10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from                      to                     

Commission File Number 001-33368

Glu Mobile Inc.

(Exact name of the Registrant as Specified in its Charter)

Delaware	91-2143667
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

875 Howard Street, Suite 100

San Francisco, California 94103

(Address of Principal Executive Offices, including Zip Code)

(415) 800-6100

(Registrant’s Telephone number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.0001 per share	GLUU	Nasdaq Global Select Market

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No   ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).     Yes  ☒    No   ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Shares of Glu Mobile Inc. common stock outstanding as of August 4, 2020: 170,853,481

GLU MOBILE INC.

FORM 10-Q

Quarterly Period Ended June 30, 2020

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)	3
Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	3
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and June 30, 2019	4
Condensed Consolidated Statements of Comprehensive Income/(Loss) for the Three and Six Months Ended June 30, 2020 and June 30, 2019	5
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and June 30, 2019	6
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and June 30, 2019	7
Notes to Unaudited Condensed Consolidated Financial Statements	8
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 4. CONTROLS AND PROCEDURES	35
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	36
ITEM 1A. RISK FACTORS	36
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	62
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	62
ITEM 4. MINE SAFETY DISCLOSURES	62
ITEM 5. OTHER INFORMATION	62
ITEM 6. EXHIBITS	62
SIGNATURES	65

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GLU MOBILE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except per share data)

	June 30,		December 31,
	2020		2019
ASSETS
Current assets:
Cash and cash equivalents	$	283,057	$	127,053
Accounts receivable, net		64,658		29,304
Prepaid royalties		17,633		15,347
Deferred royalties		9,489		5,067
Deferred platform commission fees		43,619		29,239
Prepaid expenses and other assets		18,125		8,629
Total current assets		436,581		214,639
Property and equipment, net		17,779		17,643
Operating lease right of use assets		33,553		35,170
Long-term prepaid royalties		22,100		26,879
Other long-term assets		2,738		2,733
Intangible assets, net		2,983		4,758
Goodwill		116,227		116,227
Total assets	$	631,961	$	418,049
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	27,331	$	17,535
Accrued compensation		15,752		11,260
Accrued royalties		15,987		20,802
Short-term operating lease liabilities		4,434		3,528
Deferred revenue		145,498		97,629
Total current liabilities		209,002		150,754
Long-term accrued royalties		20,783		26,842
Long-term operating lease liabilities		36,877		37,351
Other long-term liabilities		325		15
Total liabilities		266,987		214,962
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000 shares authorized at June 30, 2020 and December 31, 2019; no shares issued and outstanding at June 30, 2020 and December 31, 2019		—		—
Common stock, $0.0001 par value; 250,000 shares authorized at June 30, 2020 and December 31, 2019; 170,709 and 147,778 shares issued and outstanding at June 30, 2020 and December 31, 2019		17		15
Additional paid-in capital		813,468		634,721
Accumulated other comprehensive loss		(60)		(37)
Accumulated deficit		(448,451)		(431,612)
Total stockholders’ equity		364,974		203,087
Total liabilities and stockholders’ equity	$	631,961	$	418,049

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

3

GLU MOBILE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Revenue	$	133,316	$	95,540	$	240,590	$	191,425
Cost of revenue:
Platform commissions, royalties and other		46,727		32,806		83,701		66,076
Amortization of intangible assets		887		1,056		1,775		2,308
Total cost of revenue		47,614		33,862		85,476		68,384
Gross profit		85,702		61,678		155,114		123,041
Operating expenses:
Research and development		28,420		19,736		57,951		46,282
Sales and marketing		65,203		35,040		107,946		63,145
General and administrative		7,266		4,951		13,933		11,586
Total operating expenses		100,889		59,727		179,830		121,013
Income/(loss) from operations		(15,187)		1,951		(24,716)		2,028
Interest and other income, net		434		556		369		1,320
Income/(loss) before income taxes		(14,753)		2,507		(24,347)		3,348
Income tax benefit/(provision)		6,187		—		7,508		(178)
Net income/(loss)	$	(8,566)	$	2,507	$	(16,839)	$	3,170
Net income/(loss) per common share - basic	$	(0.05)	$	0.02	$	(0.11)	$	0.02
Net income/(loss) per common share - diluted	$	(0.05)	$	0.02	$	(0.11)	$	0.02
Weighted average common shares outstanding:
Basic		156,583		145,451		153,106		144,951
Diluted		156,583		159,682		153,106		159,556

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

4

GLU MOBILE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Unaudited)

(in thousands)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net income/(loss)	$	(8,566)	$	2,507	$	(16,839)	$	3,170
Other comprehensive income/(loss):
Foreign currency translation adjustments		—		(30)		(23)		(15)
Other comprehensive income/(loss)		—		(30)		(23)		(15)
Comprehensive income/(loss)	$	(8,566)	$	2,477	$	(16,862)	$	3,155

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

5

GLU MOBILE INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands)

						Accumulated
						Other
				Additional		Compre-				Total
	Common Stock			Paid-In		hensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Loss		Deficit		Equity
Balances at December 31, 2019	147,778	$	15	$	634,721	$	(37)	$	(431,612)	$	203,087
Net loss	-		-		-		-		(8,273)		(8,273)
Stock-based compensation expense	-		-		6,238		-		-		6,238
Issuance of common stock upon exercise of stock options	2,921		-		9,526		-		-		9,526
Issuance of common stock upon exercise of warrants	115		-		-		-		-		-
Taxes paid related to net share settlement of equity awards	320		-		(1,720)		-		-		(1,720)
Issuance of common stock pursuant to Employee Stock Purchase Plan	450		-		1,705		-		-		1,705
Other comprehensive loss	-		-		-		(23)		-		(23)
Balances at March 31, 2020	151,584	$	15	$	650,470	$	(60)	$	(439,885)	$	210,540
Net loss	-		-				-		(8,566)		(8,566)
Stock-based compensation expense	-		-		7,620		-		-		7,620
Issuance of common stock upon exercise of stock options	1,464		-		5,347		-		-		5,347
Taxes paid related to net share settlement of equity awards	411		-		(1,740)		-		-		(1,740)
Issuance of common stock upon follow-on public offering, net of issuance costs	17,250		2		151,771		-		-		151,773
Balances at June 30, 2020	170,709	$	17	$	813,468	$	(60)	$	(448,451)	$	364,974
						Accumulated
						Other
				Additional		Compre-				Total
	Common Stock			Paid-In		hensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Income/(Loss)		Deficit		Equity
Balances at December 31, 2018	143,870	$	14	$	617,781	$	1	$	(440,483)	$	177,313
Net income	-		-		-		-		663		663
Stock-based compensation expense	-		-		6,807		-		-		6,807
Issuance of common stock upon exercise of stock options	468		-		1,313		-		-		1,313
Taxes paid related to net share settlement of equity awards	560		1		(3,957)		-		-		(3,956)
Issuance of common stock pursuant to Employee Stock Purchase Plan	278		-		1,665		-		-		1,665
Other comprehensive income	-		-		-		15		-		15
Balances at March 31, 2019	145,176	$	15	$	623,609	$	16	$	(439,820)	$	183,820
Net income	-		-		-		-		2,507		2,507
Stock-based compensation expense	-		-		2,035		-		-		2,035
Issuance of common stock upon exercise of stock options	209		-		469		-		-		469
Taxes paid related to net share settlement of equity awards	399		-		(2,461)		-		-		(2,461)
Other comprehensive loss	-		-		-		(30)		-		(30)
Balances at June 30, 2019	145,784	$	15	$	623,652	$	(14)	$	(437,313)	$	186,340

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements

6

GLU MOBILE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net income/(loss)	$	(16,839)	$	3,170
Adjustments to reconcile net income/(loss) to net cash used in operating activities:
Stock-based compensation		14,488		8,842
Depreciation		2,709		2,088
Non-cash lease expense		2,013		1,409
Amortization of intangible assets		1,775		2,308
Other non-cash adjustments		225		448
Changes in operating assets and liabilities:				—
Accounts receivable		(35,310)		(12,782)
Prepaid royalties		(6,562)		(578)
Deferred royalties		(4,422)		(475)
Deferred platform commission fees		(14,380)		(752)
Prepaid expenses and other assets		(9,599)		70
Accounts payable and other accrued liabilities		12,052		13,648
Accrued compensation		4,492		(10,367)
Accrued royalties		(1,962)		(1,760)
Deferred revenue		47,869		3,084
Other long-term liabilities		310		12
Operating lease liabilities		134		(1,476)
Net cash provided by/(used in) operating activities		(3,007)		6,889
Cash flows from investing activities:
Purchase of property and equipment		(5,733)		(2,127)
Other investing activities		—		(155)
Net cash used in investing activities		(5,733)		(2,282)
Cash flows from financing activities:
Proceeds from exercise of stock options and purchases under the ESPP		16,578		3,447
Proceeds from follow-on public offering, net of issuance costs		151,773		—
Taxes paid related to net share settlement of equity awards		(3,460)		(6,417)
Net cash provided by/(used in) financing activities		164,891		(2,970)
Effect of exchange rate changes on cash		(147)		(83)
Net increase in cash, cash equivalents and restricted cash		156,004		1,554
Cash, cash equivalents and restricted cash at beginning of period		127,053		97,944
Cash, cash equivalents at end of period	$	283,057	$	99,498

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

7

GLU MOBILE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar and share amounts in thousands, except per share data)

Note 1 — The Company, Basis of Presentation and Summary of Significant Accounting Policies

Glu Mobile Inc. (the “Company” or “Glu”) was incorporated in the state of Nevada in May 2001 and reincorporated in the state of Delaware in March 2007. The Company develops, publishes, and markets a portfolio of games designed for users of smartphones and tablet devices who download and make purchases within its games through direct-to-consumer digital storefronts, such as the Apple App Store, Google Play Store and others (“Digital Storefronts”). The Company creates games based on its own original brands, as well as third-party licensed brands, properties and other content.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 28, 2020. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, which the Company believes are necessary for a fair statement of the Company’s financial position as of June 30, 2020 and its condensed consolidated results of operations for the three and six months ended June 30, 2020 and 2019, respectively. These unaudited condensed consolidated financial statements are not necessarily indicative of the results to be expected for the entire year. The condensed consolidated balance sheet presented as of December 31, 2019 has been derived from the audited consolidated financial statements as of that date, and the condensed consolidated balance sheet presented as of June 30, 2020 has been derived from the unaudited condensed consolidated financial statements as of that date. Certain prior year balances have been reclassified to conform to the current year presentation. Such reclassifications did not materially affect revenue, operating income/(loss), net income/(loss), cash flows, total assets, total liabilities or stockholders’ equity.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its unaudited condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Estimates and assumptions reflected in the unaudited condensed consolidated financial statements include, but are not limited to, estimation of the average playing period of paying users associated with durable virtual items, the allowance for doubtful accounts, useful lives of property and equipment and intangible assets, valuation and realizability of deferred tax assets and uncertain tax positions, fair value of stock awards issued, fair value of warrants issued, accounting for business combinations, evaluating goodwill, long-lived assets for impairment, and realization of prepaid royalties and fair value of investments. Actual results may differ from these estimates due to risks and uncertainties, and these differences may be material, including uncertainty in the current economic environment due to the novel strain of coronavirus, SARS-CoV-2 (“COVID-19”) pandemic. Management will continue to actively monitor the impact of the COVID-19 pandemic on the Company’s assumptions and estimates.

8

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and accounts receivable.

The Company derives its accounts receivable from revenue earned from customers located worldwide. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers. The Company bases its allowance for doubtful accounts on management’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company writes off accounts receivable balances against the allowance when it determines that the amount will not be recovered.

The following table summarizes the revenue from customers in excess of 10% of the Company’s revenue:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Apple	55.5	%	52.6	%	56.4	%	52.8	%
Google	32.7	%	34.6	%	32.3	%	34.4	%

At June 30, 2020, Apple Inc. (“Apple”) and Google Inc. (“Google”) accounted for 66.1% and 20.4%, respectively, of total accounts receivable. At December 31, 2019, Apple, Google, and Tapjoy Inc. (“Tapjoy”) accounted for 47.2%, 28.5%, and 17.8%, respectively, of total accounts receivable. No other customer or Digital Storefront represented more than 10% of the Company’s total accounts receivable as of these dates.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost and replaces the existing incurred loss impairment model with an expected loss methodology, which will result in earlier recognition of credit losses. The ASU requires a cumulative-effect adjustment to retained earnings transition approach and is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This new accounting standard update simplifies the measurement of goodwill by eliminating the Step 2 impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The new guidance requires an entity to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, limited to the amount of goodwill. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.  The new guidance becomes effective for goodwill impairment tests in fiscal years beginning after December 15, 2019. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This guidance adds, modifies and removes several disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with Topic 820, Fair Value Measurement. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

9

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

Note 2 — Net Income/(Loss) Per Share

The Company computes basic net income/(loss) per share by dividing its net income/(loss) for the period by the weighted average number of common shares outstanding during the period.

Diluted net loss per share for the three and six months ended June 30, 2020 has been computed by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for common share equivalents as their effect would have been antidilutive. Diluted net income per share for the three and six months ended June 30, 2019 is computed by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period, including potentially dilutive common stock instruments.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net income/(loss)	$	(8,566)	$	2,507	$	(16,839)	$	3,170
Shares used to compute net income/(loss) per share:
Weighted average shares used to compute basic net income/(loss) per share		156,583		145,451		153,106		144,951
Dilutive potential common shares		—		14,231		—		14,605
Weighted average shares used to compute diluted net income/(loss) per share		156,583		159,682		153,106		159,556
Basic net income/(loss) per share	$	(0.05)	$	0.02	$	(0.11)	$	0.02
Diluted net income/(loss) per share	$	(0.05)	$	0.02	$	(0.11)	$	0.02

10

The following equity awards outstanding at the end of each period presented have been excluded from the computation of diluted net income/(loss) per share of common stock for the periods presented because including them would have had an anti-dilutive effect: 

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Warrants to purchase common stock		1,125		—		1,125		—
Options to purchase common stock		12,751		579		12,751		579
Restricted stock units ("RSUs")		5,889		8		5,889		8
Performance stock options ("PSOs")		2,800		3,382		2,800		3,382
Performance stock units ("PSUs")		—		2,972		—		2,972
Employee stock purchase plan ("ESPP")		358		—		358		—
Total		22,923		6,941		22,923		6,941

Note 3 — Revenue from Contracts with Customers

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the three and six months ended June 30, 2020 and June 30, 2019:
​

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
In-App Purchases (over-time revenue recognition)	$	116,907	$	82,659	$	212,846	$	166,203
Advertisements and offers (point-in-time revenue recognition)		16,374		12,864		27,703		25,194
Other (point-in-time revenue recognition)		35		17		41		28
Total revenue	$	133,316	$	95,540	$	240,590	$	191,425

The Company operates in a single reportable segment. In the table above, revenue is disaggregated by type of revenue stream, indicating whether it is recognized over-time or at a point-in-time.

Contract Balances

The following table provides information about receivables and contract liabilities from contracts with customers:

	June 30, 2020		December 31, 2019
Receivables, which are included in accounts receivable, net	$	64,658	$	29,304
Contract liabilities, which are included in deferred revenue		145,498		97,629

The Company receives payments from customers based on billing terms established in the Company’s contracts. Contract assets relate to the Company’s right to consideration for its completed performance under the contract before the customer pays consideration or before payment is due. At June 30, 2020 and December 31, 2019, there were no contract assets recorded in the Company’s condensed consolidated balance sheets. Accounts receivable are recorded when the right to consideration becomes unconditional.

Deferred revenue relates to payments received in advance of performance under the contract.  Deferred revenue is recognized as revenue as the Company performs under the contract. The Company had $97,629 in deferred revenue as of December 31, 2019, of which $24,604 and $96,371 was recognized as revenue in the three and six months ended June 30, 2020, respectively. The Company had $85,736 in deferred revenue as of December 31, 2018, of which $21,914 and $84,612 was recognized as revenue in the three and six months ended June 30, 2019, respectively.

11

Note 4 — Fair Value Measurements

Fair Value Measurements

The Company accounts for fair value in accordance with Accounting Standard Codification 820, Fair Value Measurements and Disclosures (“ASC 820”). Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a three-tier hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s financial assets as of June 30, 2020 are presented below at fair value and were classified within the fair value hierarchy as follows:

	Level 1		Level 2		Level 3		June 30, 2020
Financial Assets
Cash and cash equivalents	$	283,057	$	—	$	—	$	283,057
Other investments		—		—		1,565		1,565
Total financial assets	$	283,057	$	—	$	1,565	$	284,622

The Company’s financial assets as of December 31, 2019 are presented below at fair value and were classified within the fair value hierarchy as follows:

	Level 1		Level 2		Level 3		December 31, 2019
Financial Assets
Cash and cash equivalents	$	127,053	$	—	$	—	$	127,053
Other investments		—		—		1,565		1,565
Total financial assets	$	127,053	$	—	$	1,565	$	128,618

The Company’s cash and cash equivalents, which were held in operating bank and money market accounts, are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. The carrying value of accounts receivable and payables approximates fair value due to the short time to expected payment or receipt of cash. The carrying value of other investments approximates fair value, and there are no unrealized gains or losses, as there have been no events or changes in circumstances that would have had a significant effect on the fair value of these investments at June 30, 2020 and December 31, 2019.

Note 5 — Balance Sheet Components

Accounts Receivable, net

	June 30,		December 31,
	2020		2019
Accounts receivable	$	64,658	$	29,304
Less: Allowance for doubtful accounts		—		—
Accounts receivable, net	$	64,658	$	29,304

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Accounts receivable includes amounts billed and unbilled as of the respective balance sheet dates, but net of platform commissions paid to the Digital Storefronts. The Company had no bad debts during the three and six months ended June 30, 2020 and 2019.

Note 6 — Goodwill and Intangible Assets

Intangible Assets

The Company’s intangible assets were acquired primarily in various acquisitions as well as in connection with the purchase of certain trademarks, brand assets and licensed content. The carrying amounts and accumulated amortization expense of the acquired intangible assets at June 30, 2020 and December 31, 2019 were as follows:

		June 30, 2020						December 31, 2019
	Estimated	Gross		Accumulated		Net		Gross		Accumulated		Net
	Useful	Carrying		Amortization		Carrying		Carrying		Amortization		Carrying
	Life	Value		Expense		Value		Value		Expense		Value
Intangible assets amortized to cost of revenue:
Titles, content and technology	3 - 5 yrs	$	21,117	$	(18,134)	$	2,983	$	21,117	$	(16,359)	$	4,758
Customer contracts and related relationships	5 yrs		700		(700)		—		700		(700)		—
Trademarks	7 yrs		5,000		(5,000)		—		5,000		(5,000)		—
		$	26,817	$	(23,834)	$	2,983	$	26,817	$	(22,059)	$	4,758

Acquisition-related intangibles included in the above table are finite-lived and are being amortized on a straight-line basis over their estimated useful lives, which approximate the pattern in which the economic benefits of the intangible assets are realized. The Company has included amortization of acquired intangible assets directly attributable to revenue-generating activities in cost of revenue.

