Glu Reports First Quarter 2019 Financial Results

First quarter revenue up 18% year over year to $95.9 million


First quarter bookings grow 7% year over year to $92.6 million


Company raises 2019 full year bookings guidance to a range of $445
million to $455 million


Positive early results from worldwide rollout of Design Home meta
features


WWE Universe, Diner DASH Adventures and Disney Sorcerer’s
Area all scheduled to globally launch in the May to August time
frame


SAN FRANCISCO–(BUSINESS WIRE)–Glu Mobile Inc. (NASDAQ: GLUU), a leading global developer and publisher
of free-to-play mobile games, today announced financial results for its
first quarter ended March 31, 2019. The company also provided an outlook
for its financial performance in the second quarter and increased its
financial guidance for the full year 2019.


Nick Earl, Chief Executive Officer, stated, “Glu had a strong start to
the year with solid bookings growth and EBITDA profitability led by our
three Growth Games. We are also excited to bring three creative and
entertaining games to the market in the near term. WWE Universe,
Diner DASH Adventures and Disney Sorcerer’s Arena are on
track to launch in the May to August time frame. Looking ahead, we
continue to bolster our pipeline with three original IP launches slated
for 2020. The increase in our bookings guidance for 2019 reflects our
confidence in our business.”


 


First Quarter 2019 Financial Highlights:


 




 


Three Months Ended


in millions, except per share data




March 31, 2019


 


March 31, 2018








 




Revenue




$95.9




$81.4


Gross margin




64.0%




62.3%


Net income/(loss)




$0.7




($7.2)


Net income/(loss) per share – basic and diluted




$0.00




($0.05)


Weighted-average common shares outstanding – basic




144.4




139.1


Weighted-average common shares outstanding – diluted




159.4




139.1


Cash used in operations excluding royalty advances




($2.4)




($12.4)


Cash paid for royalty advances that are included in cash used in
operations




($0.5)




($4.1)


Cash and cash equivalents




$92.7




$48.3










 


Additional Financial Information


 




 




 




 








Three Months Ended




Guidance provided for three months endedMarch 31, 2019






March 31, 2019




March 31, 2018




Low




High


Bookings




$92.6




$86.3




$88.0




$90.0


Platform commissions, excluding any impact of deferred platform
commissions *




$24.0




$23.2




$23.1




$23.6


Royalties, excluding any impact of deferred royalties*




$6.0




$5.5




$4.4




$4.5


Hosting costs




$1.5




$1.8




$1.5




$1.5


User acquisition and marketing expenses




$23.0




$22.2




$21.4




$21.7


Adjusted other operating expenses*




$30.5




$28.0




$31.6




$31.7


Depreciation




$1.1




$1.0




$1.0




$1.0


*


Platform commissions, excluding any impact of deferred platform
commissions, Royalties, excluding any impact of deferred royalties,
and Adjusted other operating expenses are non-GAAP financial
measures. These non-GAAP financial items should be considered in
addition to, but not as a substitute for, the information provided
in accordance with GAAP. Reconciliations for these non-GAAP
financial items to the most directly comparable financial items
based on GAAP are provided in GAAP to Adjusted results
reconciliation table.




 


Eric R. Ludwig, Chief Operating Officer and Chief Financial Officer,
said, “This is an exciting time for Glu and the mobile gaming industry
at large. Over the next four months we are planning to launch the first
three titles under our new development process. Our financial
performance from our live Growth Games continues to be solid and our
bookings will continue to benefit as we stack our new games on top of
our Core Business throughout the year. We are pleased about our
performance in Q1, what’s to come in 2019 and believe that we remain on
track to reach our financial goals.”


