Exhibit 99.01
Glu
Reports Third Quarter 2012 Financial Results
-
91%
GAAP and 73% non-GAAP smartphone revenue growth year over year
-
Non-GAAP
freemium revenue increased 103% compared to the same period last year
SAN FRANCISCO--(BUSINESS WIRE)--November 1, 2012--Glu Mobile Inc.
(NASDAQ:GLUU), a leading global developer and publisher of freemium
games for smartphone and tablet devices, today announced financial
results for its third quarter ended September 30, 2012.
“We are satisfied with our 73% year-over-year growth in non-GAAP
smartphone revenue. User reviews remained strong, with growth in daily
active users from July to September,” stated Niccolo de Masi, Chief
Executive Officer of Glu. “Q3 was underpinned by the strength of newly
launched Eternity Warriors 2 across iOS and Android and the continued
success of catalog titles Frontline Commando and Deer Hunter Reloaded.
As expected, both consumer adoption of new hardware, and advertising
demand, slowed over the summer in anticipation of new device launches.
These industry headwinds, along with weaker-than-anticipated
monetization from most new launches during the quarter, resulted in a
sequential decline in smartphone revenue from Q2 2012.”
De Masi continued, “We are confident in Glu’s long-term ability to drive
higher monetization and lifetime value through the inclusion of robust
multiplayer and community functionality. The acquisition of GameSpy and
appointment of our first President of Studios accelerate our ability to
enhance average revenue per day per daily active user. We anticipate
Adjusted EBITDA improvement in Q1 2013 from Q4 2012 guidance levels.”
Third Quarter 2012 Financial Highlights:
-
Revenue: Total GAAP revenue was $21.3 million in the third
quarter of 2012 compared to $16.9 million in the third quarter of
2011. Total non-GAAP revenue was $21.2 million in the third quarter of
2012 compared to $17.8 million in the third 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 third quarter of
2012 compared to 66% in the third quarter of 2011. Non-GAAP gross
margin was 89% in the third quarter of 2012 compared to 81% in the
third 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 $(4.2) million in
the third quarter of 2012 compared to a $(7.3) million loss in the
third quarter of 2011.
-
Non-GAAP Operating Loss: Non-GAAP operating loss was $(2.7)
million in the third quarter of 2012 compared to a loss of $(2.1)
million during the third 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 $(2.1) million loss for
the third quarter of 2012 compared to a $(1.6) million loss during the
third quarter of 2011. Adjusted EBITDA is defined as non-GAAP
operating income/(loss) less depreciation.
-
GAAP Net Loss and EPS: GAAP net loss was $(3.6) million
for the third quarter of 2012 compared to a GAAP net loss of $(6.2)
million for the third quarter of 2011. GAAP EPS was a loss of $(0.06)
for the third quarter of 2012, based on 64.6 million weighted-average
basic shares outstanding, compared to a loss of $(0.10) for the third
quarter of 2011, based on 60.5 million weighted-average basic shares
outstanding.
-
Non-GAAP Net Loss and EPS: Non-GAAP net loss was $(1.6) million
for the third quarter of 2012 compared to a loss of $(1.3) million for
the third quarter of 2011. Non-GAAP EPS was a loss of $(0.03) for the
third quarter of 2012 based on 64.6 million weighted-average basic
shares outstanding, compared to a loss of $(0.02) for the third
quarter of 2011 based on 60.5 million weighted-average basic shares
outstanding.
-
Cash Flows Used in Operations: Cash flows used in operations
were $(2.6) million for the third quarter of 2012 compared to cash
flows used in operations of $(108,000) for the third quarter of 2011.
Selected Third Quarter of 2012 Operating Highlights and Metrics:
-
We launched eleven new freemium games: Blood & Glory: Legend,
Bombshells: Hell’s Belles, Campers!, Enchant U, Eternity Warriors 2,
Gears & Guts, Ham on the Run!, Indestructible, Mutant Roadkill, My
Dragon and Tavern Quest.
-
Our total GAAP smartphone revenue of $18.4 million grew 91% from Q3
2011 and comprised 86% of total GAAP revenue.
-
Our non-GAAP smartphone revenue of $18.3 million grew 73% from Q3 2011
and was 86% of total non-GAAP revenue.
-
Our non-GAAP freemium revenue (micro-transactions, in-game advertising
and offers) grew 103% to $16.5 million compared to $8.1 million in Q3
2011.
Recent Developments and Strategic Initiatives:
-
We launched two new freemium games, Contract Killer 2 and Death Dome,
on the Apple App Store and Google Play.
-
We launched five freemium games, Bombshells: Hell’s Belles, Deer
Hunter Reloaded, Samurai vs. Zombies Defense, Small Street and
Stardom: The A-List, on the Mac App Store.
-
We partnered with Probability PLC for mobile gambling, expanding our
mobile portfolio to reach new international audiences with Glu
original IP-branded casino games.
-
We announced the optimization of our leading freemium titles for the
iPhone 5.
-
We hired Matthew Ricchetti as our new President of Studios.
