- GAAP revenues of $40.9 million;
non-GAAP revenues of $35.0 million, up 51% year-over-year and
exceeded guidance
- Signed definitive agreement to
acquire Cie Games, owner and operator of the current top grossing
racing game on the App Store and Google Play in the U.S., Racing
Rivals
- Kim Kardashian: Hollywood and Dino
Hunter: Deadly Shores set company revenue, download and DAU
records
- 2014 non-GAAP revenue and Adjusted
EBITDA profitability guidance substantially increased to Glu record
levels
Glu Mobile Inc. (NASDAQ:GLUU), a leading global developer and
publisher of free-to-play games for smartphone and tablet devices,
today announced financial results for its second quarter ended June
30, 2014.
“Our second quarter results were boosted by the continued
strength of Deer Hunter 2014 and Eternity Warriors 3 in addition to
the exceptional early performance of Kim Kardashian: Hollywood,”
stated Niccolo de Masi, Chief Executive Officer of Glu. “Kim
Kardashian: Hollywood has broken Glu single-day revenue and
sustained ARPDAU records, while Dino Hunter: Deadly Shores, has
achieved a Glu single-day download record. These two titles
simultaneously achieved the #1 and #3 chart positions on the U.S.
App Store Top Free for iPhone. As a result of these titles’
momentum, we now expect company record non-GAAP revenue and
adjusted EBITDA in Q3. In addition, we are substantially increasing
guidance for both the top and bottom line for the full year
2014.”
De Masi continued, “Through our pending acquisition of Cie
Games, we are also pleased that we will be adding the current #1
grossing racing game on the App Store and Google Play in the U.S.
to the Glu family. With more than 100 million lifetime installs
across all of Cie’s games, we are excited at the prospect of adding
Racing Rivals and its team’s racing expertise to our strong
portfolio.”
Second Quarter 2014 Financial
Highlights:
- Revenue: Total GAAP revenue was
$40.9 million in the second quarter of 2014 compared to $24.4
million in the second quarter of 2013. Total non-GAAP revenue was
$35.0 million in the second quarter of 2014, an increase of 51%
compared to $23.2 million in the second quarter of 2013. Non-GAAP
revenue excludes changes in deferred revenue.
- Gross Margin: GAAP gross margin
was 69% in the second quarter of 2014 compared to 64% in the second
quarter of 2013. Non-GAAP gross margin was 69% for both the second
quarters of 2014 and 2013, respectively. Non-GAAP gross margin
excludes changes in deferred revenue and royalties and amortization
of intangible assets.
- GAAP Operating Loss: GAAP
operating loss was $(3.7) million in the second quarter of 2014
compared to a $(6.0) million loss in the second quarter of
2013.
- Non-GAAP Operating Loss:
Non-GAAP operating loss was $(1.5) million in the second quarter of
2014 compared to a loss of $(3.6) million during the second quarter
of 2013. Non-GAAP operating income (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, and transitional costs.
- Adjusted EBITDA: Adjusted EBITDA
was a loss of $(0.9) million for the second quarter of 2014
compared to a loss of $(2.9) million during the second quarter of
2013. Adjusted EBITDA is defined as non-GAAP operating
income/(loss) less depreciation.
- GAAP Net Loss and EPS: GAAP net
loss was $(3.8) million for the second quarter of 2014 compared to
a GAAP net loss of $(2.9) million for the second quarter of 2013.
GAAP EPS loss was $(0.04) for the second quarter of 2014, based on
85.5 million weighted-average basic shares outstanding, compared to
a loss of $(0.04) for the second quarter of 2013, based on 69.8
million weighted-average basic shares outstanding.
- Non-GAAP Net Loss and EPS:
Non-GAAP net loss was $(1.6) million for the second quarter of 2014
compared to a loss of $(3.8) million for the second quarter of
2013. Non-GAAP EPS loss was $(0.02) for the second quarter of 2014
based on 85.5 million weighted-average basic shares outstanding,
compared to a loss of $(0.05) for the second quarter of 2013 based
on 69.8 million weighted-average basic shares outstanding.
- Cash Flows Generated (Used) in
Operations: Cash flows generated from operations were $5.0
million for the second quarter of 2014 compared to cash flows used
in operations of $(1.9) million for the second quarter of
2013.
