- Q4 revenue of $46.3 million and Q4
bookings of $57.8 million, exceeding bookings guidance
- Design Home peaks at #28 top
grossing game on U.S. App Store for iPhone after worldwide
launch
- Cash and cash equivalents of $102.1
million and no debt as of December 31, 2016
Glu Mobile Inc. (NASDAQ:GLUU), a leading global developer and
publisher of free-to-play mobile games, today announced financial
results for its fourth quarter and full year ended December 31,
2016.
“Our ability to exceed fourth quarter bookings expectations was
primarily driven by the strong Design Home launch and the continued
traction with Covet Fashion, both of which were related to the
recent Crowdstar acquisition,” stated Nick Earl, Chief Executive
Officer of Glu. “During the quarter, we also benefitted from the
ongoing success of our evergreen titles Cooking Dash 2016, Gordon
Ramsay DASH, Kim Kardashian: Hollywood, Tap Sports Baseball 2016
and Deer Hunter 2016.”
Earl continued, “In 2017 we will be focused on hiring proven
creative leaders with a track record of success. We will be
investing in these creative leaders to build platform titles that
we expect will share similar characteristics with Tap Sports
Baseball and Covet Fashion of more predictable bookings and year
over year growth. We have recently hired Mike Olsen as SVP of
Studios who fits this profile exactly. I am confident that we have
the right strategy to return to profitable growth and further
establish Glu as a leader in mobile games.”
Fourth Quarter 2016 Financial
Highlights:
- Revenue: Total revenue was $46.3
million in the fourth quarter of 2016 compared to $61.0 million in
the fourth quarter of 2015.
- Bookings: Total bookings were
$57.8 million in the fourth quarter of 2016 compared to $57.9
million in the fourth quarter of 2015. Bookings do not reflect the
deferral of certain game revenue that Glu recognizes over the
estimated useful lives of paying users of Glu’s games and excludes
changes in deferred revenue and litigation settlement
proceeds.
- Gross Margin: Gross margin was
56% in the fourth quarter of 2016 compared to 58% in the fourth
quarter of 2015.
- Net Loss and EPS: Net loss was
$(17.2) million for the fourth quarter of 2016 compared to a net
loss of $(3.0) million for the fourth quarter of 2015. EPS loss was
$(0.13) for the fourth quarter of 2016, based on 133.7 million
weighted-average basic and diluted shares outstanding, compared to
an EPS loss of $(0.02) for the fourth quarter of 2015, based on
127.8 million weighted-average basic and diluted shares
outstanding.
- Cash and Cash Flows: As of
December 31, 2016, Glu had cash and cash equivalents of $102.1
million and no debt. Cash used in operations was $(0.2) million for
the fourth quarter of 2016 compared to generating $2.6 million in
the fourth quarter of 2015.
Recent Developments and Strategic
Initiatives:
- Today, we announced a partnership with
MLB, the Major League Baseball Players Association, the Major
League Baseball Players Alumni Association and Chicago Cubs third
baseman Kris Bryant for the upcoming release of the latest title in
the successful Tap Sports Baseball franchise.
- In January, we announced that Mike
Olsen joined the company as Senior Vice President of Studios.
- In December, we announced the
availability of Nicki Minaj: The Empire.
- In December, we acquired substantially
all of the intangible assets, including the QuizUp mobile game, and
certain other assets from Plain Vanilla Corp.
- In November, we announced the
availability of Design Home.
“Our recent acquisition of Crowdstar, particularly the
better-than-expected launch of Design Home, and continued success
of our catalog titles were the primary drivers of our fourth
quarter bookings outperformance,” stated Eric R. Ludwig, Chief
Operating Officer and Chief Financial Officer. “Longer-term, we
believe that the combination of recent organizational changes,
evergreen game execution and our investment in our creative leaders
and platforms will result in a more predictable and sustainably
profitable operation.”
Fiscal 2016 Financial
Highlights:
- Revenue: Total revenue was
$200.6 million for the full year of 2016 compared to $249.9 million
in 2015.
- Bookings: Total bookings were
$214.0 million for the full year of 2016 compared to $242.2 million
in 2015. Bookings do not reflect the deferral of certain game
revenue that Glu recognizes over the estimated useful lives of
paying users of Glu’s games and excludes changes in deferred
revenue and litigation settlement proceeds.
