Glu Mobile Inc. (NASDAQ:GLUU), a leading global publisher of 3D
Social Mobile games for smartphone and tablet devices, today
announced financial results for its first quarter ended March 31,
2011.
“Our 3D social mobile games strategy continued to gain traction
in the first quarter with non-GAAP smartphone revenues increasing
98% sequentially from the fourth quarter of 2010 to $6.7 million,”
stated Niccolo de Masi, Chief Executive Officer of Glu. “The
majority of the new titles launched thus far in 2011 are enjoying
considerable success and resonating with users worldwide. These new
titles combined with our persistent successes of Q4 2010 drove 20.0
million new installs in Q1 2011 across iOS and Android devices and
social networking websites. New development partnerships announced
during the quarter will further underpin growth in the Glu
community worldwide.”
First Quarter 2011 Financial
Highlights:
- Revenue: Total GAAP revenue was
$16.4 million for the first quarter of 2011 compared to $17.3
million in the first quarter of 2010. Total non-GAAP revenue was
$17.2 million for the first quarter of 2011 compared to $17.5
million in the first quarter of 2010. Non-GAAP revenue excludes
changes in deferred revenue.
- GAAP Operating Loss: GAAP
operating loss was $(2.6) million for the first quarter of 2011
compared to a $(2.7) million loss in the first quarter of
2010.
- Non-GAAP Operating Loss:
Non-GAAP operating loss was $(106,000) for the first quarter of
2011 compared to a loss of $(168,000) during the first quarter of
2010. Non-GAAP operating loss excludes changes in deferred revenue
and deferred royalty expense, stock-based compensation expense,
amortization of intangible assets and restructuring charges.
- GAAP Loss and EPS: GAAP net loss
was $(3.2) million for the first quarter of 2011 compared to a GAAP
net loss of $(3.7) million for the first quarter of 2010. GAAP EPS
was a loss of $(0.06) for the first quarter of 2011, based on 52.0
million weighted-average basic shares outstanding, compared to a
loss of $(0.12) for the first quarter of 2010, based on 30.5
million weighted-average basic shares outstanding.
- Non-GAAP Net Loss and EPS:
Non-GAAP net loss was $(0.9) million for the first quarter of 2011
compared to $(0.8) million for the first quarter of 2010. Non-GAAP
EPS loss was $(0.02) for the first quarter of 2011 based on 52.0
million weighted-average diluted shares outstanding, compared to a
loss of $(0.03) for the first quarter of 2010 based on 30.5 million
weighted-average diluted shares outstanding.
- Cash Flows Provided by/(Used in)
Operations: Cash flows used in operations were $(2.1) million
for the first quarter of 2011 compared to cash flows provided by
operations of $1.6 million for the first quarter of 2010.
Selected First Quarter of 2011
Operating Highlights and Metrics:
- We launched four new freemium
titles.
- Our total GAAP smartphone revenues of
$5.9 million grew 94% quarter over quarter and comprised 36% of
total GAAP revenues.
- Our non-GAAP smartphone revenues of
$6.7 million grew 98% from the prior quarter and were 39% of total
non-GAAP revenues.
- Our non-GAAP freemium revenue
(micro-transactions, in-game advertising and offers) grew 263%
quarter over quarter to $4.7 million.
Recent Developments and Strategic
Initiatives:
- Glu was one of the first developers to
implement micro-transactions into its Android games as well as
support the Android™ 3.0 (Honeycomb) platform for tablets.
- We launched games for the Sony Ericsson
Xperia™ Play. Led by Glu's original title Gun Bros, the Xperia Play
gaming portfolio also includes Guitar Hero® 6, Family Guy®: Time
Warped and original Glu title Super KO Boxing 2.
- We signed an innovative partnership
with Full Fathom Five, the publishing company of best-selling
author James Frey, to collaborate on the creation of transmedia
properties.
- We entered into a multi-title
partnership with Blammo Games, the game development company
recently founded by Christopher Locke, who most recently ran the
studio responsible for freemium top ten grossing iOS titles Smurfs'
Village and Zombie Café.
- We launched one of the first 3D casual
games on smartphones – Bug Village.
- We were a launch partner with Amazon’s
new Android storefront.
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.”
“Our strong first quarter results highlight the successful
execution of our cross-platform social gaming strategy,” stated
Eric R. Ludwig, Glu’s Chief Financial Officer. “Investing in our
growth remains a key priority as we focus on building and
leveraging our mobile gaming platform. With a strengthened balance
sheet and a commitment to allocating resources to our key growth
initiatives, we are well positioned to become one of the leading
mobile freemium game providers in the industry.”