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.”
Recent Developments and Strategic
Initiatives:
- Today, we announced the entry into a
definitive agreement to acquire Cie Games, a leader in racing and
car collection games.
- In July, we announced that Kim
Kardashian: Hollywood and Dino Hunter: Deadly Shores set company
revenue, download and DAU records.
- In July, we launched our Hercules game
in coordination with the worldwide theatrical release.
- In June, we announced support for
Google’s Android TV platform with both Deer Hunter 2014 and
Eternity Warriors 2 immediately available on the platform.
- In June, we closed an underwritten
public offering of 9,861,250 shares of common stock with net
proceeds of approximately $32.1 million, after deducting
underwriter fees and estimated offering expenses.
- In May, we completed the acquisition of
PlayFirst - creators of casual game franchises Diner Dash®, Cooking
Dash®, Hotel Dash® and Wedding Dash®.
“We are very pleased with our overall execution, particularly
the initial performance of Kim Kardashian: Hollywood and Dino
Hunter: Deadly Shores,” stated Eric R. Ludwig, Glu’s Chief
Financial Officer. “We anticipate the combination of Glu title
execution coupled with Racing Rivals from Cie Games to result in
demonstrable leverage in the business in the second half of
2014.”
Business Outlook as of July 30, 2014:
The following forward-looking statements reflect expectations as
of July 30, 2014 and include the expected impact of the Cie Games
acquisition assuming that we close the acquisition by the middle to
end of August 2014. 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
continue to successfully launch games-as-a-service; our ability to
successfully integrate the business of Cie Games with our company
and realize the expected synergies of the acquisition; development
delays on Glu's products; continued uncertainty in the global
economic environment; competition in the industry; storefront
featuring; changes in foreign exchange rates; Glu's effective tax
rate and other factors detailed in this release and in Glu's SEC
filings.
Third Quarter Expectations – Quarter Ending September 30,
2014:
- Non-GAAP revenues are expected to be
between $80.0 million and $85.0 million.
- Non-GAAP gross margin is expected to be
approximately 58%.
- Non-GAAP operating expenses are
expected to be between $37.0 million and $38.0 million.
- Adjusted EBITDA, defined as non-GAAP
operating loss excluding depreciation of approximately $700,000, is
expected to range from $10.0 million to $12.0 million.
- Income tax is expected to be a benefit
of approximately $640,000.
- Non-GAAP net income is expected to be
between $10.0 and $12.0 million, or between $0.09 and $0.11 per
weighted-average diluted share outstanding, which excludes
approximately $1.8 million of anticipated stock-based compensation
expense and $653,000 for amortization of intangibles. Additionally,
non-GAAP net income excludes the transitional costs and
amortization of intangibles, if any, related to Cie Games that will
be recorded on completion of the transaction and purchase
accounting.
- Weighted-average common shares
outstanding are expected to be approximately 99.3 million basic and
108.8 million diluted.
2014 Expectations – Full Year Ending December 31,
2014:
- Non-GAAP revenues are expected to be
between $222.0 million and $232.0 million.
- Non-GAAP gross margin is expected to be
approximately 62%.
- Adjusted EBITDA is expected to range
from $19.1 million to $23.1 million.
- Non-GAAP net income is expected to be
between $16.5 million and $20.6 million, or between $0.17 and $0.21
per weighted-average diluted share outstanding, which excludes
approximately $11.7 million of anticipated stock-based compensation
expense, $2.6 million for amortization of intangibles, $835,000 of
Blammo earnout mark to market charges and any restructuring
charges. Additionally, non-GAAP net income excludes the
transitional costs and amortization of intangibles, if any, related
to PlayFirst and Cie Games that will be recorded on completion of
the transactions and purchase accounting.
- Weighted-average common shares
outstanding are expected to be approximately 92.2 million basic and
99.7 million diluted.
- We expect to have cash and short-term
investments at December 31, 2014 of $64.0 million with no
debt.
Quarterly Conference Call
Glu will discuss its quarterly results via teleconference today
at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). Please dial
(866) 582-8907, or if outside the U.S., (760) 298-5046, with
conference ID # 71612899 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, July 30, 2014, and 8:59 p.m. Pacific Time,
August 6, 2014, by calling (855) 859-2056, or (404) 537-3406, with
conference ID # 71612899.
