Glu Reports Fourth Quarter and Full Year 2012 Financial Results

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Glu Reports Fourth Quarter and Full Year 2012 Financial Results

  • 112% GAAP and 78% non-GAAP smartphone revenue growth for the full year 2012
  • Original IP expansion drove GAAP gross margins of 85% and non-GAAP gross margins of 90% for the full year 2012 compared to 72% and 82%, respectively, last year

SAN FRANCISCO--(BUSINESS WIRE)-- Glu Mobile Inc. (NAS: GLUU) , a leading global developer and publisher of freemium games for smartphone and tablet devices, today announced financial results for its fourth quarter and full year ended December 31, 2012.

"The fourth quarter came in at the high end of expectations across our key metrics," stated Niccolo de Masi, Chief Executive Officer of Glu. "Consistent with our guidance, smartphone revenue was flat compared to Q3 due to the decision to delay the global launch of approximately half of our Q4 2012 titles. We anticipate seeing momentum accelerate as new titles launch incorporating our new monetization systems."


De Masi continued, "Looking forward, we believe Glu is strongly positioned to lead in a Social Gaming 2.0 landscape. We will continue to deliver engaging core gameplay, industry leading production values, and outstanding global reach. Our new product roadmap emphasizes deeper and more immersive gameplay designed to drive higher monetization and lifetime value. Every game we release in 2013 is designed to have the potential to outperform our best titles of years past."

Fourth Quarter 2012 Financial Highlights:

  • Revenue: Total GAAP revenue was $21.0 million in the fourth quarter of 2012 compared to $15.2 million in the fourth quarter of 2011. Total non-GAAP revenue was $20.8 million in the fourth quarter of 2012 compared to $20.1 million in the fourth quarter of 2011. Non-GAAP revenue excludes changes in deferred revenue and amortization of in-process development contracts.
  • Gross Margin: GAAP gross margin was 85% in the fourth quarter of 2012 compared to 73% in the fourth quarter of 2011. Non-GAAP gross margin was 90% in the fourth quarter of 2012 compared to 87% in the fourth quarter of 2011. Non-GAAP gross margin excludes changes in deferred revenue and royalties and amortization of intangible assets.
  • GAAP Operating Loss: GAAP operating loss was $(6.7) million in the fourth quarter of 2012 compared to a $(9.8) million loss in the fourth quarter of 2011.
  • Non-GAAP Operating Loss: Non-GAAP operating loss was $(2.5) million in the fourth quarter of 2012 compared to a loss of $(1.2) million during the fourth quarter of 2011. Non-GAAP operating loss excludes changes in deferred revenue and royalty expense, amortization of in-process development contracts, stock-based compensation expense, amortization of intangible assets, restructuring charges, change in fair value of the Blammo earnout, transitional costs and impairment of goodwill.
  • Adjusted EBITDA: Adjusted EBITDA was a $(1.8) million loss for the fourth quarter of 2012 compared to a $(0.7) million loss during the fourth quarter of 2011. Adjusted EBITDA is defined as non-GAAP operating income/(loss) less depreciation.
  • GAAP Net Loss and EPS: GAAP net losswas $(7.1) million for the fourth quarter of 2012 compared to a GAAP net loss of $(10.0) million for the fourth quarter of 2011. GAAP EPS was a loss of $(0.11) for the fourth quarter of 2012, based on 65.7 million weighted-average basic shares outstanding, compared to a loss of $(0.16) for the fourth quarter of 2011, based on 63.0 million weighted-average basic shares outstanding.
  • Non-GAAP Net Loss and EPS: Non-GAAP net loss was $(3.2) million for the fourth quarter of 2012 compared to a loss of $(1.4) million for the fourth quarter of 2011. Non-GAAP EPS was a loss of $(0.05) for the fourth quarter of 2012 based on 65.7 million weighted-average basic shares outstanding, compared to a loss of $(0.02) for the fourth quarter of 2011 based on 63.0 million weighted-average basic shares outstanding.
  • Cash Flows Used in Operations: Cash flows used in operations were $(1.6) million for the fourth quarter of 2012 compared to cash flows used in operations of $(4.3) million for the fourth quarter of 2011.