Business Outlook as of May 3, 2011:
The following forward-looking statements reflect expectations as
of May 3, 2011. Results may be materially different and are
affected by many factors, such as: consumer demand for mobile
entertainment and specifically Glu’s mobile products; consumer
demand for mobile handsets, including smartphones and
next-generation platforms; development delays on Glu's products;
continued uncertainty in the global economic environment;
competition in the industry; storefront featuring and premium deck
placement; smartphone storefronts, carriers and other distributors
maintaining their networks and provisioning systems to enable
consumer purchases; changes in foreign exchange rates; Glu's
effective tax rate and other factors detailed in this release and
in Glu's SEC filings.
Second Quarter Expectations – Quarter Ending June 30,
2011:
- Non-GAAP revenue is expected to be
between $15.0 million and $16.5 million and non-GAAP smartphone
revenue is expected to be between $7.25 million and $8.25
million.
- Non-GAAP gross margin is expected to be
approximately 80%.
- Non-GAAP operating loss is expected to
be between $(1.3) million and $(2.5) million, with non-GAAP
operating expenses expected to be approximately $14.5 million.
- Income tax expense is expected to be
approximately $(0.6) million.
- Non-GAAP net loss is expected to be
between $(1.9) million and $(3.1) million, or a net loss of $(0.04)
to $(0.06) per basic share, which excludes $0.7 million for
amortization of intangibles and approximately $0.6 million of
anticipated stock-based compensation expense.
- Weighted average common shares
outstanding for the second quarter of 2011 are expected to be
approximately 53.9 million basic and 60.8 million diluted.
Quarterly Conference Call
Glu will discuss its quarterly results via teleconference today
at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). Please dial
(877) 311-0653, or if outside the U.S., (706) 634-7186, with
conference ID # 57750109 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 at 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, May 3, 2011, and 8:59 p.m. Pacific
Time, May 10, 2011, by calling (800) 642-1687, or (706) 645-9291,
with conference ID # 57750109.
Use of Non-GAAP Financial Measures
To supplement Glu's unaudited condensed consolidated financial
statements 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 freemium revenues, non-GAAP operating
loss, non-GAAP net loss and non-GAAP basic and diluted net loss per
share. These non-GAAP financial measures exclude the following
items from Glu's unaudited consolidated statements of
operations:
- Change in deferred revenues and
royalties;
- Amortization of intangible assets;
- Stock-based compensation expense;
- Restructuring charges; and
- Foreign currency exchange gains and
losses primarily related to the revaluation of assets and
liabilities.
Glu may consider whether other 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" ("Second Quarter
Expectations – Quarter Ending June 30, 2011"); our belief that new
development partnerships announced during the first quarter of 2011
will further underpin growth in the Glu community worldwide; that
investing in our growth remains a key priority as we focus on
building and leveraging our mobile gaming platform; and our belief
that we are well positioned to become one of the leading mobile
freemium game providers in the industry. 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"; the risk that growth of smartphones and advanced networks
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 persistent-state, freemium games for smartphones
and advanced platforms, the risk that our development expenses for
games for smartphones are greater than we anticipate; the risk that
our recently and newly launched games are less popular than
anticipated; the risk that our newly released games will be of a
quality less than desired by reviewers and consumers; the risk that
the mobile games market, particularly with respect to social,
persistent gaming, is smaller than anticipated; the risk that the
slowdown in sales of feature phones in our traditional
carrier-based business accelerates more rapidly than we anticipate;
and other risks detailed under the caption "Risk Factors" in our
Form 10-K filed with the Securities and Exchange Commission on
March 21, 2011 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 publisher of 3D
Social Mobile games for smartphone and tablet devices. Glu's unique
technology platform enables its titles to be accessible to a broad
audience of consumers all over the world - supporting iOS, Android,
Palm, Windows Phone 7 devices and beyond. Glu is focused on
bringing the best in social, freemium, cross-platform mobile gaming
experiences to the mass market. Founded in 2001, Glu is
headquartered in San Francisco and has major offices in Brazil,
China, Russia and the UK. Glu is focused on creating compelling
original IP and also partners with leading entertainment brands
including Activision, Atari, Caesar's and Fox. Consumers can find
high-quality, fresh entertainment created exclusively for their
mobile devices 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
Facebook.com/glumobile.
BUG VILLAGE, GUN BROS, SUPER KO BOXING, GLU, GLU MOBILE and the
'g' character logo are trademarks of Glu Mobile Inc. Other
trademarks used in this press release are the properties of their
respective owners.
In the financial tables below, Glu has provided a reconciliation
of the most comparable GAAP financial measure to each of the
historical non-GAAP financial measures used in this press
release.
Glu Mobile Inc.