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 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;
- 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 July 30, 2014” (“Third
Quarter Expectations – Quarter Ending September 30, 2014” and “2014
Expectations – Full Year Ending December 31, 2014”), those
regarding the expected benefits of our pending acquisition of Cie
Games and the expect timing of the completion of this acquisition;
and the statements that we now expect company record non-GAAP
revenue and adjusted EBITDA in Q3; and that we anticipate the
combination of Glu title execution coupled with Racing Rivals from
Cie Games to result in demonstrable leverage in the business in the
second half of 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 July 30, 2014";
the risk that Glu will not be able to complete the acquisition of
Cie Games; the risk that Glu will be unable to successfully
integrate Cie Games and its employees and achieve expected
synergies, the risk that Glu will have difficulty retaining key Cie
Games employees; 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 May 12,
2014 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, Japan, Korea, and Russia. Consumers can find
high-quality entertainment wherever they see the ‘g’ character logo
or at www.glu.com. For live updates, please follow Glu via Twitter
at www.twitter.com/glumobile or become a Glu fan at
www.facebook.com/glumobile.
CONTRACT KILLER, COOKING DASH, DEER HUNTER, DINER DASH, DINO
HUNTER: DEADLY SHORES, ETERNITY WARRIORS, FRONTLINE COMMANDO, HOTEL
DASH, WEDDING DASH, GLU, GLU MOBILE and the 'g' character logo are
trademarks of Glu Mobile Inc.
Glu Mobile Inc. Consolidated Balance
Sheets (in thousands) (unaudited) June 30,
December 31, 2014 2013 ASSETS
Cash and cash equivalents $ 71,456 $ 28,496 Accounts receivable,
net 15,963 18,305 Prepaid expenses and other current assets
6,496 7,663
Total current assets 93,915
54,464 Property and equipment, net 4,272 5,096 Restricted
cash 1,790 1,730 Other long-term assets 630 637 Intangible assets,
net 8,049 5,599 Goodwill 30,809 19,485
Total assets $ 139,465 $ 87,011
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $
9,198 $ 10,657 Accrued liabilities 2,458 1,971 Accrued compensation
8,239 5,378 Accrued royalties 1,556 1,727 Deferred revenues
14,738 18,224
Total current liabilities
36,189 37,957 Other long-term liabilities 2,248
2,357
Total liabilities 38,437
40,314 Common stock 9 8 Additional paid-in
capital 356,352 298,593 Accumulated other comprehensive income 513
307 Accumulated deficit (255,846 ) (252,211 )
Stockholders' equity 101,028 46,697
Total liabilities and stockholders' equity $ 139,465
$ 87,011
Glu
Mobile Inc. Condensed Consolidated Statements of
Operations (in thousands, except per share data)
(unaudited) Three Months Ended Six Months
Ended June 30, June 30, June 30, June
30, 2014 2013 2014 2013
Revenues $ 40,910 $ 24,445
$ 85,490 $ 49,050 Cost of
revenues: Platform commissions, royalties and other 12,432
7,670 25,634 15,132 Amortization of intangible assets 441
1,078 995 2,152
Total cost of revenues 12,873
8,748 26,629
17,284 Gross profit 28,037
15,697 58,861
31,766 Operating expenses:
Research and development 17,297 11,224 32,876 22,854 Sales and
marketing 7,989 5,143 17,474 10,151 General and administrative
6,131 3,852 11,057 7,771 Amortization of intangible assets 127 495
254 990 Restructuring charge 159 937
159 1,448
Total operating
expenses 31,703 21,651
61,820 43,214