Selected Fourth Quarter and Full Year 2012 Operating Highlights and Metrics:

  • Our total GAAP smartphone revenue for the fourth quarter of 2012 of $18.6 million grew 85% from the fourth quarter of 2011 and comprised 89% of total GAAP revenue.
  • Our total GAAP smartphone revenue for 2012 of $74.4 million grew 112% from 2011 and was 85% of total GAAP revenue.
  • Our non-GAAP smartphone revenue for the fourth quarter of 2012 of $18.5 million grew 24% from the fourth quarter of 2011 and was 89% of total non-GAAP revenue.
  • Our non-GAAP smartphone revenue for 2012 of $74.6 million grew 78% from 2011 and was 85% of total non-GAAP revenue.

Fourth Quarter and Recent Developments and Strategic Initiatives:

  • We launched four new freemium games: Death Dome, Contract Killer 2, Dragon Slayer, and Contract Killer Zombies 2.
  • We announced the availability of our leading freemium titles for Google's new Nexus devices and Android 4.2, Jelly Bean.
  • We announced the availability of Deer Hunter Reloaded, Small Street and Samurai vs. Zombies Defense for the Mac, all of which are fully optimized for new features on OS X Mountain Lion including full screen Retina display and support for in-app purchasing.
  • We hired Matthew Ricchetti as our President of Studios.
  • We partnered with Probability PLC to expand our mobile portfolio to include real-money gambling and reach new international audiences.
  • In January 2013, we invested in Bee Cave Games, a new company formed by industry veterans that is focused on developing social and mobile casino games.
  • We launched Glu Publishing and hired a VP of 3rd Party Development.

Fiscal 2012 Financial Highlights:

  • Revenue: Total GAAP revenue was $87.5 million for the year ended December 31, 2012 compared to $66.2 million for the year ended December 31, 2011. Total non-GAAP revenue was $87.8 million for the year ended December 31, 2012 compared to $72.9 million in the year ended December 31, 2011. Non-GAAP revenue excludes changes in deferred revenue and amortization of in-process development contracts.
  • Gross Margin: GAAP gross margin was 85% for the year ended December 31, 2012 compared to 72% for the year ended December 31, 2011. Non-GAAP gross margin was 90% for the year ended December 31, 2012 compared to 82% for the year ended December 31, 2011. Non-GAAP gross margin excludes changes in deferred revenue and royalties and amortization of intangible assets.
  • GAAP Operating Loss: GAAP operating loss was $(22.1) million for the year ended December 31, 2012 compared to a $(21.2) million loss for the year ended December 31, 2011.
  • Non-GAAP Operating Loss: Non-GAAP operating loss was $(4.6) million for the year ended December 31, 2012 compared to a loss of $(3.4) million during the year ended December 31, 2011. Non-GAAP operating loss excludes changes in deferred revenue and royalty expense, amortization of in-process development contracts, stock-based compensation expense, amortization of intangible assets, restructuring charges, change in fair value of the Blammo earnout, transitional costs and impairment of goodwill.
  • Adjusted EBITDA: Adjusted EBITDA was a $(2.3) million loss for the year ended December 31, 2012 compared to a $(1.5) million loss for the year ended December 31, 2011. Adjusted EBITDA is defined as non-GAAP operating income/(loss) less depreciation.
  • GAAP Net Loss and EPS: GAAP net losswas $(20.5) million for the year ended December 31, 2012 compared to a GAAP net loss of $(21.1) million for the year ended December 31, 2011. GAAP EPS was a loss of $(0.32) for the year ended December 31, 2012, based on 64.3 million weighted-average basic shares outstanding, compared to a loss of $(0.37) for the year ended December 31, 2011, based on 57.5 million weighted-average basic shares outstanding.
  • Non-GAAP Net Loss and EPS: Non-GAAP net loss was $(5.1) million for the year ended December 31, 2012 compared to a loss of $(4.0) million for the year ended December 31, 2011. Non-GAAP EPS was a loss of $(0.08) for the year ended December 31, 2012 based on 64.3 million weighted-average basic shares outstanding, compared to a loss of $(0.07) for the year ended December 31, 2011 based on 57.5 million weighted-average basic shares outstanding.
  • Cash Flows Used in Operations: Cash flows used in operations were $(6.7) million for the year ended December 31, 2012 compared to cash flows used in operations of $(6.7) million for the year ended December 31, 2011.

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."

"We had a solid fourth quarter performance with non-GAAP smartphone revenue growing primarily due to the strength of two of our new sequels Contract Killer 2 and Eternity Warriors 2," stated Eric R. Ludwig, Glu's Chief Financial Officer. "While we expect first quarter results to be impacted by a combination of seasonality and further delays in title launches, we remain in position to benefit from increasing monetization trends as we implement our new strategy. Given our on-going commitment to control costs, we are confident in our ability to end 2013 with approximately $14 million in cash and without the need to raise additional capital or incur debt."

