- GAAP revenues of $21.7 million;
non-GAAP revenues of $22.6 million exceed guidance
- Cash balance of $27.7 million and no
debt as of September 30, 2013
- Deer Hunter 2014 sets new Glu Mobile
download, DAU and single-day revenue records
- Q4 non-GAAP smartphone revenue
guidance increased; expect to achieve Q4 adjusted EBITDA
profitability
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 third quarter ended
September 30, 2013.
“Our third quarter results were boosted by the exceptional early
performance of Deer Hunter 2014,” stated Niccolo de Masi, Chief
Executive Officer of Glu. “Deer Hunter 2014 has broken Glu daily
revenue and DAU records and consistently remained in or near the
top 10 on both the Apple App Store and Google Play US top grossing
charts. As a result of this title’s momentum, we now expect record
topline non-GAAP revenue and adjusted EBITDA profitability in
Q4.”
De Masi continued, “In December we expect to launch Eternity
Warriors 3, a sequel of one of Glu’s most successful franchises to
date. The combination of upcoming title launches, Deer Hunter
2014’s momentum, and a strengthened balance sheet position us well
for 2014.”
Third Quarter 2013 Financial
Highlights:
All financial information in this press release reflects the
recognition on a gross basis of smartphone revenues attributable to
sales to end customers through third party digital storefronts.
- Revenues: Total GAAP revenues
were $21.7 million in the third quarter of 2013 compared to $26.1
million in the third quarter of 2012. Total non-GAAP revenues were
$22.6 million in the third quarter of 2013 compared to $25.9
million in the third quarter of 2012. Non-GAAP revenues exclude
changes in deferred revenues.
- Gross Margin: GAAP gross margin
was 59% in the third quarter of 2013 compared to 69% in the third
quarter of 2012. Non-GAAP gross margin was 66% in the third quarter
of 2013 compared to 73% in the third quarter of 2012. Non-GAAP
gross margin excludes changes in deferred revenues and cost of
revenues, amortization of intangible assets and non-cash warrant
expense.
- GAAP Operating Loss: GAAP
operating loss was $(7.8) million in the third quarter of 2013
compared to a $(4.2) million loss in the third quarter of
2012.
- Non-GAAP Operating Loss:
Non-GAAP operating loss was $(4.8) million in the third quarter of
2013 compared to a loss of $(2.7) million during the third quarter
of 2012. Non-GAAP operating loss excludes changes in deferred
revenues and deferred cost of revenues, 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 impairment of goodwill.
- Adjusted EBITDA: Adjusted EBITDA
was a $(4.1) million loss for the third quarter of 2013 compared to
a $(2.1) million loss during the third quarter of 2012. Adjusted
EBITDA is defined as non-GAAP operating income/(loss) less
depreciation.
- GAAP Net Loss and EPS: GAAP net
loss was $(8.0) million for the third quarter of 2013 compared to a
loss of $(3.6) million for the third quarter of 2012. GAAP EPS was
a loss of $(0.11) for the third quarter of 2013, based on 71.5
million weighted-average basic shares outstanding, compared to a
loss of $(0.06) for the third quarter of 2012, based on 64.6
million weighted-average basic shares outstanding.
- Non-GAAP Net Loss and EPS:
Non-GAAP net loss was $(4.7) million for the third quarter of 2013
compared to a loss of $(1.6) million for the third quarter of 2012.
Non-GAAP EPS was a loss of $(0.07) for the third quarter of 2013
based on 71.5 million weighted-average basic shares outstanding,
compared to a loss of $(0.03) for the third quarter of 2012 based
on 64.6 million weighted-average basic shares outstanding.
- Cash Flows Used in Operations:
Cash flows used in operations were $(5.9) million for the third
quarter of 2013 compared to cash flows used in operations of $(2.6)
million for the third quarter of 2012.
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.”
Selected Third Quarter of 2013
Operating Highlights and Metrics:
- We launched four new 1st party titles –
Deer Hunter 2014, Zombies Ate My Friends, Tons of Guns, and Gang
Lords – as well as two 3rd party titles by Glu Publishing – Black
Gate: Inferno and Odyssey: Age of Gods.