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 results continue to be driven by the growth of freemium revenue and
original IP," stated Eric R. Ludwig, Glu’s Chief Financial Officer. “Our
fourth quarter is being impacted by the combination of underperforming
titles launched in Q3, Apple’s prohibition of incentivized advertising
for external HTML 5 sites along with the reduction in the number of
titles launched during the quarter as we further optimize their
monetization. With more than $24 million in cash and no debt on our
balance sheet, as well as an ongoing focus on controlling costs, Glu
remains well positioned to execute its long-term monetization strategy.”
Business Outlook as of November 1, 2012:
The following forward-looking statements reflect expectations as of
November 1, 2012. 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 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 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.
Fourth Quarter Expectations – Quarter Ending December 31, 2012:
-
Non-GAAP revenue is expected to be between $19.5 million and $20.5
million and non-GAAP smartphone revenue is expected to be between
$17.5 million and $18.5 million.
-
Non-GAAP gross margin is expected to be approximately 90%.
-
Non-GAAP operating expenses are expected to be approximately $22.2
million.
-
Adjusted EBITDA, defined as non-GAAP operating loss excluding
depreciation of approximately $650,000, is expected to range from
$(4.0) million to $(3.1) million.
-
Income tax expense is expected to be $(0.5) million.
-
Non-GAAP net loss is expected to be between $(5.1) million and $(4.2)
million, or a net loss of $(0.08) to $(0.06) per weighted-average
basic share.
-
Weighted average common shares outstanding for the fourth quarter of
2012 are expected to be approximately 65.9 million basic and 69.9
million diluted.
-
We expect to use cash in operations and have a cash balance at
December 31, 2012 of approximately $21.5 million with no debt.
2012 Expectations – Full Year Ending December 31, 2012:
-
Non-GAAP revenue is expected to be between $86.4 million and $87.4
million and non-GAAP smartphone revenue is expected to be between
$73.6 million and $74.6 million.
-
Non-GAAP operating loss is expected to range from $(6.8) million to
$(5.9) million.
-
Adjusted EBITDA is expected to range from $(4.4) million to $(3.5)
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 (888) 634-0559,
or if outside the U.S., (817) 385-9380, with conference ID # 38947409 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 3:10 p.m. Pacific Time, November 1, 2012, and 8:59 p.m. Pacific
Time, November 8, 2012, by calling (855) 859-2056, or (404) 537-3406,
with conference ID # 38947409.
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 freemium 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 November 1, 2012" ("Fourth Quarter
Expectations – Quarter Ending December 31, 2012" and “2012 Expectations
– Full Year Ending December 31, 2012”) and the statements that: we are
confident in Glu’s long-term ability to drive higher monetization and
lifetime value through the inclusion of robust multiplayer and community
functionality; the acquisition of GameSpy and appointment of our first
President of Studios will accelerate our ability to enhance average
revenue per day per daily active user; we anticipate Adjusted EBITDA
improvement in Q1 2013 from Q4 2012 guidance levels; and Glu remains
well positioned to execute its long-term monetization strategy. 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 November 1, 2012"; the risk that Glu will be
unable to successfully integrate GameSpy, Griptonite and Blammo and its
employees and achieve expected synergies, the risk that Glu will have
difficulty retaining key employees of GameSpy, Griptonite and Blammo;
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
August 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.
About Glu Mobile
Glu Mobile (NASDAQ: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 Brazil, 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.
BIG TIME GANGSTA, BLOOD & GLORY, BOMBSHELLS: HELL’S BELLES, CAMPERS!,
DEATH DOME, DEER HUNTER, ENCHANT U, ETERNITY WARRIORS, FRONTLINE
COMMANDO, GEARS & GUTS, GUN BROS, HAME ON THE RUN, INDESTRUCTIBLE,
MUTANT ROADKILL, MY DRAGON, SAMURAI VS ZOMBIES DEFENSE, SMALL STREET,
STARDOM: THE A LIST, TAVERN QUEST, 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.
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Glu Mobile Inc.
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Consolidated Balance Sheets
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(in thousands)
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(unaudited)
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September 30,
2012
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December 31,
2011
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ASSETS
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Cash and cash equivalents
|
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$
|
24,051
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$
|
32,212
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Accounts receivable, net
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14,604
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|
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11,821
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|
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Prepaid royalties
|
|
|
29
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|
|
|
483
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Prepaid expenses and other current assets
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|
|
2,972
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|
|
|
1,881
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|
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Total current assets
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|
41,656
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|
|
|
46,397
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|
|
|
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Property and equipment, net
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|
4,512
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|
|
|
3,934
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Other long-term assets
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|
|
582
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|
|
404
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|
|
Intangible assets, net
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|
12,451
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|
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|
10,078
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Goodwill
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|
19,276
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|
|
|
21,991
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Total assets
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$
|
78,477
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|
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$
|
82,804
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Accounts payable
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$
|
6,903
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$
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6,894
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Accrued liabilities
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2,468
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|
939
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Accrued compensation
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|
6,455
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|
|
|
5,404
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Accrued royalties
|
|
|
2,849
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|
|
|
3,865
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|
Accrued restructuring
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|
|
118
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|
|
887
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Deferred revenues
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8,835
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|
|
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7,139
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Total current liabilities
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27,628
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|
|
|
25,128
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Other long-term liabilities
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|
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5,920
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|
|
|
8,503
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Total liabilities
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33,548
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|
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33,631
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Common stock
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6
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|
|
6
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|
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Additional paid-in capital
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269,752
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|
|
|
260,744
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Accumulated other comprehensive income
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|
|
406
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|
|
266
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Accumulated deficit
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|
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(225,235
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)
|
|
|
(211,843
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)
|
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Stockholders' equity
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44,929
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|
|
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49,173
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Total liabilities and stockholders' equity
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$
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78,477
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$
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82,804
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Glu Mobile Inc.