During the three months ended June 30, 2020 and 2019, the Company recorded amortization expense in cost of revenue of $887 and $1,056, respectively. During the six months ended June 30, 2020 and 2019, the Company recorded amortization expense in cost of revenue of $1,775 and $2,308, respectively.

As of June 30, 2020, total expected future amortization related to intangible assets was as follows:

	Amortization
	to Be Included in
	Cost of
Year Ending December 31,	Revenue
2020 (remaining 6 months)	$	1,483
2021		1,500
Total intangible assets	$	2,983

Goodwill

The Company had $116,227 in goodwill as of June 30, 2020 and December 31, 2019, respectively. There were no indicators of impairment as of June 30, 2020.

Note 7 – Leases

The Company currently leases real estate space under non-cancelable operating lease agreements for its corporate headquarters in San Francisco, California and its operations in Toronto, Canada, Hyderabad, India, Foster City, California, Burlingame, California and Orlando, Florida. These operating leases have remaining lease terms ranging from 5 months to 7.42 years, some of which include the option to extend the lease, with the longest extension option being 6 years.

The Company does not include any of its renewal options when calculating its lease liability as the Company is not reasonably certain whether it will exercise these renewal options at this time. Rent expense for the three months

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ended June 30, 2020 and 2019 was $1,712 and $653, respectively. Rent expense for the six months ended June 30, 2020 and 2019 was $2,883 and $2,004, respectively.

The future minimum lease payments to be paid under noncancelable leases in effect at June 30, 2020, are as follows:

	Operating
Year Ending December 31,	Leases
2020 (remaining 6 months)		3,422
2021		7,104
2022		7,015
2023		6,980
2024 and thereafter		27,667
Total lease payments	$	52,188
Less: imputed interest		(10,877)
Total	$	41,311

Supplemental information related to the Company’s leases for the six months ended June 30, 2020 is as follows:

	June 30, 2020
Weighted average remaining lease term	7.06	yrs
Weighted average discount rate	6.7	%

	Six Months Ended
	June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	$	1,320

		Three Months Ended		Six Months Ended
	June 30, 2020		June 30, 2020
Right of use assets obtained in exchange for new lease obligations:
Operating leases	$	73	$	407

Note 8 — Commitments and Contingencies

Minimum Guaranteed Royalties and Developer Commitments

The Company has entered into license and publishing agreements with various celebrities, athletes, sports and entertainment organizations, and other well-known brands and properties to develop and publish games for mobile devices. Pursuant to some of these agreements, the Company is required to make minimum guaranteed royalty payments regardless of revenue generated by the applicable game, which may not be dependent on any deliverables. The significant majority of these minimum guaranteed royalty payments are recoupable against future royalty obligations that would otherwise become payable, or in certain circumstances, where not recoupable, are capitalized and amortized over the lesser of (1) the estimated life of the title incorporating licensed content or (2) the term of the license agreement.

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At June 30, 2020, future unpaid minimum guaranteed royalty commitments were as follows:

	Future
	Minimum
	Guarantee
Year Ending December 31,	Commitments
2020 (remaining 6 months)	$	2,660
2021		10,829
2022		6,855
2023		6,690
2024		6,150
	$	33,184

The amounts represented in the table above reflect the Company’s minimum cash obligations for the respective calendar years, but do not necessarily represent the periods in which they will be expensed in the Company’s unaudited condensed consolidated financial statements.

Licensor commitments include $31,238 of commitments due to licensors that have been recorded in current and long-term liabilities and a corresponding amount in current and long-term assets because payment is not contingent upon performance by the licensor. The classification of commitments between long-term and short-term is determined based on the timing of expected recoupment of earned royalties calculated on projected revenue for the licensed intellectual property games.

Indemnification Arrangements

The Company has entered into agreements under which it indemnifies each of its officers and directors during his or her lifetime for certain events or occurrences while the officer or director is or was serving at the Company’s request in that capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and enables the Company to recover a portion of any future amounts paid.

In the ordinary course of its business, the Company includes standard indemnification provisions in most of its commercial agreements with Digital Storefronts and licensors. Pursuant to these provisions, the Company generally indemnifies these parties for losses suffered or incurred in connection with its games, including as a result of intellectual property infringement, viruses, worms and other malicious software, and legal or regulatory violations. The term of these indemnity provisions is generally perpetual after execution of the corresponding license agreement, and the maximum potential amount of future payments the Company could be required to make under these provisions is often unlimited. To date, the Company has not incurred costs to defend lawsuits or settle indemnified claims of these types and, accordingly, has recorded no liabilities for these provisions as of June 30, 2020 and December 31, 2019.

Contingencies

From time to time, the Company is subject to various claims, complaints and legal actions in the normal course of business. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using available information. The Company’s estimate of losses is developed in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. After taking all of the above factors into account, the Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed reasonably probable and the amount can be reasonably estimated. The Company further determines whether an estimated loss from a contingency should be disclosed by assessing whether a material loss is deemed reasonably possible. Such disclosure will include an estimate of the additional loss or range of loss or will state that an estimate cannot be made.

The Company does not believe it is party to any currently pending litigation, the outcome of which is reasonably possible to have a material adverse effect on its operations, financial position or liquidity. However, the ultimate

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outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on the Company because of defense costs, potential negative publicity, diversion of management resources and other factors.

Note 9 — Stockholders’ Equity

Warrants to Purchase Common Stock

Warrants outstanding at June 30, 2020 were as follows:

	Number	Weighted
	of Shares	Average
	Outstanding	Exercise		Average
	Under	Price per		Contractual
	Warrant	Share		Term (Years)
Warrants outstanding, December 31, 2019	1,600	$	4.61	5.44
Exercised	(475)	$	4.99	5.00
Warrants outstanding, June 30, 2020	1,125	$	4.46	5.44

No expenses with respect to these warrants were recognized during the three and six months ended June 30, 2020 and 2019.

Follow-on Public Offering

In June 2020, the Company completed a follow-on public offering of 17,250 shares of its common stock, which included an over-allotment option to purchase an additional 2,250 shares, at a public offering price of $9.25 per share (the “Offering”). The aggregate gross proceeds from the Offering, including the exercise of the over-allotment, were approximately $159,563, and net proceeds received after underwriting fees and offering expenses totalled approximately $151,773. The Company does not have specific uses of the net proceeds from the Offering but intends to use the net proceeds for working capital and other general corporate purposes, which may include potential acquisitions and strategic transactions.

Note 10 — Stock Incentive Plans

2007 Equity Incentive Plan

In April 2020, the Company’s Board of Directors approved, and in June 2020, the Company’s stockholders approved, the sixth Amended and Restated 2007 Equity Incentive Plan (the “Sixth Amended 2007 Plan”). The Sixth Amended 2007 Plan included an increase of 7,000 shares in the aggregate number of shares of common stock authorized for issuance under the plan.

Performance-based equity awards

The Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) has awarded PSOs and/or PSUs to the Company’s executives and certain other employees. These performance-based awards are subject to the achievement of specified annual performance goals. They become eligible to vest only if the applicable performance goals are achieved and will vest only if the grantee remains employed with the Company through each applicable vesting date. The number of shares that may vest depend on the extent to which the Company achieves the specified annual performance goals. The fair value of these awards is estimated on the date of grant. The PSOs have a contractual term of 10 years. If the performance goals are not met as of the end of the performance period, no compensation expense is recognized, and any previously recognized expense is reversed. The expected cost is based on the awards that are probable to vest and is recognized over the service period.

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2007 Employee Stock Purchase Plan

In April 2017, the Company’s Board of Directors approved, and in June 2017, the Company’s stockholders approved, the Amended and Restated 2007 Employee Stock Purchase Plan (the “Amended 2007 Purchase Plan”). The Amended 2007 Purchase Plan included an increase of 4,000 shares in the aggregate number of shares of common stock authorized for issuance under the plan and removal of the expiration date of the plan.

2018 Equity Inducement Plan

In April 2018, the Compensation Committee of the Company’s Board of Directors adopted the 2018 Equity Inducement Plan (the “2018 Plan”). The 2018 Plan replaced the Company’s 2008 Equity Inducement Plan that expired by its terms in March 2018, and is intended to augment the shares available for issuance under the Fourth Amended 2007 Plan. The Company did not seek stockholder approval for the 2018 Plan. As such, awards under the Inducement Plan will be granted in accordance with Nasdaq Listing Rule 5635(c)(4) and only to persons not previously considered an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such individuals entering into employment with the Company. The Company initially reserved 400 shares of common stock for issuance under the 2018 Plan.

RSU Activity

A summary of the Company’s RSU activity for the six months ended June 30, 2020 is as follows:

		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Units	Grant Date		Contractual		Intrinsic
	Outstanding	Fair Value		Term (Years)		Value
Awarded and unvested, December 31, 2019	3,951	$	5.66
Granted	3,013	$	6.40
Vested	(885)	$	4.88
Forfeited	(190)	$	5.78
Awarded and unvested, June 30, 2020	5,889	$	6.15	1.73	$	54,592

PSU Activity

A summary of the Company’s PSU activity for the six months ended June 30, 2020 is as follows:

		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Units	Grant Date		Contractual		Intrinsic
	Outstanding	Fair Value		Term (Years)		Value
Awarded and unvested, December 31, 2019	5,417	$	6.06
Vested	(276)	$	3.61
Forfeited	(1,370)	$	6.85
Awarded and unvested, June 30, 2020	3,771	$	5.95	1.24	$	34,953
PSUs expected to vest at June 30, 2020	1,625	$	5.56	0.63	$	15,068

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PSO Activity

A summary of the Company’s PSO activity for the six months ended June 30, 2020 is as follows:

		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Shares	Exercise		Contractual		Intrinsic
	Outstanding	Price		Term (Years)		Value
Balance as of December 31, 2019	6,583	$	4.54
Canceled	(1,377)	$	6.18
Exercised	(948)	$	3.61
Balance as of June 30, 2020	4,258	$	4.21	7.53	$	21,531
PSOs expected to vest at June 30, 2020	526	$	3.60	7.35	$	2,984
PSOs exercisable at June 30, 2020	2,800	$	3.59	7.30	$	15,892

Stock Option Activity

The following table summarizes the Company’s stock option activity for the six months ended June 30, 2020:

	Options Outstanding
		Weighted		Weighted
	Number	Average		Average Remaining	Aggregate
	of	Exercise		Contractual	Intrinsic
	Shares	Price		Term (Years)	Value
Balances at December 31, 2019	16,288	$	3.56
Options granted	210	$	9.00
Options canceled	(287)	$	5.35
Options exercised	(3,460)	$	3.36
Balances at June 30, 2020	12,751	$	3.66	6.98	$	71,487
Options exercisable at June 30, 2020	8,619	$	3.28	6.71	$	51,668

The aggregate intrinsic value in the preceding table is calculated as the difference between the exercise price of the underlying awards and the quoted closing price of the Company’s common stock on The Nasdaq Global Select Market of $9.27 per share as of June 30, 2020 (the last trading day in the quarter). Cash proceeds, net of taxes, from option exercises were $14,873 and $860 during the six months ended June 30, 2020 and 2019, respectively.

Stock-Based Compensation

The cost of RSUs and PSUs are determined using the fair value of the Company’s common stock based on the quoted closing price of the Company’s common stock on the date of grant. RSUs typically vest and are settled over approximately a four-year period with 25% of the shares vesting on or around the one-year anniversary of the grant date and the remaining shares vesting quarterly thereafter. Compensation cost for stock options, RSUs and performance-based awards with a single vesting date is amortized ratably over the requisite service period. For performance-based awards that have multiple vesting dates, the compensation cost is recognized ratably over the requisite service period for each tranche, whereby each vesting tranche is treated as a separate award for determining the requisite service period. The compensation cost for performance-based awards may be adjusted over the vesting period based on interim estimates of performance against the pre-set financial performance measures.

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Under Accounting Standard Codification 718, Compensation-Stock Compensation (“ASC 718”), the Company estimated the fair value of each option award on the grant date using the Black-Scholes option valuation model and the weighted average assumptions noted in the following tables:

Stock Options
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Dividend yield	—	%	—	%	—	%	—	%
Risk-free interest rate	0.28	%	2.07	%	0.28	%	2.15	%
Expected volatility	69.3	%	56.1	%	69.3	%	56.1	%
Expected term (years)	4.00		4.00		4.00		4.00

The expected term of stock options gave consideration to early exercises, post-vesting cancellations and the options’ contractual term ranging from 6 to 10 years. The Company based its expected volatility on its own historical volatility. The Company did not grant any PSOs during the three and six months ended June 30, 2020 and 2019. The weighted-average fair value of stock options granted during the three and six months ended June 30, 2020 was $4.63 per share. The weighted-average fair value of stock options granted during the three and six months ended June 30, 2019 was $3.88 and $3.94 per share, respectively.

The following table summarizes the consolidated stock-based compensation expense by line items in the condensed consolidated statement of operations:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Research and development (1)	$	5,298	$	1,128	$	9,260	$	5,074
Sales and marketing		1,013		55		1,888		881
General and administrative		1,795		852		3,340		2,887
Total stock-based compensation expense (2)	$	8,106	$	2,035	$	14,488	$	8,842

(1) For the three and six months ended June 30, 2020, stock-based compensation expense recorded in research and development includes $486 and $630 from PSUs classified as liabilities.

(2) Stock-based compensation expense for the three and six months ended June 30, 2019 included a reversal of previously accrued expense of $2,526 due to a decrease in the vesting probability of certain performance-based equity awards.

The following table summarizes total compensation expense related to unvested awards not yet recognized as of June 30, 2020:

	Unrecognized Compensation
	Expense for Unvested
	Awards
Stock options	$	8,276
RSUs		33,063
PSUs (1)		7,048
PSOs		638
Total unrecognized compensation expense	$	49,025

(1) The unrecognized compensation expense for PSUs classified as equity and vesting in fiscal years 2022 and 2023, except for PSUs classified as liabilities, is excluded in the table above as the Company does not have a reasonable basis upon which to estimate the vesting probability of such awards in those future periods.

The unrecognized compensation expense related to stock options and RSUs will be recognized over a weighted average period of 1.47 years and 3.30 years, respectively. The unrecognized compensation expense related to PSOs and PSUs, except for performance awards classified as equity and vesting in fiscal years 2022 and 2023, will be recognized over a weighted average period of 0.63 years.

Note 11 – Income Taxes

The Company recorded an income tax benefit of $6,187 and $7,508 for the three and six months ended June 30, 2020, respectively, and an income tax expense of $0 and $178 for the three and six months ended June 30, 2019,

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respectively. The change in income tax provision was primarily due to changes in pretax income (loss) in the United States and certain foreign entities and changes in tax rates. The income tax rates vary from the Federal and State statutory rates due to the valuation allowances on the Company’s net operating losses, foreign tax rate differences and withholding taxes. The Company computes its quarterly income tax provision by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter.

The Company accounts for uncertain tax positions in accordance with Accounting Standards Codification 740, Income Taxes (“ASC 740”).  As of June 30, 2020, and December 31, 2019, the total amount of unrecognized tax benefits was $16,440 and $15,084, respectively. These unrecognized tax benefits are currently included in the Company’s deferred tax assets, which are subject to full valuation allowance. As such, these unrecognized tax benefits, if recognized, would not have an impact on the Company’s effective tax rate.

The Company is subject to taxation in the United States and various foreign jurisdictions. The material jurisdictions subject to examination by tax authorities are primarily the State of California, United States, Canada, and India. The Company’s federal tax returns are open by statute for tax years 1998 and forward and California tax returns are open by statute for tax years 2003 and forward and could be subject to examination by the tax authorities. The Company’s income tax returns in its international locations are open by statute for tax years 2012 and forward.

The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are to be reinvested indefinitely outside the U.S. 

Note 12 — Segment Information and Operations by Geographic Area

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”), or decision making group, whose function is to allocate resources to and assess the performance of the operating segments. The Company has identified its Chief Executive Officer as the CODM. The Company operates in a single operating segment. The financial information reviewed by the CODM is included within one operating segment for purposes of allocating resources and evaluating financial performance.

The following tables set forth revenue and long-lived assets based on geography:

Revenue

Revenue by geography is primarily based on the geographic location of the Company’s payers. International revenue is revenue generated from distributors and advertising service providers whose principal operations are located outside the United States or, in the case of the Digital Storefronts, the revenue generated from end-user purchases made outside of the United States.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
United States of America	$	104,377	$	73,835	$	188,385	$	146,703
Americas, excluding the United States		7,827		5,979		14,447		12,197
EMEA		14,715		10,902		26,573		22,430
APAC		6,397		4,824		11,185		10,095
Total revenue	$	133,316	$	95,540	$	240,590	$	191,425

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Long-Lived Assets

The Company attributes its long-lived assets, which primarily consist of property and equipment, to a country primarily based on the physical location of the assets. Property and equipment, net of accumulated depreciation and amortization, summarized by geographic location was as follows:

	June 30,		December 31,
	2020		2019
United States of America	$	16,812	$	16,738
Rest of the World		967		905
Total	$	17,779	$	17,643

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (1) the unaudited condensed consolidated financial statements and related notes contained elsewhere in this report and (2) the audited consolidated financial statements and related notes and the Management’s Discussion and Analysis of Financial Condition and Results of Operations section, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2020. The information in this discussion and elsewhere in this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements are based upon current expectations that involve risks and uncertainties, including risks and uncertainty around the impact of the COVID-19 pandemic. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words “may,” “will,” “believe,” “anticipate,” “plan,”, “expect,” “intend,” “could,” “estimate,” “continue” and similar expressions or variations identify forward-looking statements.

Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a discrepancy include, but are not limited to, those discussed elsewhere in this report, particularly in the section titled “Risk Factors” set forth in Part II, Item 1A of this report. All forward-looking statements in this report are based on information available to us as of the date hereof, and we assume no obligation to update any such forward-looking statements to reflect future events or circumstances, except as required by law.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, includes the following sections:

● An Overview that discusses at a high level our operating results and some of the trends that affect our business;

● Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments underlying our financial statements;

● Recent Accounting Pronouncements;

● Results of Operations, including a more detailed discussion of our revenue and expenses; and

● Liquidity and Capital Resources, which discusses key aspects of our statements of cash flows, changes in our balance sheets and our financial commitments.

Overview

This overview provides a high-level discussion of our operating results and some of the trends that affect our business. We believe that an understanding of these trends is important to understanding our financial results for the

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three and six months ended June 30, 2020, as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this report, including our unaudited condensed consolidated financial statements and accompanying notes.  