Consolidated Balance Sheets (in thousands)
(unaudited) March 31, December 31,
2011 2010 ASSETS Cash and cash
equivalents $ 24,388 $ 12,863 Accounts receivable, net 11,968
10,660 Prepaid royalties 1,083 2,468 Prepaid expenses and other
current assets 1,687 2,557
Total
current assets 39,126 28,548 Property and equipment, net
2,645 2,134 Other long-term assets 634 574 Intangible assets, net
8,006 8,794 Goodwill 4,796 4,766
Total assets $ 55,207 $ 44,816
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $
6,370 $ 5,666 Accrued liabilities 923 939 Accrued compensation
3,219 4,414 Accrued royalties 6,015 7,234 Accrued restructuring
1,384 1,689 Deferred revenues 1,577 842 Current portion of
long-term debt - 2,288
Total current
liabilities 19,488 23,072 Other long-term liabilities
7,847 7,859
Total liabilities
27,335 30,931 Common stock 5 4
Additional paid-in capital 220,643 203,464 Accumulated other
comprehensive income 1,138 1,159 Accumulated deficit
(193,914 ) (190,742 )
Stockholders' equity
27,872 13,885
Total liabilities and
stockholders' equity $ 55,207 $ 44,816
Glu Mobile Inc. Consolidated
Statements of Operations (in thousands, except per share
data) (unaudited) Three Months Ended
March 31, March 31, 2011 2010
Revenues $ 16,426 $ 17,289
Cost of revenues: Royalties and impairment of prepaid
royalties and guarantees 3,840 4,691 Amortization of intangible
assets 817 1,228
Total cost of
revenues 4,657 5,919
Gross profit 11,769
11,370 Operating expenses: Research and
development 7,166 6,661 Sales and marketing 3,757 2,971 General and
administrative 2,934 3,813 Amortization of intangible assets - 55
Restructuring charge 490 594
Total
operating expenses 14,347
14,094 Loss from operations
(2,578 ) (2,724 ) Interest
and other income/(expense), net: Interest income 22 7 Interest
expense (40 ) (304 ) Other income/(expense), net 198
(334 ) Interest and other income/(expense), net
180 (631 ) Loss before
income taxes (2,398 ) (3,355 )
Income tax provision (774 ) (301 )
Net loss
$ (3,172 ) $ (3,656 )
Net loss per share - basic and diluted $
(0.06 ) $ (0.12 )
Weighted average common shares outstanding - basic and
diluted 52,048 30,458 Stock-based
compensation expense included in: Research and development $
100 $ 164 Sales and marketing 66 73 General and administrative
231 287
Total stock-based
compensation expense $ 397 $ 524
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,
2010 2010 2010 2010 2011
GAAP revenues Featurephone $ 15,106 $ 13,707 $ 13,090 $
12,572 $ 10,478 Smartphone 2,183 2,245
2,378 3,064 5,948
Total GAAP revenues 17,289
15,952 15,468
15,636 16,426 Change
in deferred revenues Featurephone 319 (61 ) (214 ) (467 ) (63 )
Smartphone (64 ) (17 ) 95 337
798
Total change in deferred revenues
255 (78 )
(119 ) (130 ) 735
Non-GAAP Revenues Featurephone 15,425 13,646
12,876 12,105 10,415 Smartphone 2,119 2,228
2,473 3,401 6,746
Total non-GAAP Revenues 17,544
15,874 15,349
15,506 17,161 GAAP
gross profit 11,370 10,003 10,525
10,915 11,769 Change in deferred revenues 255 (78 )
(119 ) (130 ) 735 Amortization of intangible assets 1,228 1,006
1,009 983 817 Change in deferred royalty expense (100 )
21 71 172 33
Non-GAAP gross profit 12,753
10,952 11,486
11,940 13,354 GAAP
operating expense 14,094 12,463 11,710
15,995 14,347 Stock-based Compensation (524 ) (349 )
(355 ) (340 ) (397 ) Amortization of intangible assets (55 ) (52 )
(53 ) (45 ) - Restructuring charge (594 ) (693 )
- (2,342 ) (490 )
Non-GAAP operating
expense 12,921 11,369
11,302 13,268
13,460 GAAP operating income/(loss)
(2,724 ) (2,460 ) (1,185
) (5,080 ) (2,578 ) Change in
deferred revenues 255 (78 ) (119 ) (130 ) 735 Non-GAAP cost of
revenues adjustment 1,128 1,027 1,080 1,155 850 Stock-based
Compensation 524 349 355 340 397 Amortization of intangible assets
55 52 53 45 - Restructuring charge 594 693
- 2,342 490
Non-GAAP operating income/(loss) (168 )
(417 ) 184
(1,328 ) (106 ) GAAP
net loss (3,656 ) (3,218 )
(1,603 ) (4,946 ) (3,172
) Change in deferred revenues 255 (78 ) (119 ) (130 ) 735
Non-GAAP cost of revenues adjustment 1,128 1,027 1,080 1,155 850
Non-GAAP operating expense adjustment 1,173 1,094 408 2,727 887
Foreign currency exchange loss/(gain) 332 429
(177 ) 115 (198 )
Non-GAAP
net loss $ (768 ) $ (746
) $ (411 ) $ (1,079
) $ (898 )
Reconciliation of net loss and net loss per share: GAAP net
loss per share - basic and diluted $ (0.12 ) $ (0.10 ) $ (0.04 ) $
(0.11 ) $ (0.06 ) Non-GAAP net loss per share - basic and diluted $
(0.03 ) $ (0.02 ) $ (0.01 ) $ (0.02 ) $ (0.02 ) Shares used in