Loss from operations (3,666 )
(5,954 ) (2,959 ) (11,448
) Interest and other income/(expense), net:
Interest income 7 4 13 7 Other income/(expense), net (31 )
159 (167 ) 288 Interest and
other income/(expense), net
(24 )
163 (154 ) 295
Loss before income taxes (3,690
) (5,791 ) (3,113 )
(11,153 ) Income tax benefit/(provision) (78 )
2,870 (522 ) 2,735
Net
loss $ (3,768 ) $ (2,921
) $ (3,635 ) $ (8,418
) Net loss per share - basic and diluted:
$ (0.04 ) $ (0.04 )
$ (0.04 ) $ (0.12 )
Weighted average common shares outstanding - basic and
diluted 85,549 69,812 82,634 68,105
Stock-based compensation expense included in:
Research and development $ 3,605 $ 163 $ 5,922 $ 831 Sales and
marketing $ 190 93 $ 291 160 General and administrative $ 771
480 $ 1,332 990
Total
stock-based compensation expense $ 4,566 $ 736 $
7,545 $ 1,981
Glu Mobile Inc. GAAP to Non-GAAP
Reconciliation (in thousands, except per share data)
(unaudited) For the Three Months Ended
March 31, June 30, September 30, December
31, March 31, June 30, 2013 2013
2013 2013 2014 2014
GAAP revenues 24,605 24,445 21,722
34,841 44,580 40,910 Change in deferred
revenues 111 (1,251 ) 886
8,005 2,377 (5,874 )
Non-GAAP
Revenues 24,716 23,194
22,608 42,846
46,957 35,036
GAAP gross profit 16,069 15,697 12,769
24,034 30,824 28,037 Change in deferred
revenues 111 (1,251 ) 886 8,005 2,377 (5,874 ) Amortization of
intangible assets 1,074 1,078 1,082 1,004 554 441 Non-cash warrant
expense - - 427 - - - Change in deferred platform commissions and
royalty expense (138 ) 419 (245 )
(1,753 ) (1,209 ) 1,527
Non-GAAP
gross profit 17,116 15,943
14,919 31,290
32,546 24,131
GAAP operating expense 21,563 21,651
20,612 27,505 30,117 31,703 Stock-based
compensation (1,245 ) (736 ) (720 ) (1,584 ) (2,979 ) (4,566 )
Amortization of intangible assets (495 ) (495 ) (229 ) (117 ) (127
) (127 ) Transitional costs - - - - - (682 ) Change in fair value
of Blammo earnout (29 ) 47 31 (56 ) (304 ) (531 ) Restructuring
charge (511 ) (937 ) - -
- (159 )
Non-GAAP operating expense
19,283 19,530
19,694 25,748
26,707 25,638 GAAP
operating income/(loss) (5,494 ) (5,954
) (7,843 ) (3,471 ) 707
(3,666 ) Change in deferred revenues 111 (1,251 ) 886
8,005 2,377 (5,874 ) Non-GAAP cost of revenues adjustment 936 1,497
1,264 (749 ) (655 ) 1,968 Stock-based compensation 1,245 736 720
1,584 2,979 4,566 Amortization of intangible assets 495 495 229 117
127 127 Transitional costs - - - - - 682 Change in fair value of
Blammo earnout 29 (47 ) (31 ) 56 304 531 Restructuring charge
511 937 - -
- 159
Non-GAAP operating
income/(loss) (2,167 )
(3,587 ) (4,775 )
5,542 5,839 (1,507
) GAAP net income/(loss) (5,497
) (2,921 ) (7,968 )
(3,523 ) 133 (3,768 ) Change in
deferred revenues 111 (1,251 ) 886 8,005 2,377 (5,874 ) Non-GAAP
cost of revenues adjustment 936 1,497 1,264 (749 ) (655 ) 1,968
Non-GAAP operating expense adjustment 2,280 2,121 918 1,757 3,410
6,065 Foreign currency exchange loss/(gain) (129 ) (137 ) 159 130
136 31 Release of tax liabilities - (3,148 )
- - - -
Non-GAAP net income/(loss) $ (2,299 )
$ (3,839 ) $ (4,741 )
$ 5,620 $ 5,401 $
(1,578 ) Reconciliation of net
income/(loss) and net income/(loss) per share: GAAP net
income/(loss) per share - basic $ (0.08 ) $ (0.04 ) $ (0.11 ) $
(0.05 ) $ 0.00 $ (0.04 ) GAAP net income/(loss) per share - diluted
$ (0.08 ) $ (0.04 ) $ (0.11 ) $ (0.05 ) $ 0.00 $ (0.04 ) Non-GAAP
net income/(loss) per share - basic $ (0.03 ) $ (0.05 ) $ (0.07 ) $
0.07 $ 0.07 $ (0.02 ) Non-GAAP net income/(loss) per share -