Impact of the COVID-19 Pandemic

The extent of the impact of the current COVID-19 pandemic on our operational and financial performance continues to depend on certain developments, including the duration and spread of the outbreak, the impact on our employees, and the effect on the global economy, all of which are uncertain and cannot be predicted. Although we were able to successfully launch two new games, MLB Tap Sports Baseball 2020 and Disney Sorcerer’s Arena, in March 2020 and have been publishing updates and running live operations for our games while our global workforce has been working from home, we believe that if our employees are required to work from home for many months, and potentially into 2021, it could ultimately negatively impact game development. During the second quarter of 2020, we benefitted from a reduction in CPIs (costs per install), particularly during the month of April, with CPIs increasing beginning in May, though remaining below historical averages. In response to this favorable CPI environment, we increased our investment in user acquisition, which resulted in an increase in the daily active users in many of our games and contributed to a significant increase in our bookings. However, CPIs have reverted to near historical norms and the daily active users of our games have declined from the peaks we experienced in May. Accordingly, we expect our bookings for the third quarter of 2020 to decline from our second quarter bookings. In addition, we may experience adverse impacts from changes in how we and companies worldwide conduct business due to the COVID-19 pandemic, including restrictions on travel and in-person meetings. As of the filing date of this Form 10-Q, the extent to which COVID-19 may impact our financial condition, results of operations or guidance is uncertain. The effects of the COVID-19 pandemic will not be fully reflected in our results of operations and overall financial performance until future periods. See “Risk Factors” included elsewhere in this report for further discussion of the possible impact of the COVID-19 pandemic on our business.

Financial Results and Trends

Revenue for the three months ended June 30, 2020 was $133.3 million, a 39.5% increase compared to the three months ended June 30, 2019, in which we reported revenue of $95.5 million. The increase was primarily related to an increase in revenue from Design Home, Covet Fashion, the Tap Sports Baseball franchise, Diner DASH Adventures, and Kim Kardashian: Hollywood, as well as the worldwide launch of Disney Sorcerer’s Arena in the first quarter of 2020. These increases were partially offset by declining revenue on a year-over-year basis from catalog titles such as Cooking Dash, Restaurant Dash with Gordon Ramsay, Deer Hunter 2018 (originally launched as Deer Hunter 2016), and Diner Dash.

We have concentrated our product development efforts towards developing games for smartphone and tablet devices. We generate the majority of our revenue from Apple’s iOS platform, which accounted for 61.2% and 59.7% of our total revenue for the three months ended June 30, 2020 and 2019, respectively, and 61.9% and 60.1% for the six months ended June 30, 2020 and 2019, respectively. We generated the majority of this iOS-related revenue through the Apple App Store, which represented 55.5% and 52.6% of our total revenue for the three months ended June 30, 2020 and 2019, respectively, and 56.4% and 52.8% for the six months ended June 30, 2020 and 2019, respectively, with the significant majority of such revenue derived from in-app purchases. We generated the balance of our iOS-related revenue from offers and advertisements in games distributed on the Apple App Store. In addition, from the Android platform, we generated approximately 38.7% and 40.2% of our total revenue for the three months ended June 30, 2020 and 2019, respectively, and 38.0% and 39.7% of our total revenue for the six months ended June 30, 2020 and 2019, respectively. We generated the majority of our Android-related revenue through the Google Play Store, which represented 32.7% and 34.6% of our total revenue for the three months ended June 30, 2020 and 2019, respectively, and 32.3% and 34.4% of our total revenue for the six months ended June 30, 2020 and 2019, respectively, with the significant majority of such revenue derived from in-app purchases. We generated the balance of our Android-related revenue from other platforms that distribute apps that run the Android operating system (e.g., the Amazon App Store) and through offers and advertisements in games distributed through the Google Play Store and other Android platforms.

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We currently publish titles primarily in four genres: lifestyle, casual, mid-core, and sports and outdoors. We believe these are genres in which we have already established a leadership position, are otherwise aligned with our strengths or are conducive to the establishment of a strong growth game. Across genres, we view our titles as either growth games or catalog games. Growth games are titles that we continue to update with additional content and features and which we expect to grow revenue year over year. We continue to update some of our catalog titles with additional content and features, whereas on others we expend little to no investment in terms of updates and enhancements.

We established our leadership position in the lifestyle genre through our acquisition of Crowdstar Inc. (“Crowdstar”) in November 2016 and its successful Covet Fashion title, and extended our leadership with our global release of Design Home in November 2016. We introduced key updates for Design Home in 2019 and the first six months of 2020, including elite events for elder players, improved series challenges, language localization in German, French and Spanish, and meta game functionality, and are planning further key updates for this title, including the introduction of e-commerce functionality and the availability of a browser-enabled version of the game. The casual genre includes our Kim Kardashian: Hollywood title; in April 2020, we extended the term of our license agreement with Ms. Kardashian West for an additional 3.5 years through the end of 2023. The casual genre also includes our Cooking Dash and Diner DASH franchises, and our leadership position in this genre was bolstered by our worldwide launch of Diner DASH Adventures in June 2019. The mid-core genre includes our Disney Sorcerer’s Arena title that launched worldwide in March 2020. Our leadership in the sports and outdoors category remains strong with our Tap Sports Baseball and Deer Hunter franchises. In March 2020, we furthered our leadership in this genre with the launch of MLB Tap Sports Baseball 2020 in more than 100 countries (prior versions of the Tap Sports Baseball franchise were only available in the United States, Canada, United Kingdom, Germany and Australia). MLB Tap Sports Baseball 2020 includes licensed content from Major League Baseball, or MLB, together with current and former MLB players pursuant to our continuing agreements with the Major League Baseball Players Association, and Major League Baseball Players Alumni Association, contains new features and content, including authentic major league stadiums, a skill-based home run mode and a new cover athlete.  We expect to add to our portfolio of sports and outdoor titles through the worldwide release of the next iteration of our Deer Hunter franchise.

We believe that our games consistently have high production values, are visually appealing and have engaging core gameplay. These characteristics have typically helped to drive installs and awareness of our games and resulted in highly positive consumer reviews. The majority of our games have been featured on the Apple and Google storefronts when they were commercially released, which we believe is the result of us being a good partner of Apple and Google.   

We work closely with our celebrity and brand licensors to engage their social media audiences and build games that will resonate with their unique fan bases.  For example, our Kim Kardashian: Hollywood title utilizes transmedia storytelling, leveraging Ms. Kardashian West’s built-in social media fan base to drive installs and awareness of the game, and then attempting to surprise and delight those fans with real-world events and other game content based on her life.  Our goal is for the game content to become entwined with Ms. Kardashian West’s persona and social media presence, and to otherwise enhance interaction with her fans. We also leverage the strength of well-known brands and licensors to provide users with more realistic experiences, such as the case with MLB Tap Sports Baseball 2020 which features all MLB clubs and uniforms, current and former MLB players and real MLB stadiums, or with our Disney Sorcerer’s Arena title, which includes characters from the Disney and Pixar universes. We also work to build and nurture social communities in and around the games themselves, creating a new vehicle for strong, personal engagement with the brand or celebrity’s fan base.   

For us to continue driving installs and awareness of our games and to improve monetization and retention of our players, we must ensure that each of our games has compelling gameplay and a deep meta game that motivates users to continue to play our games for months or even years. In addition, we must regularly update our games with compelling new content, deliver socio-competitive features like tournaments, contests, player-versus-player gameplay and live events, and build and nurture communities around our franchises both in-game and holistically via community features such as dedicated social channels. We have also made significant investments in our proprietary analytics and revenue technology infrastructure.  With our enhanced analytics capabilities, we intend to devote resources towards segmenting and learning more about the players of each of our franchises and further monetizing our highest spending and most engaged players.  We aim to connect our analytics and revenue technology infrastructure to multiple elements of our business – from marketing to merchandising – in order to improve player retention and monetization.

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We also plan to continue monitoring the successful aspects of our games to drive downloads and enhance monetization and retention as part of our product strategy, whether by optimizing advertising revenue within each title, securing additional compelling licensing arrangements, building enhanced and more complex core gameplay, adding deep meta game features and through enhancing our live operations. Optimizing advertising revenue within our games requires us to continue taking advantage of positive trends in the mobile advertising space. Continuing to drive installs and awareness of our games through licensing efforts requires that we continue to partner with brands, celebrities and social influencers that resonate with potential players of our games.  Partnering with desirable licensing partners and renewing our existing licenses with our most successful partners requires that we continue to develop successful games based on licensed content and are able to compete with other mobile gaming companies on financial and other terms in signing such partners.  We also plan to continue introducing third-party licensed brands, properties and personalities into our games as additional licensed content, for cameo appearances or for limited time events in order to drive awareness and monetization. 

Across the globe, our industry is evidencing that hit titles generally remain higher in the top grossing charts for longer.  We believe this is due to the continued specialization and investment of teams and companies in their hit titles, and the live, social nature of certain games. Our strategy and the measures we have implemented to support our business position us to take advantage of these trends, as evidenced by the continued strength and year-over-year growth of Design Home, Covet Fashion and the Tap Sports Baseball franchise. We plan to continue to regularly update and otherwise support our growth games in order to ensure that those games monetize and retain users for even longer periods of time. In addition, we plan to continue to invest in our creative leaders and the creative environments in which they and their teams work to increase our likelihood of creating significant hit growth games. 

Our net loss in the three months ended June 30, 2020 was $8.6 million versus net income of $2.5 million in the three months ended June 30, 2019. This change was primarily due to an increase in sales and marketing expenses of $30.2 million, an increase in cost of revenue of $13.8 million, an increase in research and development expenses of $8.7 million, and an increase in general and administrative expenses of $2.3 million, partially offset by an increase in revenue of $37.8 million and a change from tax expense to a tax benefit of $6.2 million. See “—Results of Operations—Comparison of the Three Months Ended June 30, 2020 and 2019” below for further details.

Our net loss in the six months ended June 30, 2020 was $16.8 million versus net income of $3.2 million in the six months ended June 30, 2019. This change was primarily due to an increase in sales and marketing expenses of $44.8 million, an increase in cost of revenue of $17.1 million, an increase in research and development expenses of $11.7 million, an increase in general and administrative expenses of $2.3 million, and a decrease in interest and other income, net of $951,000, partially offset by an increase in revenue of $49.2 million and a change from tax expense to a tax benefit of $7.5 million. See “—Results of Operations—Comparison of the Six Months Ended June 30, 2020 and 2019” below for further details.

Our ability to achieve, sustain and increase profitability depends not only on our ability to grow our revenue, but also on our ability to manage our operating expenses. We significantly increased our sales and marketing expenditures during the first six months of 2020 compared to the first six months of 2019. This increase largely related to higher marketing spend for most of our successful titles as well as for user acquisition expenditures related to the global launch of Disney Sorcerer’s Arena, and we increased our planned user acquisition spend during the second quarter of 2020 to capitalize on the lower CPI environment that resulted from the COVID-19 pandemic. Our increased sales and marketing expenses may impair our ability to achieve and sustain profitability if this spending does not result in increased revenues over the longer term. Additionally, the largest component of our recurring expenses is personnel costs, which consist of salaries, benefits and incentive compensation, including bonuses and stock-based compensation. In the remainder of 2020, we expect that our operating costs will decrease as we reduce our user acquisition costs for our games due to an expected less favorable CPI environment compared to the first half of the year.

Cash and cash equivalents at June 30, 2020 totaled $283.1 million, an increase of $156.0 million from the $127.1 million balance at December 31, 2019. This increase was primarily related to $164.9 million of cash provided by financing activities, including $151.8 million, net of expenses, received from the Offering in June 2020, partially offset by $5.7 million cash used in investing activities, and $3.0 million cash used in operating activities.

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Key Financial Metrics

Revenue and Bookings

GAAP revenue increased $37.8 million, or 39.5%, from $95.5 million for the three months ended June 30, 2019 to $133.3 million for the three months ended June 30, 2020. GAAP revenue increased $49.2 million, or 25.7%, from $191.4 million for the six months ended June 30, 2019 to $240.6 million for the six months ended June 30, 2020. The increases were primarily related to our growth games, namely Design Home, Covet Fashion, and the Tap Sports Baseball franchise, as well as the launch of Diner DASH Adventures and WWE Universe in the second quarter of 2019, and Disney Sorcerer’s Arena in the first quarter of 2020.

 Bookings is a non-GAAP financial measure that is equal to the total revenue we recognize in a given period, plus the net change in deferred revenue during the period. We initially record the sale of virtual items within our games as deferred revenue and then recognize that revenue over the estimated average playing period of paying users. Revenue from advertisements and offers are recognized at the point in time the advertisements are displayed in the game or the offer has been completed by the user, as the user simultaneously receives and consumes the benefits provided from these services. We believe bookings is a useful indicator of the sales activity in a given period and use bookings to evaluate the results of our operations, generate future operating plans and assess the performance of our company.

While we believe that bookings are useful in evaluating our business, this information should be considered as supplemental in nature and is not intended to be considered in isolation of, as a substitute for, or as superior to, revenue recognized in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate bookings differently or not at all, which may reduce its usefulness as a comparative measure.

The following table presents a reconciliation of total revenue to total bookings for each of the three and six months ended June 30, 2020 and June 30, 2019:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Reconciliation of Revenue to Bookings:	(dollars in thousands)
Revenue	$	133,316	$	95,540	$	240,590	$	191,425
Change in deferred revenue		48,672		6,380		47,869		3,084
Bookings	$	181,988	$	101,920	$	288,459	$	194,509

Key Operating Metrics

We manage our business by tracking various non-financial operating metrics that give us insight into user behavior in our games. The four metrics that we use most frequently are Daily Active Users (DAU), Monthly Active Users (MAU), Average Bookings Per Daily Active User (ABPDAU) and Average Revenue Per Daily Active User (ARPDAU). Our methodology for calculating DAU, MAU, ABPDAU and ARPDAU may differ from the methodology used by other companies to calculate similar metrics.

DAU is the number of individuals who played a particular smartphone game on a particular day. An individual who plays two different games on the same day is counted as two active users for that day when we aggregate DAU across games. In addition, an individual who plays the same game on two different devices during the same day (e.g., an iPhone and an iPad) is also counted as two active users for each such day when we average or aggregate DAU over time. Average DAU for a particular period is the average of the DAUs for each day during that period. We use DAU as a measure of player engagement with the titles that our players have downloaded.

MAU is the number of individuals who played a particular smartphone game in the month for which we are calculating the metric. An individual who plays two different games in the same month is counted as two active users for that month when we aggregate MAU across games. In addition, an individual who plays the same game on two different devices during the same month (e.g., an iPhone and an iPad) is also counted as two active users for each such

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month when we average or aggregate MAU over time. Average MAU for a particular period is the average of the MAUs for each month during that period. We use the ratio between DAU and MAU as a measure of player retention.

ABPDAU is total free-to-play smartphone bookings – consisting of micro-transactions, advertisements and offers – for the measurement period, divided by the number of days in that period, divided by the number of DAU during the period. ABPDAU reflects game monetization based on bookings which does not reflect any deferral of revenue derived from the sale of virtual items within our games.

ARPDAU is total free-to-play smartphone revenue – consisting of micro-transactions, advertisements and offers – for the measurement period divided by the number of days in the measurement period divided by the DAU for the measurement period. ARPDAU reflects game monetization. Under our revenue recognition policy, we recognize this revenue over the estimated average playing period of a user, but our methodology for calculating our DAU does not align with our revenue recognition policy for micro-transactions and offers, under which we defer revenue. For example, if a title is introduced in the last month of a quarter, we defer a substantial portion of the micro-transaction and offer revenue to future months, but the entire DAU for the newly released title is included in the month of launch.

We calculate DAU, MAU, ABPDAU and ARPDAU for only our primary distribution platforms, Apple’s App Store, the Google Play Store and Amazon’s Appstore, as well as from Facebook for certain titles; we are not able to calculate these metrics across all of our distribution channels. In addition, the platforms that we include for purposes of this calculation have changed over time, and we expect that they will continue to change as our business evolves, but we do not expect that we will adjust prior metrics to take any such additions or deletions of distribution platforms into account. We believe that calculating these metrics for only our primary distribution platforms at a given period is generally representative of the metrics for all of our distribution platforms. Moreover, we rely on the data analytics software that we incorporate into our games to calculate and report the DAU, MAU, ABPDAU and ARPDAU of our games, and we make certain adjustments to the analytics data to address inconsistencies between the information as reported and our DAU and MAU calculation methodology.

We have estimated the DAU and MAU for certain older titles because the analytics tools incorporated into those titles are incompatible with newer device operating systems (e.g., iOS 13), preventing us from collecting complete data. For these titles, we estimate DAU and MAU by extrapolating from each affected title’s historical data using a fixed decay rate in light of the behavior of similar titles for which we had complete data.

As of January 1, 2019, we began calculating DAU and MAU using the average of each month during the period rather than our historical practice of calculating these metrics based on the last month of the period. For example, DAU for the three months ended June 30, 2020 is calculated as an average of aggregate daily DAU for the months of April 2020, May 2020 and June 2020 calculated for all active smartphone free-to-play titles during those months across the distribution platforms for which we calculate the metric. We adopted this new methodology because we believe that it provides a more accurate representation of overall DAU and MAU for the applicable period and more closely aligns with the methodology used by other companies in the gaming industry to calculate similar metrics.

		Three Months Ended,
		2020				2019
		Jun 30		Mar 31		Jun 30		Mar 31
Aggregate DAU (in thousands)		3,788		3,048		3,230		3,150
Aggregate MAU (in thousands)		20,194		17,774		19,065		19,118
Aggregate ARPDAU	$	0.39	$	0.39	$	0.33	$	0.34
Aggregate ABPDAU	$	0.53	$	0.38	$	0.35	$	0.33

The increase in aggregate DAU and MAU for the three months ended June 30, 2020 as compared to the same period of the prior year was primarily related to higher downloads across our portfolio of games and an increase in aggregate DAU and MAU attributable to our new title launches in 2020, MLB Tap Sports Baseball 2020 and Disney Sorcerer’s Arena.

Our aggregate ARPDAU and ABPDAU increased for the three months ended June 30, 2020 as compared to the

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same period of the prior year, as we improved monetization on certain titles, particularly through increased content updates and use of social features in those games. Future increases in our aggregate DAU, MAU, ARPDAU and ABPDAU will depend on our ability to retain current players, attract new paying players, launch new games and expand into new markets and distribution platforms.

We rely on a very small portion of our total users for nearly all of our revenue derived from in-app purchases. Since the launch of our first free-to-play titles in the fourth quarter of 2010, the percentage of unique paying users for our largest revenue-generating free-to-play games has typically been less than 5%, when measured as the number of unique paying users on a given day divided by the number of unique users on that day, though this percentage fluctuates, and it may be higher than 5% for certain of our games during specific, relatively short time periods, such as immediately following worldwide launch or the week following content updates, marketing campaigns or certain other events.

Critical Accounting Policies and Estimates

A summary of our critical accounting policies is presented in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019. Information with respect to changes in our critical accounting policies can be found in Note 1 of the Notes to the unaudited condensed consolidated financial statements in this report, which information is incorporated herein by reference.