- Our total GAAP smartphone revenues for
the third quarter of 2013 were $20.4 million and comprised 94% of
total GAAP revenues.
- Our non-GAAP smartphone revenues for
the third quarter of 2013 were $21.3 million and comprised 94% of
total non-GAAP revenues.
- Our non-GAAP freemium revenues
(micro-transactions, in-game advertising and offers) for the third
quarter of 2013 were $20.0 million, or 94% of non-GAAP smartphone
revenues.
Recent Developments and Strategic
Initiatives:
- Deer Hunter 2014, the first game from
Glu Mobile supported by GluOn, set new company download, DAU and
single-day revenue records.
- We closed an underwritten public
offering of 7,245,000 shares of common stock with net proceeds of
approximately $14.0 million, after deducting underwriter fees and
offering expenses.
- We expanded our operations in Asia by
opening an office in Korea and establishing a legal entity in
Japan, as well as adding senior executives with deep knowledge of
these markets.
- Eric Ball, currently Senior Vice
President of Finance for Oracle, joined Glu’s Board of Directors
and Audit Committee.
“We were very pleased with our execution during the third
quarter, highlighted by our ability to exceed expectations across
all key operating metrics,” stated Eric R. Ludwig, Glu’s Chief
Financial Officer. “Our results were driven by continued strength
in our catalog titles along with the strong initial demand of Deer
Hunter 2014. The completion of our recent follow-on offering
provides Glu with additional resources to execute our strategy and
maintain our momentum in 2014.”
Business Outlook as of October 30, 2013:
The following forward-looking statements reflect expectations as
of October 30, 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; our ability to
improve the monetization of our titles and evolve our studio and
begin to launch true games-as-a-service; 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.
Fourth Quarter Expectations – Quarter Ending December 31,
2013:
As discussed above, all financial information in this press
release for future periods reflects the recognition on a gross
basis of smartphone revenues attributable to sales to end customers
through digital storefronts.
- Non-GAAP revenues are expected to be
between $31.5 million and $32.5 million and non-GAAP smartphone
revenues are expected to be between $30.8 million and $31.8
million.
- Non-GAAP gross margin is expected to be
approximately 72%.
- Non-GAAP operating expenses are
expected to range from $22.7 million to $22.9 million.
- Adjusted EBITDA, defined as non-GAAP
operating income excluding depreciation of approximately $700,000,
is expected to range from $750,000 to $1.25 million.
- Income tax expense is expected to be
$(150,000).
- Non-GAAP net income is expected to be
between breakeven and $400,000, or between breakeven and $0.01 per
weighted-average diluted share outstanding.
- Weighted-average common shares
outstanding are expected to be approximately 78.0 million basic and
81.3 million diluted.
2013 Expectations – Full Year Ending December 31,
2013:
As discussed above, all financial information in this press
release for future periods reflects the recognition on a gross
basis of smartphone revenues attributable to sales to end customers
through digital storefronts.
- Non-GAAP revenues are expected to be
between $102.0 million and $103.0 million and non-GAAP smartphone
revenues are expected to be between $96.7 million and $97.7
million.
- Non-GAAP gross margin is expected to be
approximately 69%.
- Adjusted EBITDA is expected to range
from a loss of between $(7.3) million to $(7.8) million.
- Non-GAAP net loss is expected to be a
loss between $(10.5) million and $(11.0) million, or a net loss of
$(0.15) per weighted-average basic share outstanding.
- Weighted-average common shares
outstanding are expected to be approximately 71.4 million basic and
74.2 million diluted.
- We expect to have a cash balance on
December 31, 2013 of over $27.7 million with no debt.
2014 Expectations – Full Year Ending December 31,
2014:
The company is providing an estimated initial baseline total
non-GAAP revenue growth rate of approximately 15% to 20% for 2014
from the full year 2013 guidance set forth above. However,
investors should bear in mind that this estimated growth reflects
current estimates as Glu is in the early stages of its 2014
planning process.