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Consolidated Statements of Operations
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(in thousands, except per share data)
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(unaudited)
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Three Months Ended
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Nine Months Ended
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September 30,
2012
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September 30,
2011
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September 30,
2012
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September 30,
2011
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Revenues
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$
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21,347
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$
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16,905
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$
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66,512
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$
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51,011
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Cost of revenues:
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Royalties and other cost of revenues
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2,194
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3,383
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6,888
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10,344
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Amortization of intangible assets
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1,025
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2,375
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2,710
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3,895
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Total cost of revenues
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3,219
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5,758
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9,598
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14,239
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Gross profit
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18,128
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11,147
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56,914
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36,772
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Operating expenses:
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Research and development
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9,979
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10,808
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40,709
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26,413
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Sales and marketing
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5,545
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3,576
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14,621
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10,677
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General and administrative
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2,466
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3,748
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11,388
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10,188
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Amortization of intangible assets
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495
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330
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|
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1,485
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|
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330
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Restructuring charge
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213
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-
|
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533
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637
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Impairment of goodwill
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3,613
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-
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3,613
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-
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Total operating expenses
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22,311
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18,462
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72,349
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48,245
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Loss from operations
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|
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(4,183
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)
|
|
|
|
(7,315
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)
|
|
|
|
(15,435
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)
|
|
|
|
(11,473
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)
|
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|
|
|
|
|
|
|
|
|
|
|
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|
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Interest and other income/(expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
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Interest income
|
|
|
|
7
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|
|
|
|
4
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|
|
|
|
28
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|
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|
|
33
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|
|
Interest expense
|
|
|
|
(2
|
)
|
|
|
|
-
|
|
|
|
|
(11
|
)
|
|
|
|
(72
|
)
|
|
Other income/(expense), net
|
|
|
|
(460
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)
|
|
|
|
340
|
|
|
|
|
(628
|
)
|
|
|
|
892
|
|
|
Interest and other income/(expense), net
|
|
|
|
(455
|
)
|
|
|
|
344
|
|
|
|
|
(611
|
)
|
|
|
|
853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
|
(4,638
|
)
|
|
|
|
(6,971
|
)
|
|
|
|
(16,046
|
)
|
|
|
|
(10,620
|
)
|
|
Income tax benefit/(provision)
|
|
|
|
1,075
|
|
|
|
|
813
|
|
|
|
|
2,654
|
|
|
|
|
(462
|
)
|
|
Net loss
|
|
|
$
|
(3,563
|
)
|
|
|
$
|
(6,158
|
)
|
|
|
$
|
(13,392
|
)
|
|
|
$
|
(11,082
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
|
$
|
(0.06
|
)
|
|
|
$
|
(0.10
|
)
|
|
|
$
|
(0.21
|
)
|
|
|
$
|
(0.20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted
|
|
|
|
64,562
|
|
|
|
|
60,461
|
|
|
|
|
63,865
|
|
|
|
|
55,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
$
|
(3,388
|
)
|
|
|
$
|
356
|
|
|
|
$
|
2,268
|
|
|
|
$
|
587
|
|
|
Sales and marketing
|
|
|
|
73
|
|
|
|
|
96
|
|
|
|
|
343
|
|
|
|
|
256
|
|
|
General and administrative
|
|
|
|
437
|
|
|
|
|
386
|
|
|
|
|
1,385
|
|
|
|
|
897
|
|
|
Total stock-based compensation expense
|
|
|
$
|
(2,878
|
)
|
|
|
$
|
838
|
|
|
|
$
|
3,996
|
|
|
|
$
|
1,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glu Mobile Inc.