Significant Transactions

Follow-on Public Offering

In June 2020, we completed a follow-on public offering of 17,250,000 shares of our common stock, which included an over-allotment option to purchase an additional 2,250,000 shares, at a public offering price of $9.25 per share (the “Offering”). The aggregate gross proceeds from the Offering, including the exercise of the over-allotment, were approximately $159.6 million, and net proceeds received after underwriting fees and offering expenses totalled approximately $151.8 million. We do not have specific uses of the net proceeds from the Offering but intend to use the net proceeds for working capital and other general corporate purposes, which may include potential acquisitions and strategic transactions.

Recent Accounting Pronouncements

Information with respect to recent accounting pronouncements may be found in Note 1 of the Notes to the unaudited condensed consolidated financial statements in this report, which information is incorporated herein by reference.

Results of Operations

The following sections discuss and analyze the changes in the significant line items in our statements of operations for the comparison periods identified.

Comparison of the Three Months Ended June 30, 2020 and 2019

Revenue

	Three Months Ended June 30,
	2020		2019		% Change
Revenue by Type	(dollars in thousands)
In-App Purchases	$	116,907	$	82,659		41.4%
Advertisements and Offers		16,374		12,864		27.3%
Other		35		17		103.9%
Total revenue	$	133,316	$	95,540		39.5%

Our revenue increased $37.8 million, or 39.5%, from $95.5 million for the three months ended June 30, 2019 to $133.3 million for the three months ended June 30, 2020, which was primarily comprised of a $34.2 million increase in

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our revenue from micro-transactions (in-app purchases) and an increase of $3.5 million in our revenue from advertisements and offers. The increase in revenue from micro-transactions was primarily related to an increase in revenue from our growth games, namely Design Home, Covet Fashion, and the Tap Sports Baseball franchise, as well as the worldwide launch of new titles Diner DASH Adventures and WWE Universe in the second quarter of 2019, and Disney Sorcerer’s Arena in the first quarter of 2020. Revenue from our growth games increased by $16.7 million during the three months ended June 30, 2020 compared to the three months ended June 30, 2019. Revenue from new titles launched in 2019 and 2020 increased by $18.2 million during the three months ended June 30, 2020 compared to the three months ended June 30, 2019. Revenue from our catalog titles increased by a net $2.9 million during the three months ended June 30, 2020 compared to the three months ended June 30, 2019, due to increased revenue from Kim Kardashian: Hollywood that was partially offset by declining revenue from our other catalog titles. The increase in revenue from advertisements and offers was primarily due to the increase in aggregate DAU.

During the three months ended June 30, 2020, Design Home, the Tap Sports Baseball franchise, Covet Fashion, and Kim Kardashian: Hollywood were our top four revenue-generating games and comprised 39.2%, 16.8%, 14.1%, and 10.2%, respectively, of our revenue for the period. During the three months ended June 30, 2019, Design Home, the Tap Sports Baseball franchise, and Covet Fashion, were our top three revenue-generating games and comprised 44.6%, 20.0% and 15.8%, respectively, of our revenue for the period. No other game generated more than 10% of revenue during the three months ended June 30, 2020 and 2019.

International revenue (generated from distributors and advertising service providers whose principal operations are located outside the United States or, in the case of the digital storefronts, the revenue generated from end-user purchases made outside of the United States) increased by $7.2 million from $21.7 million in the three months ended June 30, 2019 to $28.9 million in the three months ended June 30, 2020. This increase was primarily due to an increase in aggregate DAU.

Cost of Revenue

	Three Months Ended June 30,
	2020			2019			% Change
Cost of revenue:	(dollars in thousands)
Platform commissions, royalties and other	$	46,727		$	32,806			42.4%
Amortization of intangible assets		887			1,056			(16.0%)
Total cost of revenue	$	47,614		$	33,862			40.6%
Revenue	$	133,316		$	95,540			39.5%
Gross margin		64.3	%		64.6	%

Our cost of revenue increased $13.8 million, or 40.6%, from $33.9 million in the three months ended June 30, 2019 to $47.6 million in the three months ended June 30, 2020. This was primarily due to an increase of $10.5 million in platform commission and hosting fees resulting from a higher volume of revenue transactions through the digital storefronts. This increase was partially offset by a $169,000 decrease in amortization of intangible assets.

The royalties we paid to licensors increased by $3.3 million, or 52.3%, from $6.2 million in the three months ended June 30, 2019 to $9.5 million in the three months ended June 30, 2020. The increase was due to a growth in revenue from royalty burdened titles.

Research and Development Expenses

	Three Months Ended June 30,
	2020			2019			% Change
		(dollars in thousands)
Research and development expenses	$	28,420		$	19,736			44.0%
Percentage of revenue		21.3	%		20.7	%

Our research and development expenses increased $8.7 million, or 44.0%, from $19.7 million in the three months ended June 30, 2019 to $28.4 million in the three months ended June 30, 2020. This was primarily attributable to a net increase in payroll related costs of $5.8 million mainly due to the increase in headcount, payroll taxes and certain employee benefit costs, a $4.2 million increase in stock-based compensation expense mainly related to lower expense

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recorded in the three months ended June 30, 2019 due to the decrease in vesting probability of certain performance-based equity awards, a $777,000 increase in professional and outside services, and a $628,000 increase in allocated charges for equipment, facilities and depreciation. The increase in research and development expenses was partially offset by a $2.3 million research and development tax credit received and a $373,000 decrease in business travel and entertainment due to shelter in place orders resulting from the COVID-19 pandemic. As a percentage of revenue, research and development expenses increased slightly from 20.7% in the three months ended June 30, 2019 to 21.3% in the three months ended June 30, 2020. We expect our research and development expenditures to increase slightly in absolute dollars in the remainder of 2020, primarily due to expected increases in headcount and no research and development tax credit expected to be received in the second half of 2020.

Sales and Marketing Expenses

	Three Months Ended June 30,
	2020			2019			% Change
		(dollars in thousands)
Sales and marketing expenses	$	65,203		$	35,040			86.1%
Percentage of revenue		48.9	%		36.7	%

Our sales and marketing expenses increased $30.2 million, or 86.1%, from $35.0 million in the three months ended June 30, 2019 to $65.2 million in the three months ended June 30, 2020. This was primarily attributable to a $26.9 million increase in user acquisition and other marketing expenditures primarily related to a significant investment in user acquisition across our games as we sought to capitalize on the lower CPI environment that existed in April and May 2020, a $1.6 million increase in net payroll related costs mainly due to the increase in headcount and certain employee benefit costs, and a $959,000 increase in stock-based compensation expense mainly related to lower expense recorded in the three months ended June 30, 2019 due to the decrease in vesting probability of certain performance-based equity awards. As a percentage of revenue, sales and marketing expenses increased from 36.7% in the three months ended June 30, 2019 to 48.9% in the three months ended June 30, 2020. We expect that our sales and marketing expenses will decrease sequentially in the third and fourth quarters of 2020.

General and Administrative Expenses

	Three Months Ended June 30,
	2020			2019			% Change
		(dollars in thousands)
General and administrative expenses	$	7,266		$	4,951			46.8%
Percentage of revenue		5.5	%		5.2	%

Our general and administrative expenses increased $2.3 million, or 46.8%, from $5.0 million in the three months ended June 30, 2019 to $7.3 million in the three months ended June 30, 2020. The increase was primarily attributable to a $943,000 increase in stock-based compensation expense mainly related to lower expense recorded in the three months ended June 30, 2019 due to the decrease in vesting probability of certain performance-based equity awards, an $815,000 net increase in payroll related costs mainly due to the increase in headcount and certain employee benefit costs and a $456,000 increase in professional fees and expenses. As a percentage of revenue, general and administrative expenses increased from 5.2% in the three months ended June 30, 2019 to 5.5% in the three months ended June 30, 2020. We expect our general and administrative expenses to increase in absolute dollars in the remainder of 2020, primarily due to increases in headcount and certain facilities related expenses.

Interest and Other Income, Net

Interest and other income, net, decreased $122,000, or 21.9%, from $556,000 in the three months ended June 30, 2019 to $434,000 in the three months ended June 30, 2020. This was primarily attributable to lower investment and interest income earned on money market funds partially offset by foreign currency gains related to the revaluation of certain account balances during the three months ended June 30, 2020.

Income Tax Benefit/(Provision)

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Our income tax provision changed from an income tax expense of $0 in the three months ended June 30, 2019 to an income tax benefit of $6.2 million in the three months ended June 30, 2020. This change was primarily due to changes in pretax income (loss) in the United States and certain foreign entities and changes in tax rates. The provision for income taxes differs from the amount computed by applying the statutory U.S. federal rate principally due to the effect of our non-U.S. operations, non-deductible stock-based compensation expense, state taxes, and changes in foreign withholding taxes.

Comparison of the Six Months Ended June 30, 2020 and 2019

Revenue

	Six Months Ended June 30,
	2020		2019		% Change
Revenue by Type		(dollars in thousands)
In-App Purchases	$	212,846	$	166,203		28.1%
Advertisements and Offers		27,703		25,194		10.0%
Other		41		28		44.6%
Total revenue	$	240,590	$	191,425		25.7%

Our revenue increased $49.2 million, or 25.7%, from $191.4 million for the six months ended June 30, 2019 to $240.6 million for the six months ended June 30, 2020, which was primarily comprised of a $46.6 million increase in our revenue from micro-transactions (in-app purchases) and a $2.5 million increase in advertisements and offers revenues. The increase in revenue was primarily related to our growth games, namely Design Home, Covet Fashion, and the Tap Sports Baseball franchise, as well as the launch of Diner DASH Adventures and WWE Universe in the second quarter of 2019, and Disney Sorcerer’s Arena in the first quarter of 2020. Revenue from our growth games increased by $25.6 million during the six months ended June 30, 2020 compared to the six months ended June 30, 2019. Revenue from the new titles launched in 2019 and 2020 increased $27.4 million during the six months ended June 30, 2020 compared to the six months ended June 30, 2019. These increases were partially offset by a $3.8 million aggregate decline in revenue from catalog titles.

During the six months ended June 30, 2020, Design Home, the Tap Sports Baseball franchise and Covet Fashion were our top three revenue-generating games and comprised 40.9%, 17.7%  and 14.9%, respectively, of our revenue for the period. During the six months ended June 30, 2019, Design Home, the Tap Sports Baseball franchise and Covet Fashion were our top three revenue-generating games and comprised 44.8%, 18.5%  and 15.7%, respectively, of our revenue for the period. No other game generated more than 10% of revenue during the six months ended June 30, 2020 and 2019.

International revenue increased by $7.5 million, from $44.7 million in the six months ended June 30, 2019 to $52.2 million in the six months ended June 30, 2020. This increase was primarily due to increases in revenue from growth games and new title launches discussed above.

Cost of Revenue

	Six Months Ended June 30,
	2020			2019			% Change
	(dollars in thousands)
Cost of revenue:
Platform commissions, royalties and other	$	83,701		$	66,076			26.7%
Amortization of intangible assets		1,775			2,308			(23.1%)
Total cost of revenue	$	85,476		$	68,384			25.0%
Revenue	$	240,590		$	191,425
Gross margin		64.5	%		64.3	%

Our cost of revenue increased $17.1 million, or 25.0%, from $68.4 million in the six months ended June 30, 2019 to $85.5 million in the six months ended June 30, 2020. This increase was primarily due to an increase of $14.5 million in platform commission and hosting fees due to a higher volume of revenue transactions through the digital storefronts.

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The increase was partially offset by a $533,000 decrease in amortization of intangible assets and a $313,000 decrease in impairment of prepaid royalties.

The royalties we paid to licensors increased by $3.5 million, or 27.9%, from $12.4 million in the six months ended June 30, 2019 to $15.9 million in the six months ended June 30, 2020. The increase was due to a growth in revenue from royalty burdened titles.

Research and Development Expenses

	Six Months Ended June 30,
	2020			2019			% Change
	(dollars in thousands)
Research and development expenses	$	57,951		$	46,282			25.2%
Percentage of revenue		24.1	%		24.2	%

Our research and development expenses increased $11.7 million, or 25.2%, from $46.3 million in the six months ended June 30, 2019 to $58.0 million in the six months ended June 30, 2020. This was primarily attributable to a net increase in payroll related costs of $8.3 million mainly due to the increase in headcount, payroll taxes and certain employee benefit costs, a $4.2 million increase in stock-based compensation expense mainly related to lower expense recorded in the three months ended June 30, 2019 due to the decrease in vesting probability of certain performance-based equity awards, a $1.0 million increase in allocated charges for equipment, facilities and depreciation, and a $737,000 increase in professional and outside services. The increase in research and development expenses was partially offset by a $2.3 million research and development tax credit received and a $502,000 decrease in business travel and entertainment expenses due to shelter in place orders resulting from the COVID-19 pandemic. As a percentage of revenue, research and development expenses slightly decreased from 24.2% in the six months ended June 30, 2019 to 24.1% in the six months ended June 30, 2020.

Sales and Marketing Expenses

	Six Months Ended June 30,
	2020			2019			% Change
	(dollars in thousands)
Sales and marketing expenses	$	107,946		$	63,145			70.9%
Percentage of revenue		44.9	%		33.0	%

Our sales and marketing expenses increased $44.8 million, or 70.9%, from $63.1 million in the six months ended June 30, 2019 to $107.9 million in the six months ended June 30, 2020. This increase was primarily attributable to a $39.6 million increase in user acquisition and other marketing expenditures primarily related to a significant investment in user acquisition for Disney Sorcerer’s Arena and Diner DASH Adventures following these titles’ global launches in March 2020 and June 2019, respectively, as well as increased marketing expenditures for Design Home, the Tap Sports Baseball franchise, and Kim Kardashian: Hollywood as we sought to capitalize on the lower CPI environment that existed in April and May 2020, a $2.6 million increase in net payroll related costs mainly due to the increase in headcount and certain employee benefit costs, and a $1.0 million increase in stock-based compensation expense mainly related to lower expense recorded in the three months ended June 30, 2019 due to the decrease in vesting probability of certain performance-based equity awards. As a percentage of revenue, sales and marketing expenses increased from 33.0% in the six months ended June 30, 2019 to 44.9% in the six months ended June 30, 2020.

General and Administrative Expenses

	Six Months Ended June 30,
	2020			2019			% Change
	(dollars in thousands)
General and administrative expenses	$	13,933		$	11,586			20.3%
Percentage of revenue		5.8	%		6.1	%

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Our general and administrative expenses increased by $2.3 million, or 20.3%, from $11.6 million in the six months ended June 30, 2019 to $13.9 million in the six months ended June 30, 2020. The increase was primarily attributable to a $1.3 million increase in payroll related costs mainly due to the increase in headcount and certain employee benefit costs, a $571,000 increase in professional fees and expenses, a $502,000 increase in allocated charges for equipment, facilities and depreciation, and a $453,000 increase in stock-based compensation expense mainly related to lower expense recorded in the three months ended June 30, 2019 due to the decrease in vesting probability of certain performance-based equity awards. These increases were partially offset by a $357,000 decrease in consulting services expenses. As a percentage of revenue, general and administrative expenses decreased from 6.1% in the six months ended June 30, 2019 to 5.8% in the six months ended June 30, 2020.

Interest and Other Income, Net

Interest and other income, net decreased $951,000, or 72.0%, from $1.3 million in the six months ended June 30, 2019 to $369,000 in the six months ended June 30, 2020. This was primarily attributable to lower investment and interest income earned on money market funds and foreign currency losses during the six months ended June 30, 2020.

Income Tax Benefit/(Provision)

Our income tax provision changed from an income tax expense of $178,000 in the six months ended June 30, 2019 to an income tax benefit of $7.5 million in the six months ended June 30, 2020. This change was primarily due to changes in pre-tax income (loss) in the United States and certain foreign entities and changes in tax rates. The provision for income taxes differs from the amount computed by applying the statutory U.S. federal rate principally due to the effect of our non-U.S. operations, non-deductible stock-based compensation expense, state taxes, and changes in foreign withholding taxes.

Liquidity and Capital Resources

	Six Months Ended June 30,
	2020		2019
	(In thousands)
Consolidated Statement of Cash Flows Data:
Cash flows provided by/(used in) operating activities	$	(3,007)	$	6,889
Cash flows used in investing activities	$	(5,733)	$	(2,282)
Cash flows provided by/(used in) financing activities	$	164,891	$	(2,970)

Since our inception, we have generally incurred recurring losses and negative annual cash flows from operating activities. We had an accumulated deficit of $448.4 million as of June 30, 2020.

Operating Activities

In the six months ended June 30, 2020, net cash used in operating activities was $3.0 million, which was primarily due to an increase of $35.3 million in accounts receivable mainly due to the timing of payments from our customers, a $16.8 million net loss, a $14.4 million increase in deferred platform commission fees attributable to higher bookings, a $9.6 million increase in prepaid expenses and other assets, a $6.6 million increase in prepaid royalties, a $4.4 million increase in deferred royalties, and a $2.0 million decrease in accrued royalties. The total net cash used was partially offset by a $47.9 million increase in deferred revenue, a $12.1 million increase in accounts payable and other accrued liabilities mainly due to the timing of payments to our vendors, a $4.4 million increase in accrued compensation, and non-cash adjustments including $14.5 million of stock based compensation expense, $2.7 million of depreciation expense, $2.0 million of non-cash lease expense, and $1.8 million of amortization of intangible assets.

In the six months ended June 30, 2019, net cash generated from operating activities was $6.9 million, which was primarily due to an increase of $13.6 million in accounts payable and other accrued liabilities mainly due to the timing of payments to our vendors, a $3.1 million increase in deferred revenue, net income of $3.2 million and non-cash adjustments including $8.8 million of stock based compensation expense, $2.3 million of amortization of intangible assets and $2.1 million of depreciation expense. These increases were partially offset by a decrease in accrued compensation of $10.4 million mainly related to bonus payments paid in the first quarter of 2019 related to 2018

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performance, an increase of $12.8 million in accounts receivable mainly due to the timing of payments from our customers, a $1.8 million decrease in accrued royalties, a $1.5 million net decrease in lease liabilities and a $1.1 million increase in prepaid and deferred royalties.

Investing Activities

In the six months ended June 30, 2020, we used $5.7 million of cash in investing activities related to leasehold improvements and equipment purchases.

In the six months ended June 30, 2019, we used $2.3 million of cash in investing activities primarily related to property and equipment purchases of $2.1 million.

Financing Activities

In the six months ended June 30, 2020, net cash provided by financing activities was $164.9 million, which was primarily due to $151.8 million received from the Offering net of issuance costs and $16.6 million in proceeds received from option exercises and purchases under our employee stock purchase plan, partially offset by $3.5 million of taxes paid related to net share settlement of equity awards.

In the six months ended June 30, 2019, net cash used in financing activities was $3.0 million which was primarily due to $6.4 million of taxes paid related to net share settlement of equity awards offset by $3.4 million in proceeds received from option exercises and purchases under our employee stock purchase plan. 