computing basic and diluted net loss per share 30,458 30,676 36,042
44,579 52,048
Non-GAAP operating expense break-out:
GAAP research and development $ 6,661 $
6,229 $ 5,858 $ 6,432 $
7,166 Stock-based Compensation (164 ) (116 )
(104 ) (96 ) (100 )
Non-GAAP research and
development 6,497 6,113
5,754 6,336
7,066 GAAP sales and marketing
2,971 2,437 2,692 4,040 3,757
Stock-based Compensation (73 ) (40 ) (50 )
(54 ) (66 )
Non-GAAP sales and marketing
2,898 2,397
2,642 3,986 3,691
GAAP general & administrative 3,813
3,052 3,107 3,136 2,934 Stock-based
Compensation (287 ) (193 ) (201 ) (190
) (231 )
Non-GAAP general and administrative $
3,526 $ 2,859 $
2,906 $ 2,946 $
2,703
In addition to the reasons stated above, which are generally
applicable to each of the items Glu excludes from its non-GAAP
financial measures, Glu believes it is appropriate to exclude
certain items for the following reasons:
Change in Deferred Revenue and Royalties. At the date we sell
certain premium games and micro-transactions, Glu has an obligation
to provide additional services and incremental unspecified digital
content in the future without an additional fee. In these cases, we
account for the sale of the software product as a multiple element
arrangement and recognize the revenue and any associated royalty
expense on a straight-line basis over the estimated life of the
user. Internally, Glu’s management excludes the impact of the
changes in deferred revenue and royalties related to its premium
and freemium games in its non-GAAP financial measures when
evaluating the company’s operating performance, when planning,
forecasting and analyzing future periods, and when assessing the
performance of its management team. Glu believes that excluding the
impact of the changes in deferred revenue and royalties from its
operating results is important to facilitate comparisons to prior
periods during which Glu did not delay the recognition of
significant amounts of revenue related to its games and to
understand Glu’s operations.
Amortization of 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.
In addition, in accordance with GAAP, Glu generally recognizes
expenses for internally-developed intangible assets as they are
incurred until technological feasibility is reached,
notwithstanding the potential future benefit such assets may
provide. Unlike internally-developed intangible assets, however,
and also in accordance with GAAP, Glu generally capitalizes the
cost of acquired intangible assets and recognizes that cost as an
expense over the useful lives of the assets acquired (other than
goodwill, which is not amortized, and acquired in-process
technology, which is expensed immediately, as required under GAAP).
As a result of their GAAP treatment, there is an inherent lack of
comparability between the financial performance of
internally-developed intangible assets and acquired intangible
assets. Accordingly, Glu believes it is useful to provide, as a
supplement to its GAAP operating results, a non-GAAP financial
measure that excludes the amortization of acquired intangibles.
Stock-Based Compensation Expense. Glu adopted ASC 718,
"Compensation – Stock Compensation" beginning in its fiscal year
ended December 31, 2006. 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. In addition,
given Glu's adoption of ASC 718 beginning with its fiscal year
ended December 31, 2006, Glu believes that a non-GAAP financial
measure that excludes stock-based compensation will facilitate the
comparison of its year-over-year results.
Restructuring Charges. Glu undertook restructuring activities in
the first quarter of 2011 and recorded (1) a non-cash restructuring
charge due to vacating a portion of its offices in Russia and (2)
cash restructuring charges due to the termination of certain
employees in its Brazil, China and Russia offices. In the first,
second and fourth quarters of 2010, Glu recorded restructuring
charges related to the termination of certain employees in its
China, United States and European 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, in the
fourth quarter of 2010, Glu recorded facility-related restructuring
charges resulting from the relocation of its corporate headquarters
to San Francisco. 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.
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 2010 and 2011 were as follows (in
thousands):
March 31, 2010 $ (332 ) June 30, 2010 (429 ) September 30,
2010 177 December 31, 2010 (115 )
FY 2010 $
(699 ) March 31, 2011 $ 198
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