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 # 76395760 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, October 30, 2013, and 8:59 p.m. Pacific
Time, November 6, 2013, by calling (855) 859-2056, or (404)
537-3406, with conference ID # 76395760.
Disclosure Using Social Media Channels
Glu currently announces material information to its investors
using SEC filings, press releases, public conference calls and
webcasts. Glu uses these channels as well as social media
channels to announce information about the company, games,
employees and other issues. Given the recent SEC guidance
regarding the use of social media channels to announce material
information to investors, Glu is notifying investors, the media,
its players and others interested in the company that in the
future, it might choose to communicate material information via
social media channels or, it is possible that information it
discloses through social media channels may be deemed to be
material. Therefore, Glu encourages investors, the media, players
and others interested in Glu to review the information posted on
the company forum (http://ggnbb.glu.com/forum.php) and the company
Facebook site (https://www.facebook.com/glumobile) and the company
twitter account (https://twitter.com/glumobile). Investors,
the media, players or other interested parties can subscribe to the
company blog and twitter feed at the addresses listed
above. Any updates to the list of social media channels Glu
will use to announce material information will be posted on the
Investor Relations page of the company's website at
www.glu.com/investors.
Use of Non-GAAP Financial Measures
To supplement Glu's unaudited condensed consolidated financial
data presented in accordance with GAAP, Glu uses certain non-GAAP
measures of financial performance. The presentation of these
non-GAAP financial measures is not intended to be considered in
isolation from, as a substitute for, or superior to, the financial
information prepared and presented in accordance with GAAP, and may
be different from non-GAAP financial measures used by other
companies. In addition, these non-GAAP measures have limitations in
that they do not reflect all of the amounts associated with Glu's
results of operations as determined in accordance with GAAP. The
non-GAAP financial measures used by Glu include historical and
estimated non-GAAP revenues, non-GAAP smartphone revenues, non-GAAP
cost of revenues, non-GAAP operating expenses, non-GAAP gross
profit, 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
deferred cost of revenues;
- Amortization of intangible assets;
- Non-cash warrant expense;
- 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 October 30, 2013”
(“Fourth Quarter Expectations – Quarter Ending December 31, 2013,”
“2013 Expectations – Full Year Ending December 31, 2013” and “2014
Expectations – Full Year Ending December 31, 2014”) and the
statements that: we now expect record topline non-GAAP revenue and
adjusted EBITDA profitability in Q4; we expect to launch Eternity
Warriors 3 in December; the combination of upcoming title launches,
Deer Hunter 2014’s momentum, and a strengthened balance sheet
position us well for 2014; and the completion of our recent
follow-on offering provides Glu with additional resources to
execute our strategy and maintain our momentum in 2014. 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 October 30, 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 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 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; and other risks detailed under the
caption "Risk Factors" in our Form 10-Q filed with the Securities
and Exchange Commission on August 9, 2013 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, DEER HUNTER, ETERNITY WARRIORS, and FRONTLINE
COMMANDO on a wide range of platforms including iOS, Android,
Windows Phone, 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, India, 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, DEER HUNTER, ETERNITY WARRIORS, FRONTLINE
COMMANDO, GLU, GLU MOBILE and the 'g' character logo are trademarks
of Glu Mobile Inc.