Sufficiency of Current Cash and Cash Equivalents

Our cash and cash equivalents were $283.1 million as of June 30, 2020. Cash and cash equivalents held outside of the United States in various foreign subsidiaries were $3.6 million as of June 30, 2020, most of which were held by our Canadian and Indian subsidiaries. Under current tax laws and regulations, if cash and cash equivalents held outside the United States are distributed to the United States in the form of dividends or otherwise, we may be subject to additional U.S. income taxes and foreign withholding taxes. We have not provided deferred taxes on unremitted earnings attributable to foreign subsidiaries because these earnings are intended to be reinvested indefinitely. However, if any such balances were to be repatriated, additional U.S. federal income tax payments could result. Computation of the potential deferred tax liabilities associated with unremitted earnings deemed to be indefinitely reinvested is not practicable.

We expect to fund our operations, grow our business and satisfy our contractual obligations during the next 12 months primarily through our cash and cash equivalents, including cash generated from operations. We believe our cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next 12 months from the date of this report; however, our cash requirements for the next 12 months may be greater than we anticipate due to, among other reasons, revenue that is lower than we currently anticipate, greater than expected operating expenses, particularly with respect to our research and development and sales and marketing initiatives, use of cash to pay minimum guaranteed royalties, use of cash to pay operating lease obligations, use of cash to fund our foreign operations, and the impact of foreign currency rate changes, unanticipated limitations or timing restrictions on our ability to access funds that are held in our non-U.S. subsidiaries or any investments or acquisitions that we may decide to pursue. We expect to continue to use cash to fund operating lease obligations and minimum guaranteed royalty payments during the remainder of 2020 as milestone payments become due on games we publish and/or develop that incorporate third party licensed property, and may also use cash to fund investments and/or the purchase price of any acquisitions. If the games we develop based on such licensing arrangements fail to perform in accordance with our expectations, we may not fully recoup these minimum guaranteed royalty payments.

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We believe our existing cash and cash equivalents, including funds provided by the Offering, will provide sufficient liquidity and capital resources to meet our operational requirements and other general corporate purposes, which may include potential acquisitions and strategic transactions. If our cash sources are insufficient to satisfy our cash requirements, we may seek to raise additional capital. However, we may be unable to do so on terms that are favorable to us or at all.

Contractual Obligations

The following table is a summary of our contractual obligations as of June 30, 2020:

	Payments Due by Period from June 30, 2020
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(In thousands)
Operating lease obligations (1)	$	52,188	$	7,023	$	13,998	$	14,349	$	16,818
Guaranteed royalties (2)		33,184		13,025		13,469		6,690		—
Total contractual obligations	$	85,372	$	20,048	$	27,467	$	21,039	$	16,818

(1)The amount of a tenant improvement allowance that we expect to receive in the third quarter of 2020 for one of our office leases is netted against the future obligations amount.

(2) We have entered into license and publishing agreements with various celebrities and other owners of brands, properties and other content to develop and publish games and other software applications for mobile devices. These agreements typically require us to make non-refundable, but recoupable payments of minimum guaranteed royalties or license fees as upfront payments or over the term of the agreement.

Off-Balance Sheet Arrangements

At June 30, 2020, we did not have any significant off-balance sheet arrangements requiring disclosure under Item 303(a)(4)(ii) of Regulation S-K, other than those listed in our contractual obligations table above.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information in this section should be read in connection with the information on financial market risk related to changes in interest rates and non-U.S. currency exchange rates in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, 2019. Our market risk profile has not changed significantly during the three months ended June 30, 2020.

Interest Rate and Credit Risk

Our exposure to interest rate risk relates primarily to our investment portfolio and the potential losses arising from changes in interest rates.

We are potentially exposed to the impact of changes in interest rates as they affect interest earned on our investment portfolio. As of June 30, 2020, substantially all of our cash and cash equivalents of $283.1 million was held in operating bank and money market accounts earning nominal interest. Accordingly, we do not believe that a 10% change in interest rates would have a significant impact on our interest income, net, operating results or liquidity related to these amounts.

The primary objectives of our investment activities are, in order of importance, to preserve principal, provide liquidity and maximize income without significantly increasing risk. We do not currently use or plan to use derivative financial instruments in our investment portfolio.

As of June 30, 2020, and December 31, 2019, our cash and cash equivalents were maintained by financial institutions in the United States, Canada, Hong Kong and India and our current deposits are likely in excess of insurance limits.

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Our accounts receivable primarily relate to revenue earned from digital storefront operators and advertising platforms. We perform ongoing credit evaluations of our customers’ and the digital storefronts’ financial condition but generally require no collateral from them.

At June 30, 2020, Apple and Google accounted for 66.1% and 20.4% of total accounts receivable, respectively. At December 31, 2019, Apple, Google, and Tapjoy accounted for 47.2%, 28.5% and 17.8% of total accounts receivable, respectively. No other customer or digital storefront represented more than 10% of the Company’s total accounts receivable as of these dates.

Foreign Currency Exchange Risk

We transact business in more than 100 countries in more than 30 different currencies, and in 2019 and the first six months of 2020, some of these currencies fluctuated significantly. Our revenue is usually denominated in the functional currency of the distributor while the operating expenses of our operations outside of the United States are maintained in their local currency, with the significant operating currencies consisting of the Indian Rupee and the Canadian Dollar. Although recording operating expenses in the local currency of our foreign operations mitigates some of the exposure of foreign currency fluctuations, variances among the currencies of our customers and our foreign operations relative to the United States Dollar, or USD, could have and have had a material impact on our results of operations.

Our foreign currency exchange gains and losses have been generated primarily from fluctuations in the Indian Rupee versus the USD and the Canadian Dollar versus the USD. At month-end, non-functional currency-denominated accounts receivable and intercompany balances are marked to market and unrealized gains and losses are included in interest and other income, net. Translation adjustments arising from the use of differing exchange rates are included in accumulated other comprehensive loss in stockholders’ equity. We have in the past experienced, and in the future expect to experience, foreign currency exchange gains and losses on our accounts receivable and intercompany receivables and payables. Foreign currency exchange gains and losses could have a material adverse effect on our business, operating results and financial condition.

To date, we have not engaged in exchange rate hedging activities, and we do not expect to do so in the foreseeable future.

Inflation

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we might not be able to offset these higher costs fully through price increases. Our inability or failure to do so could harm our business, operating results and financial condition.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based upon an evaluation of the effectiveness of disclosure controls and procedures, our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures, as defined under Rule 13a-15(e) and 15d-15(e) of the Exchange Act, were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC and is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are subject to various claims, complaints and legal actions in the normal course of business.  We are not currently party to any pending litigation, the outcome of which we believe will have a material adverse effect on our operations, financial position or liquidity.  However, the ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on us because of defense costs, potential negative publicity, diversion of management resources and other factors.

Item 1A. Risk Factors

Our business is subject to many risks and uncertainties, which may affect our future financial performance. If any of the events or circumstances described below occurs, our business and financial performance could be harmed, our actual results could differ materially from our expectations and the market value of our stock could decline. The risks and uncertainties discussed below are not the only ones we face. There may be additional risks and uncertainties not currently known to us or that we currently do not believe are material that may harm our business and financial performance. Because of the risks and uncertainties discussed below, as well as other variables affecting our operating results, past financial performance should not be considered as a reliable indicator of future performance and investors should not use historical trends to anticipate results or trends in future periods.

If we fail to develop and timely publish new high-quality, engaging games and continue to enhance our existing games, particularly our most successful games, our revenue would suffer.

Our business depends on developing and publishing mobile games that consumers will download and spend time and money playing.  We must continue to invest significant resources in research and development, technology, analytics and marketing to introduce new games and continue to update our successful games, and we often must make decisions about these matters well in advance of a product’s release to timely implement them. Our success depends, in part, on unpredictable and volatile factors beyond our control, including consumer preferences and the number of applications they are willing to download to and maintain on their devices, competing gaming and non-gaming related applications, new mobile platforms and the availability of other entertainment activities.  If our games do not meet consumer expectations, or they are not brought to market in a timely and effective manner, our business, operating results and financial condition would be harmed. It can be difficult for us to predict with certainty when we will launch a new game as games may require longer development schedules or beta testing periods to meet our quality standards and our players’ expectations. For example, in 2018, we decided to delay the worldwide launch dates of WWE Universe and Diner DASH Adventures to May and June 2019, respectively, in order to give the development teams additional time to work on these titles. In August 2019 and August 2020, respectively, we announced that we were delaying the expected worldwide launch dates of Disney Sorcerer’s Arena and Deer Hunter World for similar reasons. While Diner DASH Adventures has been commercially successful, WWE Universe has performed significantly below our expectations, and it is possible that Disney Sorcerer’s Arena will not generate significant revenue on a long-term basis despite its initial success following worldwide launch. Furthermore, our future game launches could also be delayed, they may not be successful when launched, or we may decide to not globally launch a game at all if its performance during beta testing does not meet our quality standards (as might be the case with our Originals title), any of which would likely harm our business, operating results and financial condition. 

Even if our games are successfully introduced in a timely fashion and initially adopted, a failure to continually update them with compelling content or a subsequent shift in the entertainment preferences of consumers could cause a decline in our games’ popularity that could materially reduce our revenue and harm our business, operating results and financial condition, which effect would be magnified for our most successful games and, in particular, Design Home.  In connection with our product strategy, we have committed significant resources to updating, adding new features to and enhancing our existing titles as opposed to launching as many new titles as we have in prior years.  However, we may not be successful in doing so, such as was the case with our update of Covet Fashion in the first quarter of 2017 or as may be the case with our plan to introduce e-commerce functionality into Design Home in 2020.  It is difficult to predict when and how quickly the popularity and revenue of one of our games will decline, and if any of our key growth games

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experience any such unexpected declines, we may not meet our expectations or the expectations of securities analysts or investors for a given quarter. Furthermore, we compete for the discretionary spending of consumers, who face a vast array of entertainment choices, including social media and other non-gaming related apps, games played on personal computers and consoles, television, movies, sports and the Internet.  If we are unable to sustain sufficient interest in our games compared to other forms of entertainment, our business and financial results would be seriously harmed.

In addition to the market factors noted above, our ability to successfully develop and launch games for mobile devices and their ability to achieve and maintain commercial success will depend on our ability to:

● minimize launch delays and cost overruns on the development of new games and features;

● successfully enhance and increase the revenue we generate from our existing growth games;

● effectively market and monetize our games;

● achieve a positive return on investment from our marketing and user acquisition efforts;

● sustain sufficient interest in our games compared to other forms of entertainment for our players

● adapt to new technologies and feature sets for mobile and other devices;

● attract and retain experienced and talented employees

● compete successfully against a large and growing number of existing market participants;

● minimize and quickly resolve bugs and outages; and

● acquire and successfully integrate high quality mobile game assets, personnel or companies. 

We have recently implemented a work from home policy for all of our workforce as a result of the current COVID-19 pandemic, which may have a substantial impact on employee attendance, morale and productivity, disrupt access to facilities, equipment, networks, corporate systems, books and records and may add additional expenses and strain on our business. The duration and extent of the impact from the coronavirus outbreak on our business depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions and the impact of these and other factors on our employees. While we were able to successfully launch MLB Tap Sports Baseball 2020 and Disney Sorcerer’s Arena in March 2020 while our workforce was working from home and have been publishing updates and running live operations for our games, we believe that if our employees are required to work from home for many months, it could ultimately negatively impact game development and potentially result in delays in launching new games or releasing significant product updates.

These and other uncertainties make it difficult to know whether we will succeed in continuing to develop, launch and enhance successful mobile games in accordance with our operating plan. If we do not succeed in doing so, our business, financial condition, results of operations and reputation will suffer.

Successfully developing and monetizing free-to-play games is a challenging business model.

We face significant challenges in achieving our goal of becoming the leading developer and publisher of free-to-play mobile games.  Successful free-to-play games tend to include competitive gameplay, deep meta game features, player versus player activities, regularly updated content and other complex technological and creative attributes.  While we are working to include such features in our games, we may not successfully update our games to include these features or they may not be well received by our players. For example, the significant update to Racing Rivals that we released in the fourth quarter of 2016 was poorly received by players, led to a significant decline in revenue and ultimately contributed to our decision to sunset this title on April 1, 2019. If we are unable to successfully implement our

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product strategy, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected. Additionally, our existing games compete with our new offerings and the offerings of our competitors, and revenue from our existing catalog games has declined over time, a trend that we expect to continue.

Our efforts to develop new growth games and enhance our existing growth games may prove unsuccessful or, even if successful, it may take more time than we anticipate to achieve significant revenue because, among other reasons:

● our strategy assumes that a large number of players will download our games because they are free and that we will then be able to effectively monetize the games; however, players may not widely download our games for a variety of reasons, including:

● the increasing competition throughout the mobile gaming industry for downloads, not only with other mobile games but also with social media and other non-gaming related applications;

● limits on the number of mobile applications players are willing to download to and maintain on their devices;

● poor consumer reviews or other negative publicity;

● ineffective or insufficient marketing efforts, particularly since we intend to continue to test new user acquisition channels which may be ineffective or whose return on investment may not be as directly measurable as our traditional user acquisition campaigns;

● lack of sufficient social and community features;

● lack of prominent storefront featuring;

● failure to reach and maintain Top Free App Store rankings; and

● the relatively large file size of some of our games; in particular, our games often utilize a significant amount of the available memory on a user’s device and tend to consume additional space as players advance through our games, which may cause players to delete our games once the file size grows beyond the capacity of their devices’ storage limitations;

● even if our games are widely downloaded, we may fail to retain users or optimize the monetization of these games; this may occur for a variety of reasons, including poor game design or quality, lack of social and community features, gameplay issues such as game unavailability, long load times or an unexpected termination of the game due to data server or other technical issues, lack of differentiation from predecessor games or other competitive games, lack of innovative features that surprise and delight our players, differences in user demographics and purchasing power or our failure to effectively respond and adapt to changing user preferences through game updates;

● future games that we release may fail to resonate with consumers and games that incorporate licensed property may not be financially successful due to the minimum guaranteed royalty payments to our licensors;

● we intend to continue to develop games based upon our own intellectual property, in addition to well-known licensed brands and properties, and we may encounter difficulties in generating sufficient consumer interest in and downloads of our original intellectual property games;

● many well-funded public and private companies have released, or plan to release, games in the same genres as our growth games or games incorporating the same licensed brands that we use in our games (e.g., Disney/Pixar), and this competition will make it more difficult for us to differentiate our games and derive

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significant revenue from them;

● we may have difficulty hiring the experienced monetization, live operations, server technology, data analyst, user experience, game designer, and product management personnel that we require to develop our new games and support our existing growth and catalog games, particularly in the competitive hiring market in the San Francisco Bay Area where our headquarters is located, or may face difficulties in developing our technology platform and incorporating it into our products or developing unique gameplay;

● we depend on the proper and continued functioning of our own servers and third-party infrastructure to operate our connected games that are delivered as a service; and

● the impact of potential regulatory issues, including:

● various jurisdictions are assessing the legality of “loot boxes” which are commonly used in some of our top games. The Federal Trade Commission (“FTC”) held a public workshop in August 2019 to examine consumer protection issues related to loot boxes. If the FTC or a comparable regulatory or legislative body in another jurisdiction determines that loot boxes constitute gambling or otherwise elects to regulate the use of loot boxes, we may be required to stop utilizing loot boxes within our games that are distributed in such jurisdictions, which would negatively impact our revenues;

● the FTC has previously indicated that it intends to review issues related to in-app purchases, particularly with respect to games that are marketed primarily to minors, and the FTC might issue rules significantly restricting or even prohibiting in-app purchases or name us as a defendant in a future regulatory action or lawsuit; and

● various legislators, administrative bodies and courts, primarily in Europe, have taken actions (including imposing fines) or may be considering taking actions (including antitrust enforcement) against Apple and Google, which are our primary distribution platforms, and Facebook, which is our primary user acquisition channel.

If we do not achieve a sufficient return on our investment with respect to our free-to-play business model, it will negatively affect our operating results and may require us to formulate a new business strategy.

The markets in which we operate are highly competitive, many of our competitors have significantly greater resources than we do, and our players may prefer our competitors’ products or competing forms of entertainment.

Developing, distributing and selling mobile games is a highly competitive business, characterized by frequent product introductions and rapidly emerging new platforms, technologies and storefronts.  For players, we compete primarily on the basis of game quality, brand and customer reviews.  We compete for space on user’s smartphones and tablet devices in terms of the number of applications on their device and the amount of storage consumed by such applications.  We also compete more generally for the time, attention and discretionary spending of users of smartphones and tablet devices who are spending ever-increasing amounts of time on social media, messaging and music, movie and television streaming applications, personal computer and console games, sports and the Internet. We compete for promotional and digital storefront placement based on our relationship with the digital storefront owner, historical performance, game quality, perception of sales potential, customer reviews and relationships with licensors of brands and other content.  For content licensors, we compete based on royalty and other economic terms, historical financial performance of prior licensed content titles, perceptions of development quality, speed of execution, distribution breadth and relationships with storefront owners.  We also compete for experienced and talented employees.

We compete with a continually increasing number of companies, including Activision (the parent company of King Digital Entertainment), Disney, Electronic Arts (EA Mobile), Gameloft, Netmarble (including its Kabam Games subsidiary), Rovio, Stillfront, Warner Brothers, and Zynga and many well-funded private companies, including AppLovin, Epic Games, Firecraft Studios, Jam City, Miniclip, Niantic, Playrix, Pocket Gems, Scopely, and

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Supercell.  In addition, hyper-casual games published by companies such as Ketchapp, Lion Studios, and Voodoo account for a significant and growing percentage of mobile gaming downloads.

We also face competition from online game developers and distributors who are primarily focused on specific international markets.  We could also face increased competition if those companies choose to compete more directly in the United States or the other markets that are significant to us or if large companies with significant online presences such as Apple, Google, Amazon, Facebook, Microsoft or Verizon, choose to enter or expand in the games space or develop competing games.  For example, Apple recently launched its Apple Arcade subscription service in which users receive access to a curated selection of paid titles on the App Store, and Google recently launched its Stadia cloud gaming service in which users can stream games to various devices as well as announced plans to open a new first-party gaming studio that will be creating exclusive games for Stadia. In addition, we also face competition from mobile applications and websites focused on the home design market, which may include games, e-commerce titles, design applications and others seeking to displace our Design Home title which is a leading title in the currently unsaturated home design application market. Competitors in this space include, or may include, established game developers, established real estate companies, interior design companies, e-commerce companies and other well-funded private companies looking to enter the home design market.  Given the open nature of the development and distribution for smartphones and tablets and the relatively low barriers to entry, we also compete or will compete with a vast number of small companies and individuals who are able to create and launch games and other content for these devices using relatively limited resources and with relatively limited start-up time or expertise.  As an example of the competition that we face, it has been estimated that more than 4.3 million applications, including more than 900,000 active games, were available on Apple’s U.S. App Store as of July 31, 2020. The proliferation of titles in these open developer channels makes it difficult for us to differentiate ourselves from other developers and to compete for players without substantially increasing our marketing expenses and development costs.