- Gross Margin: Gross margin was
40% for the full year of 2016 compared to 57% in 2015. Gross margin
for the full year of 2016 included $30.2 million in prepaid royalty
impairments.
- Net Loss and EPS: Net loss was
$(87.4) million for the full year of 2016 compared to a loss of
$(7.2) million in 2015. EPS loss was $(0.66) for the full year of
2016, based on 131.8 million weighted-average basic and diluted
shares outstanding, compared to an EPS loss of $(0.06) in 2015,
based on 118.8 million weighted-average diluted shares
outstanding.
- Cash Flows: Cash used in
operations was $(19.8) million for the full year of 2016 compared
to $(11.5) million used in operations in 2015.
Supplemental financial information used by company management to
assess the Company’s operating results has been provided in the
financial statement tables included in this press release. An
explanation of these measures is also included below under the
heading “Use of Non-GAAP Financial Measures.”
Business Outlook as of February 8, 2017:
The following forward-looking statements reflect expectations as
of February 8, 2017. 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 to create evergreen games
and continue to successfully launch and update new games;
development delays on Glu's products; continued uncertainty in the
global economic environment; competition in the industry;
storefront featuring; changes in foreign exchange rates; Glu's
effective tax rate and other factors detailed in this release and
in Glu's SEC filings.
First Quarter Expectations – Quarter Ending March 31,
2017:
Glu does not provide guidance on a GAAP basis primarily due to
the fact that Glu is unable to predict, with reasonable accuracy,
future changes in its deferred revenue and corresponding cost of
revenue. The amount of Glu’s deferred revenue and cost of revenue
for any given period is difficult to predict due to differing
estimated useful lives of paying users across games, variability of
monthly revenue, platform commissions and royalties by game and
unpredictability of revenue from new game releases. Future changes
in deferred revenue and deferred cost of revenue are uncertain and
could be material to Glu’s results computed in accordance with
GAAP. Accordingly, Glu is unable to provide a reconciliation of the
non-GAAP financial measure guidance to the corresponding GAAP
measure without unreasonable effort.
- Bookings are expected to be between
$53.0 million and $55.0 million.
- Platform commissions, excluding any
impact of deferred platform commissions, are expected to be between
$13.6 million and $14.0 million.
- Royalties, excluding any impact of
deferred royalties, are expected to be between $3.7 million and
$3.9 million.
- Hosting costs are expected to be
approximately $1.5 million.
- Adjusted operating expenses are
expected to be between $43.6 million and $44.0 million.
- Depreciation expense is expected to be
$0.9 million.
- Income tax is expected to be an expense
of approximately $0.2 million.
- Stock-based compensation expense is
expected to be $3.8 million, restructuring charges are expected to
be $3.2 million, transitional costs are expected to be $1.4 million
and amortization of intangible assets is expected to be $3.3
million.
- Weighted-average common shares
outstanding are expected to be approximately 134.3 million basic
and diluted.
2017 Expectations – Full Year Ending December 31,
2017:
Glu does not provide guidance on a GAAP basis primarily due to
the fact that Glu is unable to predict, with reasonable accuracy,
future changes in its deferred revenue and corresponding cost of
revenue. The amount of Glu’s deferred revenue and cost of revenue
for any given period is difficult to predict due to differing
estimated useful lives of paying users across games, variability of
monthly revenue, platform commissions and royalties by game and
unpredictability of revenue from new game releases. Future changes
in deferred revenue and deferred cost of revenue are uncertain and
could be material to Glu’s results computed in accordance with
GAAP. Accordingly, Glu is unable to provide a reconciliation of the
non-GAAP financial measure guidance to the corresponding GAAP
measure without unreasonable effort.
- Bookings are expected to be between
$215.0 million and $225.0 million.
- Platform commissions, excluding any
impact of deferred platform commissions, are expected to be between
$58.0 million and $60.8 million.
- Royalties, excluding any impact of
deferred royalties, are expected to be between $17.2 million and
$18.0 million.
- Hosting costs are expected to be
between $5.4 million and $5.6 million.
- Adjusted operating expenses are
expected to range from $160.1 million to $162.3 million.
- Depreciation expense is expected to be
$3.7 million.
- Income tax expense is expected to be
$0.6 million.
- Stock-based compensation expense is
expected to be $16.7 million, restructuring charges are expected to
range from $3.2 million to $5.5 million, transitional costs are
expected to be $2.7 million and amortization of intangible assets
is expected to be $10.2 million.