|
|
|
GAAP to Non-GAAP Reconciliation
|
|
|
(in thousands, except per share data)
|
|
|
(unaudited)
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
|
March 31,
2011
|
|
|
June 30,
2011
|
|
|
September 30,
2011
|
|
|
December 31,
2011
|
|
|
March 31,
2012
|
|
|
June 30,
2012
|
|
|
September 30,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Featurephone
|
|
|
$
|
10,478
|
|
|
|
$
|
8,253
|
|
|
|
$
|
7,248
|
|
|
|
$
|
5,112
|
|
|
|
$
|
4,165
|
|
|
|
$
|
3,710
|
|
|
|
$
|
2,924
|
|
|
|
Smartphone
|
|
|
|
5,948
|
|
|
|
|
9,427
|
|
|
|
|
9,657
|
|
|
|
|
10,062
|
|
|
|
|
17,379
|
|
|
|
|
19,911
|
|
|
|
|
18,423
|
|
|
|
Total GAAP revenues
|
|
|
|
16,426
|
|
|
|
|
17,680
|
|
|
|
|
16,905
|
|
|
|
|
15,174
|
|
|
|
|
21,544
|
|
|
|
|
23,621
|
|
|
|
|
21,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in deferred revenues and amortization of in-process
development
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Featurephone change in deferred revenue
|
|
|
|
(63
|
)
|
|
|
|
(6
|
)
|
|
|
|
5
|
|
|
|
|
(20
|
)
|
|
|
|
(7
|
)
|
|
|
|
17
|
|
|
|
|
(21
|
)
|
|
|
Smartphone change in deferred revenue and amortization of
in-process
development contracts
|
|
|
|
798
|
|
|
|
|
240
|
|
|
|
|
875
|
|
|
|
|
4,897
|
|
|
|
|
57
|
|
|
|
|
534
|
|
|
|
|
(167
|
)
|
|
|
Total change in deferred revenues and amortization of
in-process
development contracts
|
|
|
|
735
|
|
|
|
|
234
|
|
|
|
|
880
|
|
|
|
|
4,877
|
|
|
|
|
50
|
|
|
|
|
551
|
|
|
|
|
(188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Featurephone
|
|
|
|
10,415
|
|
|
|
|
8,247
|
|
|
|
|
7,253
|
|
|
|
|
5,092
|
|
|
|
|
4,158
|
|
|
|
|
3,727
|
|
|
|
|
2,903
|
|
|
|
Smartphone
|
|
|
|
6,746
|
|
|
|
|
9,667
|
|
|
|
|
10,532
|
|
|
|
|
14,959
|
|
|
|
|
17,436
|
|
|
|
|
20,445
|
|
|
|
|
18,256
|
|
|
|
Total non-GAAP Revenues
|
|
|
|
17,161
|
|
|
|
|
17,914
|
|
|
|
|
17,785
|
|
|
|
|
20,051
|
|
|
|
|
21,594
|
|
|
|
|
24,172
|
|
|
|
|
21,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP gross profit
|
|
|
|
11,769
|
|
|
|
|
13,856
|
|
|
|
|
11,147
|
|
|
|
|
11,046
|
|
|
|
|
18,234
|
|
|
|
|
20,552
|
|
|
|
|
18,128
|
|
|
|
Change in deferred revenues and amortization of in-process
development
contracts
|
|
|
|
735
|
|
|
|
|
234
|
|
|
|
|
880
|
|
|
|
|
4,877
|
|
|
|
|
50
|
|
|
|
|
551
|
|
|
|
|
(188
|
)
|
|
|
Amortization of intangible assets
|
|
|
|
817
|
|
|
|
|
703
|
|
|
|
|
2,375
|
|
|
|
|
1,552
|
|
|
|
|
753
|
|
|
|
|
932
|
|
|
|
|
1,025
|
|
|
|
Change in deferred royalty expense
|
|
|
|
33
|
|
|
|
|
20
|
|
|
|
|
1
|
|
|
|
|
(99
|
)
|
|
|
|
60
|
|
|
|
|
67
|
|
|
|
|
(30
|
)
|
|
|
Non-GAAP gross profit
|
|
|
|
13,354
|
|
|
|
|
14,813
|
|
|
|
|
14,403
|
|
|
|
|
17,376
|
|
|
|
|
19,097
|
|
|
|
|
22,102
|
|
|
|
|
18,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating expense
|
|
|
|
14,347
|
|
|
|
|
15,436
|
|
|
|
|
18,462
|
|
|
|
|
20,807
|
|
|
|
|
24,269
|
|
|
|
|
25,769
|
|
|
|
|
22,311
|
|
|
|
Stock-based compensation
|
|
|
|
(397
|
)
|
|
|
|
(505
|
)
|
|
|
|
(838
|
)
|
|
|
|
(1,370
|
)
|
|
|
|
(3,836
|
)
|
|
|
|
(3,038
|
)
|
|
|
|
2,878
|
|
|
|
Amortization of intangible assets
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(330
|
)
|
|
|
|
(495
|
)
|
|
|
|
(495
|
)
|
|
|
|
(495
|
)
|
|
|
|
(495
|
)
|
|
|
Transitional costs
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(981
|
)
|
|
|
|
(326
|
)
|
|
|
|
(173
|
)
|
|
|
|
(30
|
)
|
|
|
|
(192
|
)
|
|
|
Change in fair value of Blammo earnout
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
178
|
|
|
|
|
(117
|
)
|
|
|
|
(645
|
)
|
|
|
|
(386
|
)
|
|
|
|
954
|
|
|
|
Impairment of goodwill
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(3,613
|
)
|
|
|
Restructuring charge
|
|
|
|
(490
|
)
|
|
|
|
(147
|
)
|
|
|
|
-
|
|
|
|
|
92
|
|
|
|
|
-
|
|
|
|
|
(320
|
)
|