We also compete for downloads and time spent on mobile devices with companies that develop popular social media and messaging applications, such as Facebook (with its Facebook, Facebook Messenger, Instagram, WhatsApp and other applications), Pinterest, Reddit, Snapchat, TikTok, Twitter, and YouTube, companies that develop streaming music, movie and television applications, such as Pandora, Spotify, Tidal, HBO Go, Netflix, Amazon Prime and Hulu, and with companies that create other non-gaming related software applications.

Some of our competitors and our potential competitors have one or more advantages over us, either globally or in particular geographic markets, which include:

●significantly greater financial resources;

●the ability or willingness to spend significantly more than we do to acquire new players, which may be due to competitors having games with higher lifetime values than our games (i.e., the amount of money the average paying player spends in the competitor’s game over the player’s lifetime is greater than in our games) or where a competitor is willing to pay to acquire users in a manner that does not have a positive return on investment in an effort to increase its revenues and/or user base;

●greater experience with free-to-play games, building and maintaining growth games, and building social and community features into mobile games, as well as more effective game monetization;

●stronger brand and consumer recognition regionally or worldwide;

●the capacity to leverage their marketing expenditures across a broader portfolio of mobile and non-mobile products;

●larger installed user bases from their existing mobile games;

●larger installed user bases from related platforms, such as console gaming or social networking websites, to which they can market and sell mobile games;

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●more substantial intellectual property of their own from which they can develop games without having to pay royalties;

●lower labor and development costs and better overall economies of scale;

●greater platform-specific focus, experience and expertise;

●broader global distribution and presence; and

●greater talent, both in overall headcount and in terms of experience in creating successful titles.

If we are unable to compete effectively or we are not as successful as our competitors in our target markets, our sales could decline, our margins could decline, and we could lose market share, any of which would materially harm our business, operating results and financial condition.

We rely on a very small portion of our total players for nearly all of our revenue that we derive from in-app purchases.

We rely on a very small portion of our total players for nearly all of our revenue derived from in-app purchases (as opposed to advertisements and incentivized offers) and installation rates and user-growth have declined for us with our most recent product launches.  The percentage of unique paying players for our largest revenue-generating free-to-play games has typically been less than 5%, when measured as the number of unique paying users on a given day divided by the number of unique users on that day, though this percentage fluctuates, and it may be higher than 5% for some of our games during specific, relatively short time periods, such as immediately following worldwide launch, during special events or following content updates or marketing campaigns.  To significantly increase our revenue, we must increase the number of downloads of our games, increase the number of players who convert into paying players by making in-app purchases or enrolling in subscriptions, increase the amount that our paying players spend in our games and/or increase the length of time our players generally play our games.  We might not succeed in our efforts to increase the monetization rates of our users, particularly if we do not increase the amount of social features in our games or otherwise improve our games though updates and live operations. In addition, if the current COVID-19 pandemic results in an economic downturn, our users may reduce their discretionary spending and our revenues could suffer. If we are unable to convert non-paying players into paying players, or if we are unable to retain our paying players or if the average amount of revenue that we generate from our players does not increase or declines, our business may not grow, our financial results will suffer, and our stock price may decline. 

We have depended on a small number of growth games for a significant portion of our revenue in recent fiscal periods.  If these games do not continue to grow or we do not release highly successful new games, our revenue would decline. 

In the mobile gaming industry, new games are frequently introduced, but a relatively small number of games account for a significant portion of industry sales. Similarly, a significant portion of our revenue comes from a limited number of games, although the games in that group have shifted over time. Our top three titles for the six months ended June 30, 2020, Design Home, the Tap Sports Baseball franchise, and Covet Fashion, each accounted for greater than 10% of our revenue in the period and collectively generated approximately 73.5% of our revenue during the period, while our top three titles for the first six months ended June 30, 2019, Design Home, the Tap Sports Baseball franchise, and Covet Fashion, each accounted for greater than 10% of our revenue in the period and collectively generated approximately 79.0% of our revenue during the period. We expect our dependency on a small number of games, and in particular Design Home, for a majority of our revenue will continue for the foreseeable future. The current COVID-19 pandemic has resulted in the delay and shortening of the Major League Baseball season, which we believe has at least somewhat negatively impacted downloads of and revenues from our MLB Tap Sports Baseball 2020 game. If the Major League Baseball season is further shortened or is unable to be completed, it could result in revenues from MLB Tap Sports Baseball 2020 declining from the prior year’s version. In addition, if we are unable to grow bookings from Disney Sorcerer’s Arena or Diner DASH Adventures so that they become growth games, or if any games that we launch in the near future are not successful, it could result in an overall decline in our revenues and cause us to continue

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to rely primarily on our existing growth games for a significant majority of revenues during 2020 and beyond.

We derive the majority of our revenue from Apple’s App Store and the Google Play Store, and if we are unable to maintain a good relationship with each of Apple and Google or if either of these storefronts were unavailable for any prolonged period of time, our business will suffer.

The majority of our smartphone revenue has historically been derived from Apple’s iOS platform, which accounted for 61.9% of our total revenue for the six months ended June 30, 2020 compared with 60.1% for the six months ended June 30, 2019.  We generated the majority of this iOS-related revenue from the Apple App Store, which represented 56.4% and 52.8% of our total revenue for the six months ended June 30, 2020 and 2019, respectively, with the significant majority of such revenue derived from in-app purchases. We generated the balance of our iOS-related revenue from offers and advertisements in games distributed on the Apple App Store. In addition, we derived approximately 38.0% and 39.7% of our total revenue for the six months ended June 30, 2020 and 2019, respectively, from the Android platform. We generated the majority of our Android-related revenue from the Google Play Store, which represented 32.3% and 34.4% of our total revenue for the six months ended June 30, 2020 and 2019, respectively, with the significant majority of such revenue derived from in-app purchases. We believe that we have good relationships with each of Apple and Google, which have contributed to the majority of our games released in the last several years being featured on their respective storefronts upon worldwide commercial release.  If we do not continue to receive prominent featuring, users may find it more difficult to discover our games and we may not generate significant revenue from them.  We may also be required to spend significantly more on marketing campaigns to generate substantial revenue on these platforms. Additionally, our efforts to advertise through search advertisements in the Apple App Store may not be successful and may not result in additional users or monetization. In addition, currently neither Apple nor Google charge a publisher when it features one of their apps. If either Apple or Google were to charge publishers to feature an app, it could cause our marketing expenses to increase considerably.  Accordingly, any change or deterioration in our relationship with Apple or Google could materially harm our business and likely cause our stock price to decline.  

We also rely on the continued functioning of the Apple App Store and the Google Play Store.  In the past, these digital storefronts have been unavailable for short periods of time or experienced issues with their in-app purchasing functionality. If such events recur on a prolonged basis or other similar issues arise that impact our ability to generate revenue from these storefronts, it would have a material adverse effect on our revenue and operating results.  In addition, if the storefront operators fail to provide high levels of service, our players’ ability to access our games may be interrupted or players may not receive the virtual currency or goods for which they have paid, which may adversely affect our brand, revenue and operating results. 

The operators of digital storefronts on which we publish our free-to-play games and the advertising channels through which we acquire some of our players in many cases have the unilateral ability to change and interpret the terms of our and others’ contracts with them.

We distribute our free-to-play games through direct-to-consumer digital storefronts, for which the distribution terms and conditions are often “click through” agreements that we are not able to negotiate with the storefront operator.  For example, we are subject to each of Apple’s and Google’s standard click-through terms and conditions for application developers, which govern the promotion, distribution and operation of apps, including our games, on their storefronts.  Each of Apple and Google can unilaterally change its standard terms and conditions, including platform commission fees, with no prior notice to us.  In addition, the agreement terms can be vague and subject to changing interpretations by the storefront operator.  Further, these storefront operators typically have the right to prohibit a developer from distributing its applications on its storefront if the developer violates its standard terms and conditions.  For example, in April 2019, Apple enforced new guidelines relating to offerwalls which has negatively impacted our revenues from offers in our games; Apple enforced similar guidelines with respect to offerwalls in January 2018 relating to Design Home. In addition, in the fourth quarter of 2017, Apple updated its terms of service to require publishers to disclose a player’s odds of winning the various items contained within loot boxes, and in May 2019 Google updated its terms of service to require substantially similar disclosure.  Glu utilizes loot boxes in many of its current games and the games it intends to release in the future, and it is possible that these disclosure requirements will negatively impact the monetization of these titles. If Apple or Google, or any other key storefront operator, determines that we or one of our key vendors are violating its standard terms and conditions, by a new interpretation or otherwise, or

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prohibits us from distributing our games on its storefront, it would materially harm our business and likely cause our stock price to significantly decline.

Furthermore, any changes to the advertising channels through which we acquire some of our players, including any changes by Facebook of its advertising platform, which we rely on for a majority of our user acquisition activities, could negatively impact our revenue or otherwise materially harm our business, and we may not receive significant or any advance warning of such changes.

The manufacturers of mobile devices on which our free-to-play games can be played have the unilateral ability to change the hardware or software of their devices which may negatively affect our business.

Our games are played on mobile devices manufactured by third parties. We have no influence on the hardware or software of these devices and any changes to them might negatively impact our business. Mobile devices contain identifiers for advertisers (“IDFAs”) which currently are shared with the publishers of the applications on a mobile device. Publishers use these IDFAs for a variety of business purposes, among others for measuring advertising, generating advertising revenue, performing application user level analytics, and targeting users in marketing campaigns. In June 2020, Apple announced that starting with its new iOS 14 operating system, which is scheduled to be available in Fall 2020, the IDFAs of Apple’s mobile devices will no longer be available by default to mobile application publishers. Instead, the IDFA will only be accessible to the application publisher if a user gives the publisher permission to access his or her IDFA by expressly consenting to this access. We expect only a minority of users who upgrade their Apple devices to iOS 14 will consent to us accessing their IDFA. This may lead to a number of challenges including:

●we may have difficulty measuring the effectiveness of our user acquisition campaigns;

●we may have difficulty optimizing user acquisition campaigns to deliver return on investment;

●we may have difficulty projecting the potential return of our user acquisition campaigns;

●we may see a negative impact to our advertising revenue;

●we may encounter challenges migrating from IDFA to other identifiers for the purposes of analytics thereby introducing risk to our core data infrastructure;

●we may have difficulties formulating new marketing strategies that are as effective as the IDFA-driven marketing strategies we currently employ; and

●we may encounter challenges updating a wide variety of software development kits utilized across our portfolio of games to be in compliance with iOS14.

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These challenges might negatively impact our revenue or otherwise materially harm our business.

It is becoming increasingly difficult and more expensive for us to acquire players for our games and we may not achieve a positive return on investment on our user acquisition efforts.

It is becoming increasingly difficult and more expensive for us to acquire players for our games for a variety of reasons, including the increasingly competitive nature of the mobile gaming industry and the significant amount of time and attention users are dedicating to competing entertainment options, including social media and other non-gaming applications. In addition, we believe that changes that Apple has implemented during the last several years to its platform, particularly the removal of the Top Grossing rankings and decreasing the prominence of the Top Free rankings, has negatively impacted the number of organic downloads of our games. These factors have contributed to an overall decline in our daily and monthly active users for our existing games as well as fewer players downloading our new games than in the past despite our substantially increased spending on user acquisition efforts. For example, our launch of Diner DASH Adventures in June 2019 resulted in significantly fewer downloads than prior versions of our Dash franchise such as Cooking Dash and Restaurant Dash with Gordon Ramsay. While the COVID-19 pandemic resulted in a reduction in CPIs (costs per install) and an increase in the daily active users in many of our games during April and May 2020, we believe that this effect may be temporary as CPIs have reverted to near historical norms and the daily active users of our games have declined from the peaks we experienced in May, and we believe that the trend of increasing CPIs and declining daily and monthly active users may persist over the longer term. If the number of players who download our new title launches does not meet our expectations, in particular for the next iteration of our Deer Hunter franchise, our revenues and operating results will suffer. Our existing successful growth games are not immune to these trends, as we experienced significantly higher CPIs for Design Home and Covet Fashion during the first half of 2019 due to substantial increases in spending by several competitors, which negatively impacted the revenue and margins for these titles. Furthermore, our spending on user acquisition is designed so that we will achieve a positive return on investment – that is, we expect that the amount we spend to acquire users in our games will be less than the revenue we ultimately generate from such acquired users. In order to determine the expected revenue from acquired users who may play our games for multiple years, we often must make certain assumptions about their projected spending behavior, particularly for new games like Disney Sorcerer’s Arena for which we do not have similar games in our portfolio to aid us in our modeling efforts. To the extent that we do not achieve a positive return on investment on our user acquisition spending, it will negatively impact our margins and overall operating results.

We have a history of net losses, may incur substantial net losses in the future and may not achieve and sustain profitability or growth in future periods.

We have incurred significant losses since inception, including a net loss of $16.8 million for the six months ended June 30, 2020. As of June 30, 2020, we had an accumulated deficit of $448.4 million. While we conducted several restructurings in the past, which measures were aimed at reducing our fixed costs and operating more efficiently, our costs may continue to rise as we implement additional initiatives designed to increase revenue, potentially including: investing more heavily in our existing growth games as part of our product strategy; increasing our spending on user acquisition efforts, particularly for our growth games and our new title launches; hiring additional staff in all of our offices worldwide; developing new games with greater complexity, higher production values and deeper social features; running live operations on our games; and taking other steps to strengthen our company. We anticipate that the costs of acquiring new players and otherwise marketing our games will continue to rise, particularly since advertising costs in our industry have generally been rising and we have encountered increasing difficulties in generating downloads of our games as users spend more time on alternative software applications, such as social media, messaging, and streaming applications. We may also continue to incur significant costs to acquire rights to third party intellectual property, including incurring significant minimum guaranteed royalty payments. If our revenue does not increase at a rate sufficient to offset these additional expenses, if the launch dates for our games are delayed, if we do not realize a sufficient return on our user acquisition spending for our growth games, if we experience unexpected significant increases in operating expenses or if we are required to take additional charges related to impairments or restructurings, we will continue to incur losses. Additionally, we have taken restructuring charges in the past and a $2.7 million charge relating to impairment of acquired in process research and development during the third quarter of 2018. Furthermore, given the significant amount of time and attention users are dedicating to social media and other non-gaming

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applications, increasing revenue may be challenging.

Our financial results could vary significantly from quarter to quarter and are difficult to predict, which in turn could cause volatility in our stock price.

Our revenue and operating results could vary significantly from quarter to quarter due to a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful.  In addition, we may not be able to accurately predict our future revenue or results of operations. We base our current and future expense levels on our internal operating plans and sales forecasts, and our operating costs are to a large extent fixed.  As a result, we may not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in revenue, and even a small shortfall in revenue could disproportionately and adversely affect financial results for that quarter. 

In addition to other factors discussed in this section, factors that may contribute to the variability of our quarterly results and the volatility in our stock price include:

●our ability to increase the number of our paying players and the amount that each paying player spends in our games;

●the popularity and monetization rates of our new games released during the quarter and the ability of games released in prior periods to sustain their popularity and monetization rates;

●the number and timing of new games released by us and our competitors, particularly those games that may represent a significant portion of revenue in a quarter, which timing can be impacted by internal development delays, longer than anticipated beta testing periods, shifts in product strategy and how quickly digital storefront operators review and approve our games for commercial release;

●changes in the prominence of storefront featuring for our games and those of our competitors;

●the loss of, or changes to, one of our distribution platforms;

●changes to the Apple iOS platform or the Google Android platform to which we are not able to adapt our game offerings;

●fluctuations in the size and rate of growth of overall consumer demand for smartphones, tablets, games and related content;

●the amount and timing of charges related to any future impairments of goodwill, intangible assets, prepaid royalties and guarantees; for example, impairments related to the contractual minimum guarantee royalty payments made to certain celebrity licensors and other prepaid royalties, and in future periods we may be required to impair our goodwill due to further declines in our business and/or stock price, or take additional large impairments related to contractual minimum guarantee commitments if the associated games we are developing are not successful;

●changes in the mix of revenue derived from games based on original intellectual property versus licensed intellectual property;

●changes in the mix of revenue derived from in-app purchases, advertisements and offers, which mix often depends on the nature of new titles launched during the quarter;

●changes in the amount of money we spend marketing our titles in a particular quarter, including the average amount we pay to acquire each new user, as well as changes in the timing of these marketing expenses within the quarter;

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●decisions by us to incur additional expenses, such as increases in research and development, restructuring expenses, or unanticipated increases in vendor-related costs, such as hosting fees;

●the timing of successful mobile device launches;

●the seasonality of our industry;

●changes in accounting rules, such as those governing recognition of revenue, including the period of time over which we recognize revenue for in-app purchases of virtual currency and goods within some of our games, as well as estimates of average playing periods and player life;

●the activities, announcements and performance of our commercial partners; and

●macro-economic fluctuations in the United States and global economies, including those that impact discretionary consumer spending such as may result from the current COVID-19 pandemic.

We may not, or may be unable to, renew our existing content licenses when they expire and may not choose to obtain additional licenses or be able to obtain new licenses on favorable terms, which could negatively impact our revenue if we fail to replace such revenue with revenue from games based on our own intellectual property.

During the six months ended June 30, 2020, we generated 33.0% of our revenue from games that are based on or substantially incorporate third-party intellectual property, such as the Tap Sports Baseball franchise, Kim Kardashian: Hollywood and Disney Sorcerer’s Arena. We expect to continue to derive significant revenue from these titles in 2020 and in future years. Certain of our licenses expire at various times during the next several years, and we may be unable to renew these licenses on terms favorable to us or at all, and we may have difficulties obtaining licenses from new content owners on terms acceptable to us, if at all.  In addition, these licensors could decide to license to our competitors or develop and publish their own mobile games, competing with us in the marketplace. We also license certain brands and their assets for our Covet Fashion and Design Home titles without the provision of a license fee or royalty. These licensors could decide to no longer license their assets under the current terms, and to instead charge a one-time payment, ongoing royalty or both, which may adversely affect the profitability of these titles. Failure to maintain or renew our existing licenses or to obtain additional licenses would prevent us from continuing to offer our current licensed games and introducing new mobile games based on such licensed content, which could harm our business, operating results and financial condition.

Securing license agreements to develop, publish and market games based on or significantly incorporating celebrities, third-party licensed brands, properties, and other content typically requires that we make minimum guaranteed royalty and other payments to such licensors, and to the extent such payments become impaired, our operating results would be harmed.

In connection with partnerships with celebrities and other licensors of third-party brands, properties and content, we have incurred and may continue to incur significant minimum guaranteed royalty and other payments.  As a result, we may incur impairments on such payments if our forecasts for these games are lower than we anticipated at the time we entered into the agreements. As of June 30, 2020, we had remaining prepaid royalty balances totaling $39.7 million. We expect to continue to selectively license third-party licensed brands, properties and other content and to pay minimum guaranteed royalty payments in connection with such deals.  As a result, we may be required to take impairments in future periods if the games we are developing that have significant contractual minimum guarantee commitments associated with them are not successful.