- Weighted-average common shares
outstanding are expected to be approximately 135.6 million basic
and diluted.
- We expect to have cash and short-term
investments at December 31, 2017 of at least $60.0 million.
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 (domestic), or (760) 298-5046 (international), with
conference ID # 47719241 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 8, 2017, and 8:59 p.m. Pacific
Time, February 15, 2017, by calling (855) 859-2056, or (404)
537-3406, with conference ID # 47719241.
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 bookings, platform commissions, excluding any impact of
deferred platform commissions, royalties, excluding any impact of
deferred royalties,, and Adjusted operating expense. These non-GAAP
financial measures exclude the following items from Glu's unaudited
consolidated statements of operations:
- Change in deferred platform
commissions;
- Change in deferred royalties;
- Amortization and impairment of
intangible assets;
- Stock-based compensation expense;
- Restructuring charges;
- Litigation settlement proceeds and
costs; and
- Transitional costs.
Bookings do not reflect the deferral of certain game revenue
that Glu recognizes over the estimated useful lives of paying users
of Glu’s games and excludes changes in deferred revenue and
litigation settlement proceeds.
Glu may consider whether significant 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 8, 2017”
(“First Quarter Expectations – Quarter Ending March 31, 2017” and
“2017 Expectations – Full Year Ending December 31, 2017”), and the
statements regarding that in 2017 we will be focused on hiring
proven creative leaders with a track record of success; that we
intend to invest in these creative leaders to build platform titles
that we expect will share similar characteristics with Tap Sports
Baseball and Covet Fashion of more predictable bookings and year
over year growth; that we have the right strategy to return to
profitable growth and further establish Glu as a leader in mobile
games; and that we believe that the combination of recent
organizational changes, evergreen game execution and our investment
in our creative leaders and platforms will result in more
predictable and sustainably profitable operations. 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 8, 2017"; the
risk that Glu will be unable to attract and retain creative leaders
with a successful track record; the risk that Glu does not realize
the anticipated strategic benefits from our celebrity partnerships;
the risk that the number of social followers of our celebrity
partners does not correlate to strong performance for our celebrity
titles; the risk that consumer demand for smartphones, tablets and
next-generation platforms does not grow as significantly as we
anticipate or that we will be unable to capitalize on any such
growth; the risk that we do not realize a sufficient return on our
investment with respect to our efforts to develop free-to-play
games for smartphones, tablets and next-generation platforms, the
risk that we will be unable build successful platform titles that
provide predictable bookings and year over year growth; 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; the risk that we may lose a key
intellectual property license; the risk that we are unable to
recruit and retain qualified personnel for developing and
maintaining the games in our product pipeline resulting in reduced
monetization of a game, product launch delays or games being
eliminated from our pipeline altogether; and other risks detailed
under the caption "Risk Factors" in our Form 10-Q filed with the
Securities and Exchange Commission on November 9, 2016 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 mobile games. Glu is focused on creating
compelling original IP games such as CONTRACT KILLER, COOKING DASH,
COVET FASHION, DEER HUNTER, DESIGN HOME, QUIZUP, RACING RIVALS, and
TAP SPORTS BASEBALL, and branded IP games including GORDON RAMSAY
DASH, KENDALL & KYLIE, and KIM KARDASHIAN: HOLLYWOOD on the App
Store, Google Play and Amazon Appstore. Founded in 2001, Glu is
headquartered in San Francisco with U.S. offices outside Seattle
and in Burlingame, San Mateo, Long Beach and Portland, and
international locations in Canada, China, India, Japan, 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 and on Instagram at
www.instagram.com/glumobile, or become a Glu fan at
www.facebook.com/glumobile.
CONTRACT KILLER, COOKING DASH, COVET FASHION, DEER HUNTER,
QUIZUP, RACING RIVALS, TAP SPORTS, GLU, GLU MOBILE, and the 'g'
character logo are trademarks of Glu Mobile Inc.