|
|
|
(213
|
)
|
|
|
Non-GAAP operating expense
|
|
|
|
13,460
|
|
|
|
|
14,784
|
|
|
|
|
16,491
|
|
|
|
|
18,591
|
|
|
|
|
19,120
|
|
|
|
|
21,500
|
|
|
|
|
21,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating loss
|
|
|
|
(2,578
|
)
|
|
|
|
(1,580
|
)
|
|
|
|
(7,315
|
)
|
|
|
|
(9,761
|
)
|
|
|
|
(6,035
|
)
|
|
|
|
(5,217
|
)
|
|
|
|
(4,183
|
)
|
|
|
Change in deferred revenues and amortization of in-process
development
contracts
|
|
|
|
735
|
|
|
|
|
234
|
|
|
|
|
880
|
|
|
|
|
4,877
|
|
|
|
|
50
|
|
|
|
|
551
|
|
|
|
|
(188
|
)
|
|
|
Non-GAAP cost of revenues adjustment
|
|
|
|
850
|
|
|
|
|
723
|
|
|
|
|
2,376
|
|
|
|
|
1,453
|
|
|
|
|
813
|
|
|
|
|
999
|
|
|
|
|
995
|
|
|
|
Stock-based compensation
|
|
|
|
397
|
|
|
|
|
505
|
|
|
|
|
838
|
|
|
|
|
1,370
|
|
|
|
|
3,836
|
|
|
|
|
3,038
|
|
|
|
|
(2,878
|
)
|
|
|
Amortization of intangible assets
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
330
|
|
|
|
|
495
|
|
|
|
|
495
|
|
|
|
|
495
|
|
|
|
|
495
|
|
|
|
Transitional costs
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
981
|
|
|
|
|
326
|
|
|
|
|
173
|
|
|
|
|
30
|
|
|
|
|
192
|
|
|
|
Change in fair value of Blammo earnout
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(178
|
)
|
|
|
|
117
|
|
|
|
|
645
|
|
|
|
|
386
|
|
|
|
|
(954
|
)
|
|
|
Impairment of goodwill
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
3,613
|
|
|
|
Restructuring charge
|
|
|
|
490
|
|
|
|
|
147
|
|
|
|
|
-
|
|
|
|
|
(92
|
)
|
|
|
|
-
|
|
|
|
|
320
|
|
|
|
|
213
|
|
|
|
Non-GAAP operating income/(loss)
|
|
|
|
(106
|
)
|
|
|
|
29
|
|
|
|
|
(2,088
|
)
|
|
|
|
(1,215
|
)
|
|
|
|
(23
|
)
|
|
|
|
602
|
|
|
|
|
(2,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net loss
|
|
|
|
(3,172
|
)
|
|
|
|
(1,752
|
)
|
|
|
|
(6,158
|
)
|
|
|
|
(10,019
|
)
|
|
|
|
(6,841
|
)
|
|
|
|
(2,988
|
)
|
|
|
|
(3,563
|
)
|
|
|
Change in deferred revenues and amortization of in-process
development
contracts
|
|
|
|
735
|
|
|
|
|
234
|
|
|
|
|
880
|
|
|
|
|
4,877
|
|
|
|
|
50
|
|
|
|
|
551
|
|
|
|
|
(188
|
)
|
|
|
Non-GAAP cost of revenues adjustment
|
|
|
|
850
|
|
|
|
|
723
|
|
|
|
|
2,376
|
|
|
|
|
1,453
|
|
|
|
|
813
|
|
|
|
|
999
|
|
|
|
|
995
|
|
|
|
Non-GAAP operating expense adjustment
|
|
|
|
887
|
|
|
|
|
652
|
|
|
|
|
1,971
|
|
|
|
|
2,216
|
|
|
|
|
5,149
|
|
|
|
|
4,269
|
|
|
|
|
681
|
|
|
|
Foreign currency exchange loss/(gain)
|
|
|
|
(198
|
)
|
|
|
|
(363
|
)
|
|
|
|
(344
|
)
|
|
|
|
116
|
|
|
|
|
373
|
|
|
|
|
(205
|
)
|
|
|
|
460
|
|
|
|
Release of tax liabilities
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(2,427
|
)
|
|
|
|
-
|
|
|
|
Non-GAAP net income/(loss)
|
|
|
$
|
(898
|
)
|
|
|
$
|
(506
|
)
|
|
|
$
|
(1,275
|
)
|
|
|
$
|
(1,357
|
)
|
|
|
$
|
(456
|
)
|
|
|
$
|
199
|
|
|
|
$
|
(1,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net loss and net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net loss per share - basic and diluted
|
|
|
$
|
(0.06
|
)
|
|
|
$
|
(0.03
|
)
|
|
|
$
|
(0.10
|
)
|
|
|
$
|
(0.16
|
)
|
|
|
$
|
(0.11
|
)
|
|
|
$
|
(0.05
|
)
|
|
|
$
|
(0.06
|
)
|
|
|
Non-GAAP net income/(loss) per share - basic and diluted
|
|
|
$
|
(0.02
|
)
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
(0.02
|
)
|
|
|
$
|
(0.02
|
)
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
0.00
|
|
|
|
$
|
(0.03
|
)
|
|
|
Shares used in computing Non-GAAP basic net income/(loss) per share
|
|
|
|
52,048
|
|
|
|
|
54,587
|
|
|
|
|
60,461
|
|
|
|
|
62,973
|
|
|
|
|
63,229
|
|
|
|
|
63,802
|
|
|
|
|
64,562
|
|
|
|
Shares used in computing Non-GAAP diluted net income/(loss) per share
|
|
|
|
52,048
|
|
|
|
|
54,587
|
|
|
|
|
60,461
|
|
|
|
|
62,973
|
|
|
|
|
63,229
|
|
|
|
|
69,490
|
|
|
|
|