Glu Mobile Inc.Consolidated Balance
Sheets(in thousands)(unaudited)
September 30,2013 December
31,2012 (Restated) ASSETS Cash and
cash equivalents $ 27,658 $ 22,325 Accounts receivable, net 11,282
11,881 Prepaid royalties 41 - Prepaid expenses and other current
assets 4,615 5,167
Total current
assets 43,596 39,373 Property and equipment, net 5,149
5,026 Restricted cash 1,730 - Other long-term assets 566 227
Intangible assets, net 6,465 10,889 Goodwill 19,477
19,440
Total assets $ 76,983 $ 74,955
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts
payable $ 8,540 $ 7,269 Accrued liabilities 2,170 2,124 Accrued
compensation 3,620 5,989 Accrued royalties 1,250 2,781 Accrued
restructuring - 4 Deferred revenues 10,544
11,711
Total current liabilities 26,124 29,878 Other
long-term liabilities 2,706 6,190
Total liabilities 28,830 36,068
Common stock 8 6 Additional paid-in capital 296,611 271,016
Accumulated other comprehensive income 222 167 Accumulated deficit
(248,688 ) (232,302 )
Stockholders' equity
48,153 38,887
Total liabilities and
stockholders' equity $ 76,983 $ 74,955
Glu Mobile Inc.Consolidated Statements of
Operations(in thousands, except per share
data)(unaudited) Three Months Ended
Nine Months Ended September 30,2013
September 30,2012 September 30,2013
September 30,2012 (Restated)
(Restated) Revenues $ 21,722
$ 26,099 $ 70,772 $
81,872 Cost of revenues: Platform commissions,
royalties and other 7,436 6,946 22,568 22,248 Impairment of prepaid
royalties and guarantees 435 - 435 - Amortization of intangible
assets 1,082 1,025 3,234
2,710
Total cost of revenues
8,953 7,971 26,237
24,958 Gross profit
12,769 18,128
44,535 56,914
Operating expenses: Research and development 11,405 9,979
34,259 40,709 Sales and marketing 5,361 5,545 15,512 14,621 General
and administrative 3,617 2,466 11,388 11,388 Amortization of
intangible assets 229 495 1,219 1,485 Restructuring charge - 213
1,448 533 Impairment of goodwill - 3,613
- 3,613
Total operating
expenses 20,612 22,311
63,826 72,349
Loss from operations (7,843 )
(4,183 ) (19,291 ) (15,435
) Interest and other income/(expense), net:
Interest income 4 5 11 17 Other income/(expense), net (159 )
(460 ) 129 (628 ) Interest and other
income/(expense), net
(155 )
(455 ) 140 (611
) Loss before income taxes (7,998
) (4,638 ) (19,151 )
(16,046 ) Income tax benefit 30
1,075 2,765 2,654
Net
loss $ (7,968 ) $ (3,563
) $ (16,386 ) $ (13,392
) Net loss per share - basic and diluted
$ (0.11 ) $ (0.06 )
$ (0.24 ) $ (0.21 )
Weighted average common shares outstanding - basic and
diluted 71,529 64,562 69,246 63,865
Stock-based compensation expense included in:
Research and development $ 268 $ (3,388 ) $ 1,099 $ 2,268 Sales and
marketing 40 73 200 343 General and administrative 412
437 1,402 1,385
Total stock-based compensation expense $ 720 $ (2,878
) $ 2,701 $ 3,996
Glu Mobile
Inc.GAAP to Non-GAAP Reconciliation(in thousands,
except per share data)(unaudited)
For the Three Months Ended
March 31,2012 June 30,2012
September 30,2012 December
31,2012 March 31,2013 June
30,2013 September 30,2013
(Restated) (Restated) (Restated)
(Restated) (Restated) GAAP revenues
Featurephone $ 4,165 $ 3,710 $ 2,924 $ 2,336 $ 1,856 $ 1,423 $
1,305 Smartphone 22,344 25,554
23,175 23,975 22,749
23,022 20,417
Total GAAP revenues
26,509 29,264
26,099 26,311
24,605 24,445
21,722 Change in deferred revenues
Featurephone change in deferred revenues (7 ) 17 (21 ) 17 29 (46 )
(43 ) Smartphone change in deferred revenues 380
479 (197 ) 71 82
(1,205 ) 929