Glu Mobile Inc. Consolidated Balance
Sheets (in thousands) (unaudited) December
31, December 31, 2016 2015
ASSETS Cash and cash equivalents $ 102,102 $ 180,542
Accounts receivable, net 21,477 17,956 Prepaid royalties 12,465
23,715 Prepaid expenses and other current assets 18,986
14,841
Total current assets 155,030
237,054 Property and equipment, net 5,640 5,447 Restricted
cash 1,312 1,498 Long-term prepaid royalties 31,288 46,944 Other
long-term assets 3,506 1,386 Intangible assets, net 25,896 22,767
Goodwill 116,832 87,890
Total
assets $ 339,504 $ 402,986
LIABILITIES
AND STOCKHOLDERS' EQUITY Accounts payable $ 16,298 $ 9,386
Accrued liabilities 1,788 1,654 Accrued compensation 12,495 7,100
Accrued royalties 8,623 21,032 Accrued restructuring 271 342
Deferred revenue 44,865 31,112
Total
current liabilities 84,340 70,626 Long-term accrued royalties
20,836 24,347 Other long-term liabilities 1,514
1,585
Total liabilities 106,690
96,558 Common stock 14 13 Additional paid-in
capital 571,242 557,748 Accumulated other comprehensive
income/(loss) 246 (85 ) Accumulated deficit (338,688 )
(251,248 )
Stockholders' equity 232,814
306,428
Total liabilities and stockholders'
equity $ 339,504 $ 402,986
Glu Mobile
Inc. Condensed Consolidated Statements
of Operations (in thousands, except per share data)
(unaudited) Three Months Ended Twelve
Months Ended December 31, December 31,
December 31, December 31, 2016
2015 2016 2015
Revenue $ 46,309 $ 61,030
$ 200,581 $ 249,900 Cost of
revenue: Platform commissions, royalties and other 17,468
22,251 75,239 95,682 Impairment of prepaid royalties and minimum
guarantees 123 858 30,107 2,502 Impairment and amortization of
intangible assets 2,811 2,325
14,792 9,553
Total cost of revenue
20,402 25,434
120,138 107,737 Gross
profit 25,907 35,596
80,443 142,163
Operating expenses: Research and development 20,766 20,001
81,879 72,856 Sales and marketing 14,387 10,729 48,050 48,240
General and administrative 8,134 6,838 30,225 26,092 Amortization
of intangible assets - 11 - 201 Restructuring charge -
1,075 2,279 1,075
Total operating expenses 43,287
38,654 162,433
148,464
Loss from operations
(17,380 ) (3,058 ) (81,990
) (6,301 ) Interest and other expense,
net: Interest income / (expense) (60 ) 15 (2 ) 49 Other expense
(54 ) (149 ) (5,749 ) (792 ) Interest
and other (expense), net
(114 )
(134 ) (5,751 )
(743 )
Loss before income taxes
(17,494 ) (3,192 ) (87,741
) (7,044 ) Income tax benefit/(provision)
280 234 301 (141 )
Net loss
$ (17,214 ) $ (2,958 )
$ (87,440 ) $ (7,185 )
Net loss per share - basic and
diluted
Basic
$ (0.13 ) $ (0.02 )
$ (0.66 ) $ (0.06 )
Diluted
$ (0.13 ) $ (0.02
) $ (0.66 ) $ (0.06
) Weighted average common shares outstanding - basic and
diluted Basic
133,738 127,775 131,804
118,775 Diluted
133,738 127,775 131,804
118,775 Stock-based compensation expense included
in: Research and development $ 1,401 $ 1,099 $ 4,567 $ 3,563
Sales and marketing 344 305 1,091 1,082 General and administrative
1,922 2,065 7,605
7,041
Total stock-based compensation expense $ 3,667
$ 3,469 $ 13,263 $ 11,686
Glu Mobile Inc.