diluted $ (0.03 ) $ (0.05 ) $ (0.07 ) $ 0.07 $ 0.06 $ (0.02 )
Shares used in computing Non-GAAP basic net income/(loss) per share
66,397 69,812 71,529 78,071 79,719 85,549 Shares used in computing
Non-GAAP diluted net income/(loss) per share 66,397 69,812 71,529
81,433 85,398 85,549
Non-GAAP operating expense
break-out: GAAP research and development expense
$ 11,630 $ 11,224 $
11,405 $ 12,618 $ 15,579
$ 17,297 Transitional costs - - - - - (20 )
Stock-based compensation (668 ) (163 ) (268 )
(849 ) (2,317 ) (3,605 )
Non-GAAP research
and development expense 10,962
11,061 11,137
11,769 13,262
13,672 GAAP sales and marketing expense
5,008 5,143 5,361 10,608 9,485
7,989 Stock-based compensation (67 ) (93 )
(40 ) (103 ) (101 ) (190 )
Non-GAAP
sales and marketing expense 4,941
5,050 5,321 10,505
9,384 7,799
GAAP general & administrative expense 3,919
3,852 3,617 4,162 4,926 6,131
Transitional costs - - - - - (662 ) Change in fair value of Blammo
earnout (29 ) 47 31 (56 ) (304 ) (531 ) Stock-based compensation
(510 ) (480 ) (412 ) (632 ) (561
) (771 )
Non-GAAP general and administrative expense
$ 3,380 $ 3,419 $
3,236 $ 3,474 $
4,061 $ 4,167
Glu Mobile Inc. Non-GAAP
Adjusted EBITDA (in thousands) (unaudited)
For the Three Months Ended
March 31, June 30, September 30, December
31, March 31, June 30, 2013 2013
2013 2013 2014 2014
GAAP net income/(loss) $ (5,497 )
$ (2,921 ) $ (7,968 )
$ (3,523 ) $ 133 $
(3,768 ) Change in deferred revenues 111 (1,251 ) 886
8,005 2,377 (5,874 ) Change in deferred platform commissions and
royalty expense (138 ) 419 (245 ) (1,753 ) (1,209 ) 1,527 Non-cash
warrant expense - - 427 - - - Amortization of intangible assets
1,569 1,573 1,311 1,121 681 568 Depreciation 731 661 633 682 620
607 Stock-based compensation 1,245 736 720 1,584 2,979 4,566 Change
in fair value of Blammo earnout 29 (47 ) (31 ) 56 304 531
Transitional costs - - - - - 682 Restructuring charge 511 937 - - -
159 Foreign currency exchange loss/(gain) (129 ) (137 ) 159 130 136
31 Interest and other income (3 ) (26 ) (4 ) - (6 ) (7 ) Income tax
provision/(benefit) 135 (2,870 ) (30 )
(78 ) 444 78
Total Non-GAAP
Adjusted EBITDA $ (1,436 ) $
(2,926 ) $ (4,142 ) $
6,224 $ 6,459 $
(900 )
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. In the third quarter of 2013, Glu
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 were computed using the Black-Scholes valuation model
and were 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 first and second quarters of 2013 and the second quarter of
2014 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. Glu has
incurred various costs related to the acquisition and integration
of PlayFirst into Glu’s operations. Glu recorded these
non-recurring acquisition and transitional costs as operating
expenses when they were incurred. Glu believes that these
acquisition and transitional costs affect comparability from period
to period and that investors benefit from a supplemental non-GAAP
financial measure that excludes these expenses.
Release of tax liabilities. In the second quarter of 2013, Glu
recorded a 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 2013 and the first quarter of 2014
were as follows (in thousands):
March 31, 2013 $ 129 June 30, 2013 137 September 30, 2013
(159 ) December 31, 2013 (130 )
FY 2013 $
(23 ) March 31, 2014 $ (136 ) June 30,
2014 (31 )
FY 2014 $ (167 )
Media & Investor Relations:ICR, Inc.Seth Potter,
646-277-1230ir@glu.com
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