Financial Outlook as of May 6, 2019:


Glu is providing its financial outlook for the second quarter of 2019
and updating guidance for the full year 2019 as follows:




 




 




Second Quarter 2019 Guidance:


















 


in millions




Low


 


High


Bookings




$100.0




$102.0


Platform commissions, excluding any impact of deferred platform
commissions




$25.8




$26.3


Royalties, excluding any impact of deferred royalties




$6.5




$6.6


Hosting costs




$1.4




$1.4


User acquisition and marketing expenses




$27.5




$27.8


Adjusted other operating expenses




$32.8




$32.9


Depreciation




$1.0




$1.0










 


Supplemental information:










Income tax




($0.2)




($0.2)


Stock-based compensation




$6.2




$6.2


Amortization of intangible assets




$1.1




$1.1


Weighted-average common shares outstanding – basic




145.7




145.7


Weighted-average common shares outstanding – diluted




161.9




161.9










 




 




 




Full Year 2019 Guidance:


















 


in millions




Low


 


High


Bookings




$445.0




$455.0


Platform commissions, excluding any impact of deferred platform
commissions




$115.6




$118.2


Royalties, excluding any impact of deferred royalties




$29.8




$30.5


Hosting costs




$6.7




$6.8


User acquisition and marketing expenses




$115.3




$117.0


Adjusted other operating expenses




$126.7




$129.6


Depreciation




$4.1




$4.1










 


Supplemental information:










Income tax




$0.4




$0.4


Stock-based compensation




$26.8




$26.8


Amortization of intangible assets




4.4




4.4


Weighted-average common shares outstanding – basic




146.2




146.2


Weighted-average common shares outstanding – diluted




162.6




162.6


Cash and cash equivalent balance




At least $145.0M






 


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.


Quarterly Conference Call Information:


Glu will discuss its quarterly results via teleconference today at 2:00
p.m. Pacific Time (5:00 p.m. Eastern Time). Please dial (866) 582-8907
(domestic), or (760) 298-5046 (international), with conference ID #
2099286 to access the conference call at least five minutes prior to the
2:00 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 5:00 p.m. Pacific Time, May 6,
2019, and 8:59 p.m. Pacific Time, May 13, 2019, by calling (855)
859-2056, or (404) 537-3406, with conference ID # 2099286.


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 (https://communities.glu.com/home)
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 expenses. 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;


Non-cash warrant expense;


Impairment and amortization of intangible assets;


Stock-based compensation expense;


Restructuring charges;


Transitional costs; and


Litigation 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.


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 “Financial Outlook as of May 6, 2019” (“Second Quarter
2019 Guidance” and “Full Year 2019 Guidance”), and the statements that
we expect our three new titles launching this year to be globally
released in the May to August time frame; we continue to bolster our
pipeline with three original IP launches slated for 2020; our financial
performance from our live Growth Games continues to be solid and our
bookings will continue to benefit as we stack our new games on top of
our Core Business throughout the year; and that we believe that we
remain on track to reach our financial goals. 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 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 Growth Games 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-K filed with the Securities and Exchange Commission on February 28,
2019 and our other SEC filings. You can locate these reports through our
website at
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 creator of mobile games. Founded
in 2001, Glu is headquartered in San Francisco with additional locations
in San Mateo, Toronto and Hyderabad. With a history spanning over a
decade, Glu’s culture is rooted in taking smart risks and fostering
creativity to deliver world-class interactive experiences for our
players. Glu’s diverse portfolio features top-grossing and award-winning
original and licensed IP titles including, Cooking DASH, Covet
Fashion, Deer Hunter, Design Home, MLB Tap Sports
Baseball and Kim Kardashian: Hollywood available worldwide on
various platforms including the App Store and Google Play. For more
information, visit www.glu.com
or follow Glu on Twitter,
Facebook
and Instagram.


COOKING DASH, COVET FASHION, DEER HUNTER, DESIGN HOME, DINER DASH, TAP
SPORTS, GLU, GLU MOBILE, and the ‘g’ character logo are trademarks of
Glu Mobile Inc.




 




 




Glu Mobile Inc.










Condensed Consolidated Statements of Operations










(in thousands, except per share data)










(unaudited)


















 


 






Three Months Ended








March 31,




March 31,








2019




2018












 


Revenue




$


95,885






$


81,443














 


Cost of revenue:












Platform commissions, royalties and other






32,813








29,167






Impairment of prepaid royalties and minimum guarantees






457








99






Impairment and amortization of intangible assets




 


1,252


 




 


1,467


 




Total cost of revenue




 


34,522


 




 


30,733


 


Gross profit




 


61,363


 




 


50,710


 












 


Operating expenses:












Research and development






26,546








22,710






Sales and marketing






28,105








26,810






General and administrative






6,635








7,890






Restructuring charge




 


–


 




 


80


 


Total operating expenses




 


61,286


 