Business Outlook as of February 5, 2013:

The following forward-looking statements reflect expectations as of February 5, 2013. Results may be materially different and are affected by many factors, such as: consumer demand for mobile entertainment and specifically Glu's products; consumer demand for smartphones, tablets and next-generation platforms; development delays on Glu's products; continued uncertainty in the global economic environment; competition in the industry; storefront featuring; 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.

First Quarter Expectations - Quarter Ending March 31, 2013:

  • Non-GAAP revenue is expected to be between $17.0 million and $18.5 million and non-GAAP smartphone revenue is expected to be between $16.0 million and $17.0 million.
  • Non-GAAP gross margin is expected to be between 89% and 90%.
  • Non-GAAP operating expenses are expected to be between $20.5 million and $20.7 million.
  • Adjusted EBITDA, defined as non-GAAP operating loss excluding depreciation of approximately $800,000, is expected to range from $(3.3) million to $(4.6) million.
  • Income tax expense is expected to be $(0.2) million.
  • Non-GAAP net loss is expected to be between $(4.3) million and $(5.6) million, or a net loss of $(0.06) to $(0.08) per weighted-average basic shares outstanding.
  • Weighted-average common shares outstanding are expected to be approximately 66.2 million basic and 70.8 million diluted.

2013 Expectations - Full Year Ending December 31, 2013:

  • Non-GAAP revenue is expected to be between $84.0 million and $92.0 million and non-GAAP smartphone revenue is expected to be between $80.0 million and $88.0 million.
  • Non-GAAP gross margin is expected to be approximately 91.5%.
  • Adjusted EBITDA is expected to range from $(1.8) million to $(7.5) million.
  • Non-GAAP net loss is expected to be between $(5.9) million and $(11.6) million, or a net loss of $(0.09) to $(0.17) per weighted-average basic shares outstanding.
  • Weighted-average common shares outstanding are expected to be approximately 67.3 million basic and 73.0 million diluted.
  • We expect to have a cash balance on December 31, 2013 of approximately $14.0 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 (877) 593-1988, or if outside the U.S., (678) 905-9423, with conference ID # 87391968 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 5, 2013, and 8:59 p.m. Pacific Time, February 12, 2013, by calling (855) 859-2056, or (404) 537-3406, with conference ID # 87391968.

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 operating expenses, 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 royalties;
  • Amortization of in-process development contracts;
  • Amortization of intangible assets;
  • Stock-based compensation expense;
  • Restructuring charges;
  • Change in fair value of Blammo earnout;
  • Transitional costs;
  • Impairment of goodwill;
  • Release of tax liabilities; and
  • Foreign currency exchange gains and losses primarily related to the revaluation of assets and liabilities.

In addition, Glu has included in this release "Adjusted EBITDA" figures which are used to evaluate Glu's operating performance and is defined as non-GAAP operating income/(loss) excluding depreciation.

Glu may consider whether significant non-recurring items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses.

Glu believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding Glu's performance by excluding certain items that may not be indicative of Glu's core business, operating results or future outlook. Glu's management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing Glu's operating results, as well as when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons of Glu's performance to prior periods.

Cautions Regarding Forward-Looking Statements

This news release contains forward-looking statements, including those regarding our "Business Outlook as of February 5, 2013" ("First Quarter Expectations - Quarter Ending March 31, 2013" and "2013 Expectations - Full Year Ending December 31, 2013") and the statements that: we anticipate seeing momentum accelerate as new titles launch incorporating our new monetization systems; we believe Glu is strongly positioned to lead in a Social Gaming 2.0 landscape; we will continue to deliver engaging core gameplay, industry leading production values, and outstanding global reach; our new product roadmap is designed to drive higher monetization and lifetime value; every game we release in 2013 is designed to have the potential to outperform our best titles of years past; while we expect first quarter results to be impacted by a combination of seasonality and further delays in title launches, we remain in position to benefit from increasing monetization trends as we implement our new strategy; and that we are confident in our ability to end 2013 with approximately $14 million in cash and without the need to raise additional capital or incur debt. 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 5, 2013"; the risk that consumer demand for smartphones, tablets and next-generation platforms does not grow as significantly as we anticipate or that we will be unable to capitalize on any such growth; the risk that we do not realize a sufficient return on our investment with respect to our efforts to develop freemium 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; 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 freemium 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 November 9, 2012 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.