Supplemental Financial
Information
(in thousands)
(unaudited)
For the Three Months Ended March
31, June 30, September 30,
December 31, March 31, June 30, September
30, December 31, 2015 2015 2015
2015 2016 2016 2016 2016
GAAP gross profit/(loss) $ 40,726
$ 32,396 $ 33,445 $
35,596 $ 31,841 $ 27,388
$ (4,693 ) $ 25,907 Impairment
and amortization of intangible assets in cost of revenue 2,434
2,434 2,360 2,325 2,324 2,336 7,320 2,811 Non-cash warrant
benefit/(expense) 93 135 1,896 (116 ) 9 (32 ) (6 ) (26 ) Change in
deferred revenue and litigation settlement proceeds (7,023 ) 1,329
1,174 (3,135 ) (530 ) 2,575 (102 ) 11,464 Change in deferred
platform commissions 1,838 (214 ) (605 ) 1,081 (278 ) (588 ) 96
(3,126 ) Change in deferred royalties 981 (107 ) (175 ) 416 (398 )
240 (294 ) (200 )
GAAP operating expense $
38,214 $ 38,540 $ 33,056
$ 38,654 $ 41,026 $
40,868 $ 37,252 $ 43,287
Stock-based compensation (2,129 ) (3,032 ) (3,056 ) (3,469 ) (3,545
) (2,961 ) (3,090 ) (3,667 ) Amortization of intangible assets in
operating expenses (127 ) (32 ) (31 ) (11 ) - - - - Litigation
costs and settlement proceeds - (476 ) 390 - - - - - Transitional
costs (72 ) - - - - - - (802 ) Restructuring charge - - - (1,075 )
(106 ) (2,116 ) (57 ) -
GAAP research and development
expense $ 18,243 $ 18,308 $
16,304 $ 20,001 $ 20,312
$ 20,721 $ 20,080 $
20,766 Transitional costs - - - - - - - (83 ) Stock-based
compensation (760 ) (836 ) (868 ) (1,099 ) (1,194 ) (837 ) (1,135 )
(1,401 )
GAAP sales and marketing expense $
12,438 $ 12,771 $ 12,302
$ 10,729 $ 12,624 $
10,935 $ 10,104 $ 14,387
Transitional costs
- - - - -
- - (39 ) Stock-based compensation (218 ) (282 ) (277
) (305 ) (292 ) (191 ) (263 ) (344 )
GAAP general &
administrative expense $ 7,406 $
7,429 $ 4,419 $ 6,838 $
7,984 $ 7,096 $ 7,011 $
8,134 Transitional costs (72 ) - - - - - - (680 )
Stock-based compensation (1,151 ) (1,914 ) (1,911 ) (2,065 ) (2,059
) (1,933 ) (1,692 ) (1,922 ) Litigation costs - (476 ) 390 - - - -
-
Other supplemental financial information
Depreciation $ 706 $ 732 $ 718 $ 706 $ 656 $ 720 $ 768 $ 804
Foreign currency exchange gain/(loss) 290 186 167 149 (148 ) (182 )
1,035 294 Loss/(income) from change in fair value of strategic
investments - - - - (300 ) 4,660 630 (255 ) Income tax
provision/(benefit) 1,104 (809 ) 79 (234 ) (166 ) 16 129 (280 )
Interest and other (income)/expense (6 ) (12 ) (15 ) (15 ) (21 )
(25 ) (12 ) 74
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 Platform Commissions and Deferred 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 any associated cost of
revenue, including platform commissions and royalties, on a
straight-line basis over the estimated life of the paying user.
Internally, Glu’s management excludes the impact of the changes in
deferred platform commissions and deferred royalties 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 platform commissions and deferred
royalties from its operating results is important to facilitate
comparisons to prior periods and to understand Glu’s
operations.
Amortization and Impairment of Intangible Assets. When analyzing
the operating performance of an acquired entity or intangible
asset, 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 applies the fair value
provisions of ASC 718, Compensation-Stock Compensation (“ASC 718”).
ASC 718 requires the recognition of compensation expense, using a
fair-value based method, for costs related to all share-based
payments. 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 third quarters of 2016 and the fourth quarter
of 2015 and recorded cash restructuring charges due to the
termination of certain employees in Asia and certain 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.
Additionally, Glu recorded restructuring charges upon exiting
portions of certain facilities in Asia and the US in the second and
third quarters of 2016. 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.
Litigation Settlement Proceeds and Costs. These proceeds and
expenses consist primarily of one-time settlement payments received
from, and legal fees incurred in connection with, intellectual
property infringement matters. Glu has treated the settlement
proceeds as a multiple element arrangement and has allocated a
significant portion of the proceeds to revenue as deemed royalty
revenue for the settlement of past infringement. The residual
proceeds have been allocated to contra general and administrative
expenses and offset legal fees incurred. Glu excludes these
proceeds and costs from its non-GAAP measures as these proceeds and
costs are isolated, unpredictable and not expected to recur
regularly, and Glu believes that these proceeds and costs have no
direct correlation to the operation of its ongoing core
business.
Transitional Costs. GAAP requires expenses to be recognized for
various types of events associated with a business acquisition such
as legal, accounting and other deal related expenses. Glu has
incurred various costs related to the acquisition and integration
of Crowdstar into Glu’s operations. Glu recorded these 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170208006177/en/
Investor Relations:ICR, Inc.Seth Potter,
646-277-1230ir@glu.com
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