64,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP operating expense break-out:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP research and development expense
|
|
|
$
|
7,166
|
|
|
|
$
|
8,439
|
|
|
|
$
|
10,808
|
|
|
|
$
|
12,660
|
|
|
|
$
|
15,033
|
|
|
|
$
|
15,697
|
|
|
|
$
|
9,979
|
|
|
|
Transitional costs
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(219
|
)
|
|
|
|
(23
|
)
|
|
|
|
(68
|
)
|
|
|
|
(1
|
)
|
|
|
|
(45
|
)
|
|
|
Stock-based compensation
|
|
|
|
(100
|
)
|
|
|
|
(131
|
)
|
|
|
|
(356
|
)
|
|
|
|
(800
|
)
|
|
|
|
(3,260
|
)
|
|
|
|
(2,396
|
)
|
|
|
|
3,388
|
|
|
|
Non-GAAP research and development expense
|
|
|
|
7,066
|
|
|
|
|
8,308
|
|
|
|
|
10,233
|
|
|
|
|
11,837
|
|
|
|
|
11,705
|
|
|
|
|
13,300
|
|
|
|
|
13,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP sales and marketing expense
|
|
|
|
3,757
|
|
|
|
|
3,344
|
|
|
|
|
3,576
|
|
|
|
|
3,930
|
|
|
|
|
4,375
|
|
|
|
|
4,701
|
|
|
|
|
5,545
|
|
|
|
Transitional costs
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(2
|
)
|
|
|
|
(5
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(15
|
)
|
|
|
Stock-based compensation
|
|
|
|
(66
|
)
|
|
|
|
(94
|
)
|
|
|
|
(96
|
)
|
|
|
|
(95
|
)
|
|
|
|
(115
|
)
|
|
|
|
(155
|
)
|
|
|
|
(73
|
)
|
|
|
Non-GAAP sales and marketing expense
|
|
|
|
3,691
|
|
|
|
|
3,250
|
|
|
|
|
3,478
|
|
|
|
|
3,830
|
|
|
|
|
4,260
|
|
|
|
|
4,546
|
|
|
|
|
5,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP general & administrative expense
|
|
|
|
2,934
|
|
|
|
|
3,506
|
|
|
|
|
3,748
|
|
|
|
|
3,814
|
|
|
|
|
4,366
|
|
|
|
|
4,556
|
|
|
|
|
2,466
|
|
|
|
Transitional costs
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(760
|
)
|
|
|
|
(298
|
)
|
|
|
|
(105
|
)
|
|
|
|
(29
|
)
|
|
|
|
(132
|
)
|
|
|
Change in fair value of Blammo earnout
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
178
|
|
|
|
|
(117
|
)
|
|
|
|
(645
|
)
|
|
|
|
(386
|
)
|
|
|
|
954
|
|
|
|
Stock-based compensation
|
|
|
|
(231
|
)
|
|
|
|
(280
|
)
|
|
|
|
(386
|
)
|
|
|
|
(475
|
)
|
|
|
|
(461
|
)
|
|
|
|
(487
|
)
|
|
|
|
(437
|
)
|
|
|
Non-GAAP general and administrative expense
|
|
|
$
|
2,703
|
|
|
|
$
|
3,226
|
|
|
|
$
|
2,780
|
|
|
|
$
|
2,924
|
|
|
|
$
|
3,155
|
|
|
|
$
|
3,654
|
|
|
|
$
|
2,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glu Mobile Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
March 31,
2011
|
|
|
June 30,
2011
|
|
|
September 30,
2011
|
|
|
December 31,
2011
|
|
|
March 31,
2012
|
|
|
June 30,
2012
|
|
|
September 30,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net loss
|
|
|
$
|
(3,172
|
)
|
|
|
$
|
(1,752
|
)
|
|
|
$
|
(6,158
|
)
|
|
|
$
|
(10,019
|
)
|
|
|
$
|
(6,841
|
)
|
|
|
$
|
(2,988
|
)
|
|
|
$
|
(3,563
|
)
|
|
Change in deferred revenues and amortization of in-process
development
contracts
|
|
|
|
735
|
|
|
|
|
234
|
|
|
|
|
880
|
|
|
|
|
4,877
|
|
|
|
|
50
|
|
|
|
|
551
|
|
|
|
|
(188
|
)
|
|
Change in deferred royalty expense
|
|
|
|
33
|
|
|
|
|
20
|
|
|
|
|
1
|
|
|
|
|
(99
|
)
|
|
|
|
60
|
|
|
|
|
67
|
|
|
|
|
(30
|
)
|
|
Amortization of intangible assets
|
|
|
|
817
|
|
|
|
|
703
|
|
|
|
|
2,705
|
|
|
|
|
2,047
|
|
|
|
|
1,248
|
|
|
|
|
1,427
|
|
|
|
|
1,520
|
|
|
Depreciation
|
|
|
|
427
|
|
|
|
|
406
|
|
|
|
|
470
|
|
|
|
|
543
|
|
|
|
|
562
|
|
|
|
|
556
|
|
|
|
|
554
|
|
|
Stock-based compensation
|
|
|
|
397
|
|
|
|
|
505
|
|
|
|
|
838
|
|
|
|
|
1,370
|
|
|
|
|
3,836
|
|
|
|
|
3,038
|
|
|
|
|
(2,878
|
)
|
|
Change in fair value of Blammo earnout
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(178
|
)
|
|
|
|
117
|
|
|
|
|
645
|
|
|
|
|
386
|
|
|
|
|
(954
|
)
|
|
Transitional costs
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
981
|
|
|
|
|
326
|
|
|
|
|
173
|
|
|
|
|
30
|
|
|
|
|
192
|
|
|
Impairment of goodwill
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
3,613
|
|
|