2008 Equity Inducement Plan

In connection with the hiring of our new VP of 3rd Party Development, Glu has agreed that its Compensation Committee will award our new VP of 3rd Party Development a non-qualified stock option to purchase 150,000 shares of Glu's common stock pursuant to Glu's 2008 Equity Inducement Plan. Glu's historical policy with respect to new hire stock option grants is to award a newly hired employee his or her stock option on the second Tuesday of the month following his or her employment start date; accordingly, the grant date for our new VP of 3rd Party Development's option grant will be February 12, 2013. The stock option will have a six-year term, vest on a four-year schedule (25% of the underlying shares will vest on the first anniversary of our new VP of 3rd Party Development's hire date, and 2.083% of the underlying shares will vest monthly thereafter), and have an exercise price equal to the closing price of Glu's common stock on the NASDAQ Global Market on the February 12, 2013 grant date.

Glu's Compensation Committee adopted the 2008 Equity Inducement Plan, which is a non-stockholder approved plan, to facilitate the granting of stock options as an inducement to new employees to join Glu. NASDAQ Marketplace Rule 5635(c)(iv) requires a public announcement of equity awards made under this type of plan.

About Glu Mobile

Glu Mobile (NAS: GLUU) is a leading global developer and publisher of freemium games for smartphone and tablet devices. Glu is focused on creating compelling original IP games such as BLOOD & GLORY, DEER HUNTER, FRONTLINE COMMANDO, GUN BROS, and SAMURAI VS. ZOMBIES DEFENSE on a wide range of platforms including iOS, Android™, Windows Phone, Google Chrome 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 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.

BLOOD & GLORY, CONTRACT KILLER, CONTRACT KILLER ZOMBIES, DEATH DOME, DEER HUNTER, DRAGON SLAYER, FRONTLINE COMMANDO, GUN BROS, SAMURAI VS ZOMBIES DEFENSE, SMALL STREET, GLU, GLU MOBILE and the 'g' character logo are trademarks of Glu Mobile Inc.

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)
 
December 31,
2012
December 31,
2011
 
ASSETS
Cash and cash equivalents$22,325$32,212
Accounts receivable, net11,88111,821
Prepaid royalties-483
Prepaid expenses and other current assets 2,487  1,881 
Total current assets36,69346,397
 
Property and equipment, net5,0263,934
Other long-term assets227404
Intangible assets, net10,88910,078
Goodwill 19,440  21,991 
Total assets$72,275 $82,804 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable$7,785$6,894
Accrued liabilities2,410939
Accrued compensation5,9895,404
Accrued royalties2,7813,865
Accrued restructuring4887
Deferred revenues 9,031  7,139 
Total current liabilities28,00025,128
Other long-term liabilities 5,388  8,503 
Total liabilities 33,388  33,631 
 
Common stock66
Additional paid-in capital271,016260,744
Accumulated other comprehensive income167266
Accumulated deficit (232,302) (211,843)
Stockholders' equity 38,887  49,173 
Total liabilities and stockholders' equity$72,275 $82,804 

 
 
Glu Mobile Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 Three Months Ended Twelve Months Ended
December 31,
2012
 December 31,
2011
December 31,
2012
 December 31,
2011
 
Revenues$20,981$15,174$87,493$66,185
 
Cost of revenues:
Royalties and other cost of revenues2,0522,5768,94012,920
Amortization of intangible assets 1,073  1,552  3,783  5,447 
Total cost of revenues 3,125  4,128  12,723  18,367 
Gross profit 17,856  11,046  74,770  47,818 
 
Operating expenses:
Research and development13,56612,66054,27539,073
Sales and marketing6,2723,93020,89314,607
General and administrative3,3563,81414,74414,002
Amortization of intangible assets4954951,980825
Restructuring charge838(92)1,371545
Impairment of goodwill -  -  3,613  - 
Total operating expenses 24,527  20,807  96,876  69,052 
 
Loss from operations(6,671)(9,761)(22,106)(21,234)
 
Interest and other income/(expense), net:
Interest income/(expense)41021(29)
Other income/(expense), net 260  (116) (368) 776 
Interest and other income/(expense), net 264  (106) (347) 747 
 
Loss before income taxes(6,407)(9,867)(22,453)(20,487)
Income tax benefit/(provision) (660) (152) 1,994  (614)
Net loss$(7,067)$(10,019)$(20,459)$(21,101)
 
Net loss per share - basic and diluted$(0.11)$(0.16)$(0.32)$(0.37)
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