234 880 4,877 50 551 (188 ) (150 ) Change
in deferred royalty expense 33 20 1 (99 ) 60 67 (30 ) (121 )
Amortization of intangible assets 817 703 2,705 2,047 1,248 1,427
1,520 1,568 Depreciation 427 406 470 543 562 556 554 696
Stock-based compensation 397 505 838 1,370 3,836 3,038 (2,878 )
1,826 Change in fair value of Blammo earnout - - (178 ) 117 645 386
(954 ) 90 Transitional costs - - 981 326 173 30 192 94 Impairment
of goodwill - - - - - - 3,613 - Restructuring charge 490 147 - (92
) - 320 213 838 Foreign currency exchange loss/(gain) (198 ) (363 )
(344 ) 116 373 (205 ) 460 (263 ) Interest and other
(income)/expense, net 18 34 - (10 ) (7 ) (5 ) (5 ) (1 ) Income tax
provision/(benefit) 774 501 (813
) 152 440 (2,019 ) (1,075
) 660
Total Non-GAAP Adjusted EBITDA $
321 $ 435 $ (1,618
) $ (672 ) $ 539
$ 1,158 $ (2,141 )
$ (1,830 )
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 Royalties. At the date we sell
certain premium games and micro-transactions, Glu has an obligation
to provide additional services and incremental unspecified digital
content in the future without an additional fee. In these cases, we
recognize the revenue and any associated royalty expense on a
straight-line basis over the estimated life of the user.
Internally, Glu’s management excludes the impact of the changes in
deferred revenue and royalties related to its premium and freemium
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 royalties from its operating
results is important to facilitate comparisons to prior periods
during which Glu did not delay the recognition of significant
amounts of revenue related to its games and to understand Glu’s
operations.
Amortization of In-Process Development Contracts. In conjunction
with the Griptonite acquisition, Glu assumed the remaining
obligations to perform services under Griptonite’s development
contracts. The estimated fair value of the future, excess profits
from these contracts was recorded in purchase accounting and is
amortized as a reduction to revenue as services are performed. When
analyzing the operating performance of an acquired entity, Glu’s
management focuses on the total return provided by the investment
without taking into consideration any fair value adjustments made
for accounting purposes. Because the final purchase price paid for
an acquisition necessarily reflects the accounting value assigned
to both the 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 excluding the impact of the amortization
of the customer contract value from its operating results is
important as they do not reflect its ongoing operations and that
investors benefit from a supplemental non-GAAP financial measure
that excludes these charges.
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.
Stock-Based Compensation Expense. Glu adopted ASC 718,
"Compensation – Stock Compensation" beginning in its fiscal year
ended December 31, 2006. Included in the stock compensation expense
is the contingent consideration potentially issuable to the Blammo
employees who were former shareholders of Blammo, which is recorded
as research and development expense over the term of the earn-out
periods, since these employees are primarily employed in product
development. Glu re-measures the fair value of the contingent
consideration each reporting period and only records a compensation
expense for the portion of the earn-out target which is likely to
be achieved. In addition, Glu is exposed to potential continued
fluctuations in the fair market value of the contingent
consideration in each reporting period, since re-measurement is
impacted by changes in Glu’s share price and the assumptions used
by Glu. 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 first, second and fourth quarters of 2011 and the second, third
and fourth quarters of 2012 and recorded (1) a non-cash
restructuring charge due to vacating a portion of its offices in
Russia, (2) cash restructuring charges due to the termination of
certain employees in its Brazil, China, Europe, Russia and U.S.
offices and (3) non-cash adjustments related to initial, estimated
restructuring payments no longer deemed payable. 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 are
achieved. Glu recorded the estimated contingent consideration
liability at acquisition and will adjust 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.
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. Additionally,
Glu has incurred various costs related to the transition and
integration of Blammo, GameSpy and Griptonite 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.
Impairment of Goodwill. In accordance with ASC 350 “Goodwill and
Other Intangible Assets” Glu performs its annual goodwill
impairment test as of September 30. Glu recorded a goodwill
impairment charge in the third quarter of 2012 as the fair value of
one of its three reporting units was determined to be below its
carrying value. As this impairment is non-recurring, Glu believes
it does not reflect the Company’s ongoing operations and that
investors benefit from a supplemental non-GAAP financial measure
that excludes this impairment, enabling them to compare the
Company’s core operating results in different periods without this
variability.
Release of tax liabilities. In the second quarter of 2012, Glu
recorded a one-time, non-cash income tax benefit related to the
release of certain foreign income tax liabilities upon the
expiration of the statute of limitations. Glu believes that this
one-time tax benefit does not reflect its ongoing operations and
that investors benefit from a supplemental non-GAAP financial
measure that excludes this benefit.
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
gains/(losses) recognized during 2011 and 2012 were as follows (in
thousands):
March 31, 2011 $ 198 June 30, 2011 363 September 30, 2011
344 December 31, 2011 (116 )
FY 2011 $
789 March 31, 2012 $ (373 ) June 30, 2012 $ 205
September 30, 2012 $ (460 ) December 31, 2012 $ 263
FY
2012 $ (365 )
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