Total change in deferred
revenues 373 496
(218 ) 88
111 (1,251 ) 886
Non-GAAP Revenues Featurephone 4,158 3,727
2,903 2,353 1,885 1,377 1,262 Smartphone 22,724
26,033 22,978 24,046
22,831 21,817 21,346
Total non-GAAP Revenues 26,882
29,760 25,881
26,399 24,716
23,194 22,608 GAAP
gross profit 18,234 20,552 18,128
17,856 16,069 15,697 12,769 Change in
deferred revenues 373 496 (218 ) 88 111 (1,251 ) 886 Amortization
of intangible assets 753 932 1,025 1,073 1,074 1,078 1,082 Non-cash
warrant expense - - - - - - 427 Change in deferred platform
commissions and royalty expense (263 ) 122
- (359 ) (138 ) 419
(245 )
Non-GAAP gross profit 19,097
22,102 18,935
18,658 17,116
15,943 14,919 GAAP
operating expense 24,269 25,769 22,311
24,527 21,563 21,651 20,612 Stock-based
compensation (3,836 ) (3,038 ) 2,878 (1,826 ) (1,245 ) (736 ) (720
) Amortization of intangible assets (495 ) (495 ) (495 ) (495 )
(495 ) (495 ) (229 ) Transitional costs (173 ) (30 ) (192 ) (94 ) -
- - Change in fair value of Blammo earnout (645 ) (386 ) 954 (90 )
(29 ) 47 31 Impairment of goodwill - - (3,613 ) - - - -
Restructuring charge - (320 ) (213 )
(838 ) (511 ) (937 ) -
Non-GAAP operating expense 19,120
21,500 21,630
21,184 19,283
19,530 19,694 GAAP
operating loss (6,035 ) (5,217 )
(4,183 ) (6,671 ) (5,494
) (5,954 ) (7,843 ) Change in
deferred revenues 373 496 (218 ) 88 111 (1,251 ) 886 Non-GAAP cost
of revenues adjustment 490 1,054 1,025 714 936 1,497 1,264
Stock-based compensation 3,836 3,038 (2,878 ) 1,826 1,245 736 720
Amortization of intangible assets 495 495 495 495 495 495 229
Transitional costs 173 30 192 94 - - - Change in fair value of
Blammo earnout 645 386 (954 ) 90 29 (47 ) (31 ) Impairment of
goodwill - - 3,613 - - - - Restructuring charge -
320 213 838 511
937 -
Non-GAAP operating
income/(loss) (23 ) 602
(2,695 ) (2,526 )
(2,167 ) (3,587 )
(4,775 ) GAAP net loss (6,841
) (2,988 ) (3,563 )
(7,067 ) (5,497 ) (2,921
) (7,968 ) Change in deferred revenues 373 496
(218 ) 88 111 (1,251 ) 886 Non-GAAP cost of revenues adjustment 490
1,054 1,025 714 936 1,497 1,264 Non-GAAP operating expense
adjustment 5,149 4,269 681 3,343 2,280 2,121 918 Foreign currency
exchange loss/(gain) 373 (205 ) 460 (263 ) (129 ) (137 ) 159
Release of tax liabilities - (2,427 ) -
- - (3,148 ) -
Non-GAAP net income/(loss) $ (456
) $ 199 $ (1,615 )
$ (3,185 ) $ (2,299 )
$ (3,839 ) $ (4,741 )
Reconciliation of net loss and net loss per
share: GAAP net loss per share - basic and diluted $ (0.11 ) $
(0.05 ) $ (0.06 ) $ (0.11 ) $ (0.08 ) $ (0.04 ) $ (0.11 ) Non-GAAP
net income/(loss) per share - basic and diluted $ (0.01 ) $ 0.00 $
(0.03 ) $ (0.05 ) $ (0.03 ) $ (0.05 ) $ (0.07 ) Shares used in
computing Non-GAAP basic net income/(loss) per share 63,229 63,802
64,562 65,678 66,397 69,812 71,529 Shares used in computing
Non-GAAP diluted net income/(loss) per share 63,229 69,490 64,562
65,678 66,397 69,812 71,529
Non-GAAP operating expense
break-out: GAAP research and development expense
$ 15,033 $ 15,697 $ 9,979
$ 13,566 $ 11,630 $
11,224 $ 11,405 Transitional costs (68 ) (1 )
(45 ) (70 ) - - - Stock-based compensation (3,260 )
(2,396 ) 3,388 (1,223 ) (668 )
(163 ) (268 )
Non-GAAP research and development
expense 11,705 13,300
13,322 12,273
10,962 11,061
11,137 GAAP sales and marketing expense
4,375 4,701 5,545 6,272 5,008
5,143 5,361 Transitional costs - - (15 ) (24 ) - - -
Stock-based compensation (115 ) (155 ) (73 )
(43 ) (67 ) (93 ) (40 )
Non-GAAP
sales and marketing expense 4,260
4,546 5,457 6,205