Restructuring charge
|
|
|
|
490
|
|
|
|
|
147
|
|
|
|
|
-
|
|
|
|
|
(92
|
)
|
|
|
|
-
|
|
|
|
|
320
|
|
|
|
|
213
|
|
|
Foreign currency exchange loss/(gain)
|
|
|
|
(198
|
)
|
|
|
|
(363
|
)
|
|
|
|
(344
|
)
|
|
|
|
116
|
|
|
|
|
373
|
|
|
|
|
(205
|
)
|
|
|
|
460
|
|
|
Interest (income)/expense, net
|
|
|
|
18
|
|
|
|
|
25
|
|
|
|
|
(4
|
)
|
|
|
|
(10
|
)
|
|
|
|
(7
|
)
|
|
|
|
(5
|
)
|
|
|
|
(5
|
)
|
|
Other non operating expense
|
|
|
|
-
|
|
|
|
|
9
|
|
|
|
|
4
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Income tax provision/(benefit)
|
|
|
|
774
|
|
|
|
|
501
|
|
|
|
|
(813
|
)
|
|
|
|
152
|
|
|
|
|
440
|
|
|
|
|
(2,019
|
)
|
|
|
|
(1,075
|
)
|
|
Total Non-GAAP Adjusted EBITDA
|
|
|
$
|
321
|
|
|
|
$
|
435
|
|
|
|
$
|
(1,618
|
)
|
|
|
$
|
(672
|
)
|
|
|
$
|
539
|
|
|
|
$
|
1,158
|
|
|
|
$
|
(2,141
|
)
|
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 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 In-Process Development Contracts. In conjunction
with the Griptonite acquisition, Glu assumed the remaining obligations
to perform services under Griptonite’s development contracts. The
estimated fair value of the future, excess profits from these contracts
was recorded in purchase accounting and is amortized as a reduction to
revenue as services are performed. When analyzing the operating
performance of an acquired entity, Glu’s management focuses on the total
return provided by the investment without taking into consideration any
fair value adjustments made for accounting purposes. Because the final
purchase price paid for an acquisition necessarily reflects the
accounting value assigned to both the consideration paid and to the
intangible assets (including goodwill) acquired, when analyzing the
operating performance of an acquisition in subsequent periods, the
Company’s management excludes the GAAP impact of any adjustments to the
fair value of these acquisition-related balances to its financial
results. Glu believes that excluding the impact of the amortization of
the customer contract value from its operating results is important as
they do not reflect its ongoing operations and that investors benefit
from a supplemental non-GAAP financial measure that excludes these
charges.
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.
Stock-Based Compensation Expense. Glu adopted ASC 718,
"Compensation – Stock Compensation" beginning in its fiscal year ended
December 31, 2006. Included in the stock compensation expense is the
contingent consideration potentially issuable to the Blammo employees
who were former shareholders of Blammo, which is recorded as research
and development expense over the term of the earn-out periods, since
these employees are primarily employed in product development. Glu
re-measures the fair value of the contingent consideration each
reporting period and only records a compensation expense for the portion
of the earn-out target which is likely to be achieved. In addition, Glu
is exposed to potential continued fluctuations in the fair market value
of the contingent consideration in each reporting period, since
re-measurement is impacted by changes in Glu’s share price and the
assumptions used by Glu. When evaluating the performance of its
consolidated results, Glu does not consider stock-based compensation
charges. Likewise, Glu's management team excludes stock-based
compensation expense from its short and long-term operating plans. In
contrast, Glu's management team is held accountable for cash-based
compensation and such amounts are included in its operating plans.
Further, when considering the impact of equity award grants, Glu places
a greater emphasis on overall stockholder dilution rather than the
accounting charges associated with such grants.