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If we do not successfully establish and maintain awareness of our brand and games, if we fail to develop high-quality, engaging games that are differentiated from our prior games, if we incur excessive expenses promoting and maintaining our brand or our games or if our games contain defects or objectionable content, our operating results and financial condition could be harmed.

We believe that establishing and maintaining our brand is critical to establishing, developing and maintaining favorable relationships with players, distributors, content licensors, platform providers, advertisers and key talent. Increasing awareness of our brand and recognition of our games is particularly important in connection with our strategic focus of developing games based on our own intellectual property.  Our ability to promote the Glu brand and increase recognition of our games depends on our ability to develop high-quality, engaging games, including integrating the level of social and community features appropriate for a game’s target audience and partnering with brands with fan bases that can support successful mobile games.  If consumers, digital storefront owners and branded content owners do not perceive our existing games as high-quality or if we introduce new games that are not favorably received by them, then we may not succeed in building brand recognition and brand loyalty in the marketplace. In addition, globalizing and extending our brand and recognition of our games is costly and involves extensive management time to execute successfully. Although we make significant sales and marketing expenditures in connection with the launch of our games, these efforts may not succeed in increasing awareness of our brand or the new games.  If we fail to maintain and increase brand awareness and consumer recognition of our games, our potential revenue could be limited, our costs could increase and our business, operating results and financial condition could suffer.

In addition, if a game contains objectionable content, we could experience damage to our reputation and brand. Our games may contain violence or other content that some consumers may find objectionable, particularly in light of high-profile mass shootings.  For example, many of our shooter games, including our Deer Hunter games, have a 17-and-older rating on the Apple App Store due to its violence. Despite these ratings, consumers may be offended by some of our game content and children to whom these games are not targeted may choose to play them without parental permission nonetheless. In addition, our employees or employees of outside developers could include hidden features in our games without our knowledge, which might contain profanity, graphic violence, sexually explicit or otherwise objectionable material. Users of our games, particularly games with social messaging features, may utilize these features for illegal purposes or target certain users through these features. If consumers believe that a game we published contains objectionable content or may expose them to nefarious individuals, it could harm our brand, consumers could refuse to download it or demand a refund for any in-app purchases and could pressure the digital storefront operators to no longer allow us to publish the game on their platforms.  Similarly, if any of our games are introduced with defects, vulnerabilities or have playability issues, we may receive negative user reviews, our brand may be damaged, and our operating results and revenue negatively affected. For example, our attempt to relaunch our Racing Rivals title, which had experienced playability and user interface issues in the past, in the second quarter of 2018 by introducing new features and resetting the economy of the game resulted in the game crashing and not being available to most users for several days. As a result, the daily active users of Racing Rivals and the revenue that we generated from this title significantly decreased from peak levels which contributed to our decision to shut down the game effective as of April 1, 2019. In addition, any issues relating to our games could be exacerbated if our customer service department does not timely and adequately address issues that our players have encountered with our games.

We rely on a combination of our own servers and technology and third party infrastructure to operate our games. If we experience any system or network failures, unexpected technical problems, cyber-attacks or any other interruption to our games, it could reduce our sales, increase costs, or result in a loss of revenue or loss of end users of our games.

We rely on our own servers and third-party infrastructure to operate our games, and we expect that our reliance on such third-party infrastructure and our technology platform will increase as we continue to add additional social features and functionality into our games.  We do not control these third parties and replacing them might require significant time and expense.  In particular, a significant portion of our game traffic is hosted by Amazon Web Services, which service provides server redundancy and uses multiple locations on various distinct power grids. Amazon may terminate its agreement with us upon 30 days’ notice.  In addition, Amazon has experienced brief power outages on occasion during the past several years that have affected the availability of certain of our games during such outages. While none of these events adversely impacted our business, a similar outage of a longer duration could. Any technical problem with cyber-attack on, or loss of access to these third parties’ or our systems, servers or other technologies, including our technology

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platform, could result in the inability of end users to download or play our games, cause interruption to gameplay, prevent the completion of billing for a game or result in the loss of users’ virtual currency or other in-app purchases, interfere with access to some aspects of our games or result in the theft of end-user personal information.  For example, in the second quarter of 2018, our efforts to relaunch Racing Rivals resulted in the game crashing and not being available to most users for several days. If users are unable to access and play our games for any period of time, if virtual assets are lost, or if users do not receive their purchased virtual currency, we may receive negative publicity and game ratings, we may lose players of our games, we may be required to issue refunds, and we may become subject to regulatory investigation or class action litigation, any of which would negatively affect our business. Any of these problems could require us to incur substantial repair costs, distract management from operating our business and result in a loss of revenue. Furthermore, our disaster recovery systems and those of third-parties with which we do business may not function as intended or may fail to adequately protect our critical business information in the event of a significant business interruption, which may cause interruption in service of our games, security breaches or the loss of data or functionality, which could negatively affect our business, financial condition or results of operations.

Cyber-attacks, security breaches, and computer viruses could harm our business, reputation, brand and operating results.

Cyber-attacks, security breaches, and computer viruses have occurred on our systems in the past and may occur on our systems in the future. We store sensitive information, including personal information about our employees.  In addition, our games involve the storage and transmission of players’ personal information in our facilities and on our equipment, networks and corporate systems run by us or managed by third-parties including Apple, Google, Facebook, Microsoft, and Amazon. Our player data, corporate systems, third-party systems and security measures may be breached due to the actions of outside parties, employee error, malfeasance, a combination of these, or otherwise, and, as a result, an unauthorized party may obtain access to our data, our employees’ data, our players’ data or any third party data we may possess. In addition, outside parties have in the past and may in the future attempt to fraudulently induce employees to disclose information in order to gain access to this data.  Any such incidents, particularly of longer duration, could damage our brand and reputation and result in a material loss of revenue. Given the global nature of our business and the low cost, relative ease and proliferation of internet enabled devices, we may be at an increased risk for cyber-attacks and, specifically, denial of service attacks. In addition, the chat and other social features in our games could potentially be used by terrorist organizations or other criminals to communicate or for other nefarious purposes, which could severely damage our brand and reputation. If an actual or perceived security breach of our or a third-party system on which we rely occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose players and advertisers, and we could suffer significant legal and financial harm including loss of revenue due to such events or in connection with remediation efforts and costs, investigation costs or penalties, litigation, regulatory and enforcement actions, compliance with notification obligations, changed security and system protection measures. Any of these actions could have a material and adverse effect on our business, reputation and operating results.

We use a game development engine licensed from Unity Technologies to create many of our games. If we experience any prolonged technical issues with this engine or if we lose access to this engine for any reason, it could delay our game development efforts and cause our financial results to fall below expectations for a quarterly or annual period, which would likely cause our stock price to decline.

We use a game development engine licensed from Unity Technologies to create many of our games, and we expect to continue to use this engine for the foreseeable future. Because we do not own this engine, we do not control its operation or maintenance, nor do we control how the engine is updated or upgraded. As a result, any prolonged technical issues with this engine might not be resolved quickly, despite the fact that we have contractual service level commitments from Unity. In addition, to the extent that we require any functionality that is not offered by Unity we are dependent on Unity to update or upgrade its engine to offer such functionality. Furthermore, although Unity cannot terminate our agreement absent an uncured material breach of the agreement by us, we could lose access to this engine under certain circumstances, such as a natural disaster that impacts Unity or a bankruptcy event.  If we experience any prolonged issues with the operation of the Unity game development engine, if the Unity game development engine does not offer the functionality we require or if we lose access to this engine for any reason, it could delay our game development efforts and cause us to not meet revenue expectations for a quarterly or annual period, which would likely cause our stock price to decline. Further, if one of our competitors acquired Unity, the acquiring company would be less

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likely to renew our agreement, which could impact our game development efforts in the future, particularly with respect to sequels to games that were created on the Unity engine.

We derive a significant portion of our revenue from advertisements and offers that are incorporated into our free-to-play games through relationships with third parties. If we lose the ability to provide these advertisements and offers for any reason, if we become victim to advertising fraud or if any events occur that negatively impact the revenue we receive from these sources, it would negatively impact our operating results.

In addition to in-app purchases, we derive revenue from our free-to-play games through advertisements and offers. We incorporate advertisements and offers into our games by implementing third parties’ software development kits. We rely on these third parties to provide us with a sufficient inventory of advertisements and offers to meet the demand of our user base. If we exhaust the available inventory of these third parties, it will negatively impact our revenue. If our relationship with any of these third parties terminates for any reason, or if the commercial terms of our relationships do not continue to be renewed on favorable terms, we would need to locate and implement other third party solutions, which could negatively impact our revenue, at least in the short term. In addition, we may be susceptible to various types of advertising fraud, which could reduce the effectiveness of our advertising campaigns or cause us to pay money to advertising firms for installations that were wrongly attributed to such firms. While we have implemented measures to detect and prevent advertising fraud, such measures may not prove effective, which would harm our user acquisition efforts and could harm our revenues. Some players of our games also use various techniques in an attempt to circumvent limits on the number of advertisements that players can watch in a given period in order to earn extra virtual currency, which could result in our advertising partners not paying us for any advertisements viewed in excess of these limits. Furthermore, the revenue that we derive from advertisements and offers is subject to seasonality, as companies’ advertising budgets are generally highest during the fourth quarter and decline significantly in the first quarter of the following year, which negatively impacts our revenue in the first quarter.

The actions of the storefront operators can also negatively impact the revenue that we generate from advertisements and offers. For example, in April 2019, Apple enforced new guidelines relating to offerwalls which has negatively impacted our revenues from offers in our games; Apple enforced similar guidelines with respect to offerwalls in January 2018 relating to Design Home. Any similar changes in the future that impact our revenue that we generate from advertisements and offers could materially harm our business.

We rely on assumptions and estimates to calculate certain of our key metrics, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.

Certain of our key metrics, including the number of our daily and monthly active users, our average revenue per daily user and the average useful life of our paying players, is calculated using internal company data from multiple analytics systems that have not been independently verified. The calculation of these metrics is described in detail under the heading titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics.” While these numbers are based on what we believe to be reasonable calculations for the applicable period of measurement, there are inherent challenges in measuring these metrics across our large user base around the world.  We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy, but these efforts may not prove successful and we may discover material inaccuracies.  In addition, our methodology for calculating these metrics may differ from the methodology used by other companies to calculate similar metrics.  For example, we currently treat an individual who plays two different Glu games on the same day or who plays the same game on two different devices during the same day (e.g., iPhone and an iPad) as two active users for each such day when we average or aggregate active users over time. As such, the calculations of our active users may not precisely reflect the actual number of people using our titles. We may also discover unexpected errors in our internal data that resulted from technical or other errors.  Furthermore, our Crowdstar studio utilizes a separate analytics system from the rest of our company, which could result in internal inconsistencies or errors.  If we determine that any of our metrics are not accurate, we may be required to revise or cease reporting such metrics and it may harm our reputation and business.

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Our business and growth may suffer if we are unable to hire and retain key personnel.

Our future success will depend, to a significant extent, on our ability to attract, retain and motivate our key personnel, namely our management team, creative leaders and experienced game development personnel.  In particular, Nick Earl, our President and Chief Executive Officer, is critical to our vision, strategic direction, products and technology, and the continued retention of the other members of our senior management team is important to our continued success. In addition, to grow our business, execute on our business strategy and replace departing employees, we must identify, hire and retain qualified personnel, particularly experienced monetization, live operations, server technology, data analyst, user experience, game designer, and product management personnel to develop and support our growth games.  Attracting and retaining key personnel and other staff is difficult in a competitive hiring market, particularly in the San Francisco Bay Area where we are headquartered, and we may not succeed in doing so. The gaming and technology industries are also traditionally male dominated, so it may be difficult for us to recruit and retain talented female personnel who may be needed to help us optimize our games that are targeted to a more female-focused audience, including our games in the lifestyle and casual genres. Volatility of our stock price, changes in our compensation structure for our executive officers that significantly relies on performance linked stock awards, and previous headcount reductions may make it more difficult for us to attract and retain top talent. In particular, should our stock price decline it might be difficult for us to attract and retain qualified personnel, since individuals may elect to seek employment with other companies that they believe have better long-term prospects or that present better opportunities for earning equity-based compensation.  Competitors have in the past and may in the future attempt to recruit our employees, and our management and key employees are not bound by agreements that could prevent them from terminating their employment at any time.  In addition, we do not maintain a key-person life insurance policy on any of our officers.  Our business and growth may suffer if we are unable to hire and retain key personnel.

Any restructuring actions and cost reduction initiatives that we undertake may not deliver the results we expect, and these actions may adversely affect our business.

During the last several years we have implemented restructuring actions and cost reduction initiatives to streamline operations and improve cost efficiencies.  Some of our previous restructurings included reductions in personnel in Bellevue, Washington; San Francisco, California; Long Beach, California; Portland, Oregon; and Beijing, China, as well as the divestiture of our Moscow, Russia game development studio. Any future restructurings or divestitures could result in disruptions to our operations and adversely affect our business.  For example, in connection with the divestiture of our Moscow studio, we transitioned certain titles that were developed or operated by the Moscow studio, including Deer Hunter 2018, to our Hyderabad, India studio.  We have seen a decline in revenues from Deer Hunter 2018, which may in part be related to this transition. In addition, we cannot be sure that any cost reduction and streamlining initiatives will be as successful in reducing our overall expenses as we expect or that additional costs will not offset any such reductions or streamlining.  If our operating costs are higher than we expect or if we do not maintain adequate control of our costs and expenses, our operating results will suffer.

We may not realize the benefits expected through our strategic relationship with Tencent and other aspects of the relationship could have adverse effects on our business.

In April 2015, we entered into a strategic relationship with Tencent, a leading Internet company in China and arguably the world’s largest gaming company. Tencent, through a controlled affiliate, agreed to invest $126.0 million in exchange for approximately 16.3% of our total outstanding common stock on a post-transaction basis.  In November 2015, we entered into an agreement with an affiliate of Tencent to license and publish its game, WeFire, in the United States and international markets outside of Asia under the name Rival Fire, which we launched in July 2016. In light of the poor performance of the title in terms of monetization and downloads, and the related contractual prepaid royalty commitments and license fees under our agreement with the affiliate of Tencent, we impaired $14.5 million in the third quarter of 2016. We may not succeed in entering into any other agreements or operating partnerships with Tencent in the future.  Even if we do enter into any operational partnerships, it could take months to years to fully realize the benefits of such partnerships or they may not be successful as was the case with WeFire, and, to the extent such agreements involve publishing our games in China, some of our platform partners in China and other parts of Asia may view such a partnership negatively.

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Tencent, through its controlled affiliates, held approximately 12.3% of the aggregate voting power of our common stock as of June 30, 2020, and could acquire up to 25.0% of the voting power through open-market purchases of our common stock. While Tencent has agreed to cause these shares to be voted with the majority recommendation of the independent members of our board of directors on most matters, Tencent could have considerable influence over matters such as approving a potential acquisition of us. Tencent was also granted the right to designate a member of our board of directors, and currently Ben Feder, Tencent’s President of International Partnerships (North America), is Tencent’s representative on our board of directors. Mr. Feder or any future Tencent designee could have an actual or apparent conflict of interest in such matters.  Tencent’s investment in and position with us could also discourage others from pursuing any potential acquisition of us, which could have the effect of depriving the holders of our common stock of the opportunity to sell their shares at a premium over the prevailing market price.

Our reported financial results could be adversely affected by changes in financial accounting standards or by the application of existing or future accounting standards to our business as it evolves.

Our reported financial results are impacted by the accounting policies promulgated by the SEC and accounting standards bodies and the methods, estimates and judgments that we use in applying our accounting policies.  The frequency of accounting policy changes may accelerate, including conversion to unified international accounting standards. Policies affecting revenue recognition have affected, and could further significantly affect, the way we account for revenue.  For example, the accounting for revenue derived from free-to-play games, particularly with regard to revenue generated from online digital storefronts, is still evolving and, in some cases, uncertain. While we believe that we are correctly accounting for our revenues, this is an area that continues to involve significant discussion among accounting professionals and the future changes to the standard may cause our operating results to fluctuate. In addition, we currently defer revenue related to virtual goods and currency over the average playing period of paying users, which approximates the estimated weighted average useful life of the transaction. While we believe our estimates are reasonable based on available game player information, we may revise such estimates in the future in the event the average playing period of our paying users changes. Any adjustments arising from changes in the estimates of the lives of these virtual items would be applied to the current quarter and prospectively on the basis that such changes are caused by new information indicating a change in the game player behavior patterns of our paying users.  Any changes in our estimates of useful lives of these virtual items may result in our revenue being recognized on a basis different from prior periods’ and may cause our operating results to fluctuate. As we enhance, expand and diversify our business and product offerings, the application of existing or future financial accounting standards could have a significant adverse effect on our reported results although not necessarily on our cash flows.

If we are unable to maintain effective internal control over financial reporting, the accuracy and timeliness of our financial reporting may be adversely affected.

Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial statements.  If we are unable to maintain such internal controls, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls as required pursuant to the Sarbanes-Oxley Act, it could result in a material misstatement of our financial statements that would require a restatement, and investor confidence in the accuracy and timeliness of our financial reports and the market price of our common stock could be negatively impacted.

Conversion of key internal systems and processes, particularly our ERP system, and problems with the design, implementation or operation of these systems and processes could interfere with, and therefore harm, our business and operations.

We converted certain key internal business systems and processes, including our enterprise resource planning, or ERP, system to a cloud-based system. We have invested, and will continue to invest, significant capital and human resources in the design, implementation and operation of these business systems and processes. Any problems in the functioning of these systems or processes, particularly any that impact our operations, could adversely affect our ability to process payments, record and transfer information in a timely and accurate manner, recognize revenue, file SEC reports in a timely manner, or otherwise run our business and could negatively impact our business, financial condition, and results of operations.

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Our business will suffer if our acquisition and strategic investment activities are unsuccessful or disrupt our ongoing business, which may involve increased expenses and may present risks not contemplated at the time of the transactions.

We have acquired and invested in, and intend to continue to acquire and invest in, companies, products and technologies that complement our strategic direction. Acquisitions and investments involve significant risks and uncertainties, including:

●diversion of management’s time and a shift of focus from operating the business to issues related to negotiation of acquisition or investment terms, integration and administration;

●our ability to successfully integrate acquired technologies and operations into our business and maintain uniform standards, controls, policies and procedures;

●potential employee morale and retention issues resulting from any reductions in compensation, or changes in management, reporting relationships, or future prospects;

●potential product development delays resulting from any changes and disruptions that may follow the acquisition;

●significant competition from other acquirers and investors as the gaming industry consolidates and challenges in offering attractive consideration given the volatility of our stock price and potential difficulties in obtaining alternative financing;

●challenges retaining the key employees, customers and other business partners of the acquired or investee business;

● our ability to realize synergies expected to result from an acquisition or strategic investment;

● an impairment of acquired goodwill and other intangible assets or investments in future periods would result in a charge to earnings in the period in which the write-down occurs, such as the case with the impairment charge for acquired in-process research and development recorded in the third quarter of 2018;

● the internal control environment of an acquired or investee entity may not be consistent with our standards and may require significant time and resources to improve;

● in the case of foreign acquisitions or strategic investments, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries;

● liability for activities of the acquired or investee companies before the acquisition or investment, including violations of laws, rules and regulations, commercial disputes, tax liabilities, intellectual property and other litigation claims or disputes, accounting standards and other known and unknown liabilities;

● harm to our brand and reputation; and

● harm to our existing business relationships with business partners and advertisers as a result of the acquisition.