 


57,490


 












 


Income/(loss) from operations






77








(6,780


)












 


Interest and other income / (expense), net






764








(251


)












 


Income/(loss) before income taxes






841








(7,031


)




Income tax benefit/(provision)




 


(178


)




 


(175


)


Net income/(loss)




$


663


 




$


(7,206


)












 


Net income/(loss) per common share – basic




$


0.00






$


(0.05


)


Net income/(loss) per common share – diluted




$


0.00






$


(0.05


)












 


Weighted average common shares outstanding – basic






144,445








139,108




Weighted average common shares outstanding – diluted






159,423








139,108




















 




 




 




Glu Mobile Inc.










Consolidated Balance Sheets










(in thousands)










(unaudited)


















 






March 31,




December 31,






2019




2018










 


ASSETS










Cash and cash equivalents




$


92,673






$


97,834




Accounts receivable, net






34,684








27,325




Prepaid royalties






9,284








8,520




Deferred royalties






3,813








4,410




Deferred platform commission fees






24,753








25,862




Restricted cash






110








110




Prepaid expenses and other current assets




 


5,463


 




 


6,940


 


Total current assets






170,780








171,001












 


Property and equipment, net






13,427








13,888




Operating lease right of use assets






28,401








–




Long-term prepaid royalties






18,044








1,667




Other long-term assets






3,644








2,505




Intangible assets, net






7,893








9,145




Goodwill




 


116,227


 




 


116,227


 


Total assets




$


358,416


 




$


314,433


 










 


LIABILITIES AND STOCKHOLDERS’ EQUITY










Accounts payable




$


16,895






$


10,480




Accrued liabilities






1,042








1,384




Accrued compensation






7,593








17,896




Accrued royalties






14,316








14,139




Accrued restructuring






–








294




Short-term operating lease liabilities






3,997








–




Deferred revenue




 


82,440


 




 


85,736


 


Total current liabilities






126,283








129,929




Long-term accrued royalties






18,021








1,649




Long-term operating lease liabilities






29,932








–




Other long-term liabilities




 


360


 




 


5,542


 


Total liabilities




 


174,596


 




 


137,120


 










 


Common stock






15








14




Additional paid-in capital






623,609








617,781




Accumulated other comprehensive income






16








1




Accumulated deficit




 


(439,820


)




 


(440,483


)


Total stockholders’ equity




 


183,820


 




 


177,313


 


Total liabilities and stockholders’ equity




$


358,416


 




$


314,433


 


















 




 




 




 




 




 




 




Glu Mobile Inc.


























GAAP to Adjusted Results Reconciliation


























(in thousands)


























(unaudited)


























 




Three Months Ended






December 31,




March 31,




June 30,




September 30,




December 31,




March 31,






2017




2018




2018




2018




2018




2019


GAAP platform commissions




$


20,787






$


21,729






$


23,250






$


25,650






$


24,756






$


25,148




Change in deferred platform commissions




 


707


 




 


1,477


 




 


2,768


 




 


413


 




 


760


 




 


(1,109


)


Platform Commissions, excluding any impact of deferred platform
commissions




$


21,494


 




$


23,206


 




$


26,018


 




$


26,063


 




$


25,516


 




$


24,039


 


























 


GAAP royalties (including impairment of royalties and minimum
guarantees)




$


31,311






$


5,506






$


6,631






$


7,141






$


6,784






$


6,605




Change in deferred royalties




 


355


 




 


15


 




 


767


 




 


(70


)




 


122


 




 


(596


)


Royalties, excluding any impact of deferred royalties




$


31,666


 




$


5,521


 




$


7,398


 




$


7,071


 




$


6,906


 




$


6,009


 


























 


GAAP other operating expenses (GAAP operating expenses excluding
user acquisition and marketing expenses)




$


34,516






$


35,263






$


34,929






$


36,797






$


38,695






$


38,314




Stock-based compensation






(4,424


)






(6,308


)






(5,343


)






(5,879


)






(7,062


)






(6,807


)


Transitional costs






(336


)






(919


)






(13


)






–








(598


)






(998


)


Restructuring charge






21








(80


)






–








(160


)






–








–




Litigation Costs




 


–


 




 


–


 




 


–


 




 


(717


)




 


(1,217


)




 


(28