4,941 5,050
5,321 GAAP general & administrative
expense 4,366 4,556 2,466 3,356
3,919 3,852 3,617 Transitional costs (105 )
(29 ) (132 ) - - - - Change in fair value of Blammo earnout (645 )
(386 ) 954 (90 ) (29 ) 47 31 Stock-based compensation (461 )
(487 ) (437 ) (560 ) (510 ) (480
) (412 )
Non-GAAP general and administrative expense
$ 3,155 $ 3,654 $
2,851 $ 2,706 $
3,380 $ 3,419 $
3,236 Glu Mobile Inc.Non-GAAP
Adjusted EBITDA(in thousands)(unaudited)
For the Three Months Ended March 31,2012
June 30,2012 September
30,2012 December 31,2012
March 31,2013 June 30,2013
September 30,2013 (Restated) (Restated)
(Restated) (Restated) (Restated)
GAAP net loss $ (6,841 ) $
(2,988 ) $ (3,563 ) $
(7,067 ) $ (5,497 ) $
(2,921 ) $ (7,968 ) Change in
deferred revenues 373 496 (218 ) 88 111 (1,251 ) 886 Change in
deferred platform commissions and royalty expense (263 ) 122 - (359
) (138 ) 419 (245 ) Non-cash warrant expense - - - - - - 427
Amortization of intangible assets 1,248 1,427 1,520 1,568 1,569
1,573 1,311 Depreciation 562 556 554 696 731 661 633 Stock-based
compensation 3,836 3,038 (2,878 ) 1,826 1,245 736 720 Change in
fair value of Blammo earnout 645 386 (954 ) 90 29 (47 ) (31 )
Transitional costs 173 30 192 94 - - - Impairment of goodwill - -
3,613 - - - - Restructuring charge - 320 213 838 511 937 - Foreign
currency exchange loss/(gain) 373 (205 ) 460 (263 ) (129 ) (137 )
159 Interest and other income (7 ) (5 ) (5 ) (1 ) (3 ) (26 ) (4 )
Income tax provision/(benefit) 440 (2,019 )
(1,075 ) 660 135 (2,870 )
(30 )
Total Non-GAAP Adjusted EBITDA $
539 $ 1,158 $
(2,141 ) $ (1,830 ) $
(1,436 ) $ (2,926 ) $
(4,142 )
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 Revenues and Deferred Cost of Revenues. 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 revenues and any associated
cost of revenues, 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 revenues 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 revenues and deferred cost of
revenues 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 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. The Company recorded a non-cash charge
related to the vesting of warrants to purchase shares of common
stock issued to a brand holder as part of a third party licensing,
development and publishing arrangement. These charges are computed
using the Black-Scholes valuation model and are recorded in cost of
revenues. 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. 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 second, third and fourth quarters of 2012 and the first and
second quarters of 2013 and recorded (1) non-cash restructuring
charges due to vacating a portion of its offices in Washington,
vacating its Brazil office and writing-off the cumulative
translation adjustment upon substantial liquidation of its
Brazilian entity; and (2) cash restructuring charges due to the
termination of certain employees in its Brazil, 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 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 and
2013, Glu recorded non-cash income tax benefits 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 2012 and 2013 were as follows (in
thousands):
March 31, 2012 $ (373 ) June 30, 2012 205 September
30, 2012 (460 ) December 31, 2012 263
FY 2012
$ (365 ) March 31, 2013 $ 129
June 30, 2013 137 September 30, 2013 (159 )
FY 2013
$ 107
Media & Investor Relations:ICR, Inc.Seth Potter,
646-277-1230ir@glu.com
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