Glu believes it is useful to provide a non-GAAP financial measure that
excludes stock-based compensation in order to better understand the
long-term performance of its business. 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, second and fourth quarters of 2011 and the second and third
quarters of 2012 and recorded (1) a non-cash restructuring charge due to
vacating a portion of its offices in Russia (2) cash restructuring
charges due to the termination of certain employees in its Brazil,
China, Europe, Russia and U.S. offices and (3) non-cash adjustments
related to initial, estimated restructuring payments no longer deemed
payable. Glu recorded the severance costs as an operating expense when
it communicated the benefit arrangement to the employee and no
significant future services, other than a minimum retention period, were
required of the employee to earn the termination benefits. Glu believes
that these restructuring charges do not reflect its ongoing operations
and that investors benefit from a supplemental non-GAAP financial
measure that excludes these charges.
Change in Fair Value of Blammo Earnout. As part of the
acquisition of Blammo, Glu committed to issue additional consideration
in the form of Glu’s common stock to the former, non-employee Blammo
shareholders if certain revenue targets are achieved. Glu recorded the
estimated contingent consideration liability at acquisition and will
adjust the fair value of the liability each reporting period. When
analyzing the operating performance of an acquired entity, Glu’s
management focuses on the total return provided by the investment (i.e.,
operating profit generated from the acquired entity as compared to the
purchase price paid including the final amounts paid for contingent
consideration) without taking into consideration any expenses recognized
post-acquisition related to the change in fair value of the contingent
consideration. Because the final purchase price paid for an acquisition
necessarily reflects the accounting value assigned to both the
consideration, including the contingent consideration, paid and to the
intangible assets (including goodwill) acquired, when analyzing the
operating performance of an acquisition in subsequent periods, the
Company’s management excludes the GAAP impact of any adjustments to the
fair value of these acquisition-related balances to its financial
results. Glu believes that the fair value adjustments affect
comparability from period to period and that investors benefit from a
supplemental non-GAAP financial measure that excludes these charges.
Transitional Costs. GAAP requires expenses to be recognized for
various types of events associated with a business acquisition such as
legal, accounting and other deal related expenses. Additionally,
Glu has incurred various costs related to the transition and integration
of Blammo, GameSpy and Griptonite into Glu’s operations. Glu recorded
these non-recurring acquisition and transitional costs as operating
expenses when they were incurred. Glu believes that these acquisition
and transitional costs affect comparability from period to period and
that investors benefit from a supplemental non-GAAP financial measure
that excludes these expenses.
Impairment of Goodwill. In accordance with ASC 350 “Goodwill and
Other Intangible Assets” Glu performs its annual goodwill impairment
test as of September 30. Glu recorded a goodwill impairment charge in
the third quarter of 2012 as the fair value of one of its three
reporting units was determined to be below its carrying value. As this
impairment is non-recurring, Glu believes it does not reflect the
Company’s ongoing operations and that investors benefit from a
supplemental non-GAAP financial measure that excludes this impairment,
enabling them to compare the Company’s core operating results in
different periods without this variability.
Release of tax liabilities. In the second quarter of 2012, Glu
recorded a one-time, non-cash income tax benefit related to the release
of certain foreign income tax liabilities upon the expiration of the
statute of limitations. Glu believes that this one-time tax benefit does
not reflect its ongoing operations and that investors benefit from a
supplemental non-GAAP financial measure that excludes this benefit.
Foreign currency exchange gains and losses. Foreign currency
exchange gains and losses represent the net gain or loss that Glu has
recorded for the impact of currency exchange rate movements on cash and
other assets and liabilities denominated in foreign currencies related
to the revaluation of assets and liabilities. Accordingly, foreign
currency exchange gains and losses are generally unpredictable and can
cause Glu’s reported results to vary significantly. Due to the unusual
magnitude of these gains and losses, and the fact that Glu has not
engaged in hedging or taken other actions to reduce the likelihood of
incurring a sizeable net gain or loss in future periods, Glu began, with
the quarter ended December 31, 2008, to present non-GAAP net loss and
net loss per share excluding foreign exchange gains and losses for
comparability purposes. Glu believes that these gains and losses do not
reflect its ongoing operations and that investors benefit from a
supplemental non-GAAP financial measure that excludes these items,
enabling investors to compare Glu’s core operating results in different
periods without this variability. Foreign exchange gains/(losses)
recognized during 2011 and 2012 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
$
|
198
|
|
|
June 30, 2011
|
|
|
|
363
|
|
|
September 30, 2011
|
|
|
|
344
|
|
|
December 31, 2011
|
|
|
|
(116
|
)
|
|
FY 2011
|
|
|
$
|
789
|
|
|
|
|
|
|
|
March 31, 2012
|
|
|
$
|
(373
|
)
|
|
June 30, 2012
|
|
|
$
|
205
|
|
|
September 30, 2012
|
|
|
$
|
(460
|
)
|
|
FY 2012
|
|
|
$
|
(628
|
)
|
CONTACT:
Media & Investor Relations:
ICR, Inc.
Seth
Potter, 646-277-1230
ir@glu.com