In particular, we acquired Crowdstar in the fourth quarter of 2016 in a multi-step transaction that did not involve the cooperation of Crowdstar’s management, where the former Chief Executive Officer of Crowdstar did not continue with the company post-acquisition and where we did not receive customary representations, warranties or indemnities from the acquired company. While we successfully integrated Crowdstar into our company and Crowdstar’s top titles, Covet Fashion and Design Home, are generating significant revenue, we still face risks and uncertainties in

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connection with this acquisition. For example, we may not be able to retain key Crowdstar employees for a variety of reasons, including the fact that we relocated the Crowdstar team from Burlingame, California to our new San Francisco headquarters during the fourth quarter of 2018, and the loss of key Crowdstar employees could affect revenue derived from Covet Fashion and Design Home. 

Acquisitions may be particularly challenging during the COVID-19 pandemic. For example, we will likely not be able to travel to conduct in-person meetings and due diligence sessions with potential target companies. In addition, if we issue equity securities as consideration in an acquisition or strategic investment, as we did for our acquisitions of Griptonite, Inc., Blammo Games Inc., GameSpy Industries, Inc., PlayFirst, Inc. and Cie Games, Inc., our current stockholders’ percentage ownership and earnings per share would be diluted.  We may also need to raise additional capital in the event we use a significant amount of cash as consideration in an acquisition. Because acquisitions and strategic investments are inherently risky, our transactions may not be successful and may, in some cases, harm our operating results or financial condition.

Changes in foreign exchange rates and limitations on the convertibility of foreign currencies could adversely affect our business and operating results.

We currently transact business in more than 100 countries and in dozens of different currencies, with the Canadian Dollar and Indian Rupee being the primary international currencies in which we transact business. Conducting business in currencies other than U.S. Dollars subjects us to fluctuations in currency exchange rates that could have a negative impact on our reported operating results. We experienced significant fluctuations in currency exchange rates in the past and expect to experience continued significant fluctuations in the future. We incur expenses for employee compensation and other operating expenses at our non-U.S. locations in the local currency, and an increasing percentage of our international revenue is from customers who pay us in currencies other than the U.S. Dollar. Fluctuations in the exchange rates between the U.S. Dollar and those other currencies could result in the U.S. Dollar equivalent of these expenses being higher and/or the U.S. Dollar equivalent of the foreign-denominated revenue being lower than would be the case if exchange rates were stable. This could negatively impact our operating results. To date, we have not engaged in exchange rate hedging activities, and we do not expect to do so in the foreseeable future.

We face added business, political, regulatory, operational, financial and economic risks as a result of our international operations and distribution, any of which could increase our costs and adversely affect our operating results.

International sales represented approximately 21.7% and 23.4% of our revenue during the six months ended June 30, 2020 and 2019, respectively. To target international markets, we develop games that are customized for consumers in those markets. We have international offices located in Canada and India. We expect to increase our international presence, as we intend to increase the number of our employees in our Hyderabad, India office. Risks affecting our international operations include:

●our ability to develop games that appeal to the tastes and preferences of consumers in international markets;

●difficulties developing, staffing, and simultaneously managing a large number of varying foreign operations as a result of distance, language, and cultural differences;

●multiple and conflicting laws and regulations, including complications due to unexpected changes in these laws and regulations;

●our ability to develop, customize and localize games that appeal to the tastes and preferences of consumers in international markets;

●competition from local game developers that have significant market share in certain foreign markets and a better understanding of local consumer preferences;

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●potential violations of the Foreign Corrupt Practices Act and local laws prohibiting improper payments to government officials or representatives of commercial partners;

●regulations that could potentially affect the content of our products and their distribution, such as in China where multiple governmental bodies must review and approve of any gaming application before it may be published;

●foreign exchange controls that might prevent us from repatriating income earned in countries outside the United States;

●potential adverse foreign tax consequences, since due to our international operations, we must pay income tax in numerous foreign jurisdictions with complex and evolving tax laws;

●political, economic and social instability in some regions of the world;

●health epidemics or contagious diseases, such as the current COVID-19 pandemic, that negatively impact our customers or business partners;

●restrictions on the export or import of technology;

●trade and tariff restrictions and variations in tariffs, quotas, taxes and other market barriers; and

●difficulties in enforcing intellectual property rights in certain countries.

These risks could harm our international operations, which, in turn, could materially and adversely affect our business, operating results and financial condition. We may also liquidate or cease operating some of our foreign subsidiaries in the future which may raise additional risks, including related to taxes and obtaining governmental approvals.

If the mobile games market is disrupted by new technologies and we are not able to appropriately adapt our business, our business will suffer.

The mobile games market could be disrupted by new technologies that could impact our business.  For example, the introduction of 5G wireless networking will offer technological advancements like faster download speeds and lower latency. While these technological advancements will provide opportunities for our business, it may also create risks if we do not adapt to these new technologies in a quick and timely manner.  For example, 5G technology may result in the proliferation of game streaming services. Multiple instances of new cloud gaming services are already commercially available and new entrants like Google and Microsoft have or will announce their ability to stream games to mobile devices. Some of these new streaming entrants will also choose to publish first-party content on their platforms. Streaming technology could potentially disrupt the mobile gaming industry by enabling companies to publish cross-platform games that users can play across multiple platforms and devices. This could result in consumers choosing to play these cross-platform games rather than our games which are currently only available on mobile devices. If we do not appropriately adapt our business to new technologies, our business will suffer.

If we fail to deliver our games at the same time as new mobile devices are commercially introduced, our revenue may suffer.

Our business depends, in part, on the commercial introduction of new mobile devices with enhanced features, including larger, higher resolution color screens, improved audio quality, and greater processing power, memory, battery life and storage.  For example, the introduction of new and more powerful versions of Apple’s iPhone and iPad and devices based on Google’s Android operating system, have helped drive the growth of the mobile games market. We do not control the timing of these device launches. Some manufacturers give us access to their new devices prior to commercial release.  If one or more major manufacturers were to stop providing us access to new device models prior to

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commercial release, we might be unable to introduce games that are compatible with the new device when the device is first commercially released, and we might be unable to make compatible games for a substantial period following the device release.  If we do not adequately build into our title plan the demand for games for a particular mobile device, experience game launch delays, or miss the opportunity to sell games when new mobile devices are shipped or our end users upgrade to a new mobile device, our revenue would likely decline and our business, operating results and financial condition would likely suffer.

If the mobile gaming market does not continue to grow, our business could be adversely affected.

Our future success is substantially dependent upon the continued growth of the mobile gaming market.  The mobile gaming market has experienced significant revenue growth during the last several years despite an overall flattening of downloads of games on the appstores. The mobile gaming industry may not continue to grow at historical rates which could negatively impact our business. In addition, new and emerging technologies could make the mobile devices on which our games are currently released obsolete, requiring us to transition our business model to develop games for other next-generation platforms.

Changes to digital platforms’ rules relating to “loot boxes,” or the potential adoption of regulations or legislation impacting loot boxes, could require us to make changes to some of our games’ economies or design, which could negatively impact the monetization of these games reducing our revenues.

In December 2017, Apple updated its terms of service to require publishers of applications that include “loot boxes” to disclose the odds of receiving each type of item within each loot box to customers prior to purchase. Google similarly updated its terms of service in May 2019. Loot boxes are a commonly used monetization technique in free-to-play mobile games in which a player can acquire a virtual loot box, typically through game play or by using virtual currency, but the player does not know which virtual item(s) he or she will receive (which may be a common, rare or extremely rare item, and may be a duplicate of an item the player already has in his or her inventory) until the loot box is opened.  The player will always receive one or more virtual items when he or she opens the loot box, but the player does not know exactly which item(s) until the loot box is opened. We utilize loot boxes in some of our top games including our Tap Sports Baseball franchise, Kim Kardashian: Hollywood, and Disney Sorcerer’s Arena. We have updated our games that offer loot boxes to comply with Apple’s and Google’s rules and do not believe that this has had a material impact on the monetization of these games. However, in the event that Apple or Google changes its developer terms of service to include more onerous requirements or if either Apple or Google were to prohibit the use of loot boxes in games distributed on its digital platform, we would be required to redesign the economies of the affected games in order to continue distribution on the impacted platforms, which would likely cause a decline in the revenues generated from these games could require us to incur additional development costs, and might have an impact on the development and release schedule of our products.  In April 2018, each of the Belgian Gaming Commission and the Dutch Gambling Authority declared that loot boxes as implemented in certain of the games that they reviewed constituted illegal gambling under each country’s laws. Our games were not among those reviewed, but if they were found to be sufficiently similar, we may be required to modify our implementation of loot boxes to continue offering them in these jurisdictions, remove loot boxes from our games published in these jurisdictions or cease publishing games containing loot boxes in these jurisdictions.  In addition, the FTC held a public workshop in August 2019 to examine consumer protection issues related to loot boxes. Various other jurisdictions, including Australia, the United Kingdom, and the states of California, Hawaii, Minnesota and Washington, are reviewing or have indicated that they intend to review the legality of loot boxes and whether they constitute gambling. Furthermore, in May 2019, U.S. Senators Josh Hawley, Ed Markey and Richard Blumenthal introduced a bill to the Senate that would prohibit loot boxes and pay-to-win micro-transactions in “minor oriented” games. To the extent that a United States federal law, the FTC or a comparable regulatory or legislative body of another jurisdiction determines that loot boxes constitute gambling or otherwise elects to regulate the use of loot boxes, we could be required to stop utilizing loot boxes within our games that are distributed in such jurisdictions, negatively impacting our revenues.   

Our business is subject to increasing governmental regulation. If we do not successfully respond to these regulations, our business may suffer.

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We are subject to a number of domestic and foreign laws and regulations that affect our business.  Not only are these laws constantly evolving, which could result in their being interpreted in ways that could harm our business, but legislation is also continually being introduced that may affect both the content of our products and their distribution. In the United States, for example, numerous federal and state laws have been introduced which attempt to restrict the content or distribution of games.  Legislation has been adopted in several states, and proposed at the federal level, regulating the ability to offer certain games to minors.  If such legislation is adopted, it could harm our business by limiting the games we are able to offer to our customers or by limiting the size of the potential market for our games. In addition, there have been calls from U.S. government officials to examine violence in video games in light of high-profile mass shootings. We may also be required to modify certain games or alter our marketing strategies to comply with new and possibly inconsistent regulations, which could be costly or delay the release of our games, for example to comply with labeling requirements for our free-to-play games. Additionally, if the FTC or any other significant regulatory body issues rules significantly restricting or even prohibiting in-app purchases or any other key aspect of our business, it would significantly impact our business strategy. In addition, self-regulatory bodies in the United States (the Entertainment Software Rating Board) and foreign jurisdictions (such as the Pan European Game Information (PEGI) in the European Union) provide consumers with rating information on various products such as entertainment software similar to our games based on the content (for example, violence, sexually explicit content, language). Furthermore, the Chinese government has adopted measures designed to eliminate violent or obscene content in games, along with regulations that may require us to obtain approval from certain government agencies in China, including the Ministry of Culture and General Administration of Press and Publication, in order to continue to publish our games in China. Any one or more of these factors could harm our business by limiting the products we are able to offer to our customers, by limiting the size of the potential market for our products, or by requiring costly additional differentiation between products for different territories to address varying regulations. 

Furthermore, the growth and development of free-to-play gaming and the sale of virtual goods may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies such as ours.  We anticipate that scrutiny and regulation of our industry will increase and that we will be required to devote legal and other resources to addressing such regulation.  For example, existing laws or new laws regarding the regulation of currency and banking institutions may be interpreted to cover virtual currency or goods.  If that were to occur we may be required to seek licenses, authorizations or approvals from relevant regulators, the granting of which may depend on us meeting certain capital and other requirements and we may be subject to additional regulation and oversight, all of which could significantly increase our operating costs.  Changes in current laws or regulations or the imposition of new laws and regulations in the United States or elsewhere regarding these activities may dampen the growth of free-to-play gaming and impair our business.

We sometimes offer our players various types of sweepstakes, giveaways and promotional opportunities, and have allowed players to compete against each other in tournaments for cash prizes. We are subject to laws in a number of jurisdictions concerning the operation and offering of such activities and games, many of which are still evolving and could be interpreted in ways that could harm our business.  For example, a March 2018 ruling from the 9^th Circuit found that the mobile social casino game Big Fish Casino constituted gambling under Washington state law. Any future court ruling or other governmental action that imposes liability on providers of online services could result in criminal or civil liability and could harm our business.

In addition, because our services are available worldwide, certain foreign jurisdictions and others may claim that we are required to comply with their laws, including in jurisdictions where we have no local entity, employees or infrastructure.

The laws and regulations concerning data privacy and data security are continually evolving, and our actual or perceived failure to comply with these laws and regulations could harm our business.

We are subject to federal, state and foreign laws regarding privacy and the protection of the information that we collect regarding our users, which laws are currently in a state of flux and likely to remain so for the foreseeable future.  The U.S. government, including the FTC and the Department of Commerce, is continuing to review the need for greater regulation over collecting information concerning consumer behavior on the Internet and on mobile devices.  The European Union’s General Data Protection Regulation, which became effective in May 2018, the California Consumer

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Privacy Act of 2018, which became effective in January 2020, and other laws, like the Brazilian General Data Protection Law, create new individual privacy rights and impose worldwide obligations on companies handling personal data, which has resulted, or will result, in a greater compliance burden for us and other companies and could result in us incurring substantial monetary penalties if we are found to be in violation of these laws and regulations. Various U.S. state and federal regulators have also continued to expand the scope of data elements worthy of, and subject to, privacy protections, creating a multi-layered regulation regime that may be applicable to our business and will require time and resources to address.  Additionally, the Children’s Online Privacy Protection Act requires companies to obtain parental consent before collecting personal information from children under the age of 13.  If we do not follow existing laws and regulations, as well as the rules of the smartphone platform operators, with respect to privacy-related matters, or if consumers raise any concerns about our privacy practices, even if unfounded, it could damage our reputation and operating results. Furthermore, new or the interpretation of existing laws, policies, or industry codes could prevent us from offering, or make it costlier or more difficult to offer services in certain jurisdiction.

All of our games are subject to our privacy policy and our terms of service located on our corporate website.  If we fail to comply with our posted privacy policy, terms of service or privacy-related laws and regulations, including with respect to the information we collect from users of our games, it could result in proceedings against us by governmental authorities or others, which could harm our business.  In addition, interpreting and applying data protection laws to the mobile gaming industry is often unclear.  These laws may be interpreted and applied in conflicting ways from state to state, country to country, or region to region, and in a manner, that is not consistent with our current data protection practices.  Complying with these varying requirements could cause us to incur additional costs and change our business practices. Additionally, a violation of applicable data privacy or data security laws by third parties we work with might also have an adverse effect on our business, financial condition or results of operations. Further, if we fail to adequately protect our users’ privacy and data, it could result in a loss of player confidence in our services and ultimately in a loss of users, which could adversely affect our business.

In the area of information security and data protection, many states and foreign jurisdictions have passed laws requiring notification to users when there is a security breach for personal data or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to implement.  Costs to comply with these laws may increase as a result of changes in interpretation.  Furthermore, any failure on our part to comply with these laws may subject us to significant liabilities.  The security measures we have in place to protect our data and the personal information of our employees, customers and partners could be breached due to cyber-attacks initiated by third party hackers, employee error or malfeasance, fraudulent inducement of our employees to disclose sensitive information or otherwise.  Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.  Any breach or unauthorized access could materially interfere with our operations or our ability to offer our services or result in significant legal and financial exposure, damage to our reputation and a loss of confidence in the security of our data, which could have an adverse effect on our business and operating results.

“Cheating” programs, scam offers, black-markets and other offerings or actions by unrelated third parties that seek to exploit our games and players affect the game-playing experience and may lead players to stop playing our games or divert revenue to unrelated third parties.

Unrelated third parties have developed, and may continue to develop, “cheating” programs, scam offers, black-markets and other offerings that may decrease our revenue generated from our virtual economies, divert our players from our games or otherwise harm us.  Cheating programs enable players to exploit vulnerabilities in our games to obtain virtual currency or other items that would otherwise generate in-app purchases for us, play the games in automated ways or obtain unfair advantages over other players who do play fairly.  Unrelated third parties attempt to scam our players with fake offers for virtual goods or other game benefits.  In addition, we previously announced that we intend to explore the extension of Design Home and Tap Sports Baseball to the PC web browser, and a browser-enabled version of these titles may contain vulnerabilities that we don’t anticipate which could significantly impact our top two revenue generating titles. We devote resources to discover and disable these programs and activities, but if we are unable to do so in a prompt and timely manner, our operations may be disrupted, our reputation damaged and players may play our games less frequently or stop playing our games altogether.  This may lead to lost revenue from paying players,

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increased cost of developing technological measures to combat these programs and activities, legal claims, and increased customer service costs needed to respond to disgruntled players.

Some of our players may make sales or purchases of virtual goods used in our games through unauthorized or fraudulent third-party websites, which may reduce our revenue.

Virtual goods in our games have no monetary value outside of our games. Nonetheless, some of our players may make sales and/or purchases of our virtual goods, such as virtual currency for our Tap Sports Baseball games, through unauthorized third-party sellers in exchange for real currency. These unauthorized or fraudulent transactions are usually arranged on third-party websites and the virtual goods offered may have been obtained through unauthorized means such as exploiting vulnerabilities in our games, from scamming our players with fake offers for virtual goods or other game benefits, or from credit card fraud. We do not generate any revenue from these transactions. These unauthorized purchases and sales from third-party sellers could reduce our revenues by, among other things:

● decreasing revenue from authorized transactions;  

● creating downward pressure on the prices we charge players for our virtual currency;

● increasing chargebacks from unauthorized credit card transactions;

● causing us to lose revenue from dissatisfied players who stop playing a particular game;

● increasing costs we incur to develop technological measures to curtail unauthorized transactions;

● resulting in negative publicity or harm our reputation with players and partners; and

● increasing customer support costs to respond to dissatisfied players.

To discourage unauthorized purchases and sales of our virtual goods, we state in our terms of service that the buying or selling of virtual currency and virtual goods from unauthorized third party sellers may result in bans from our games or legal action. We have banned players as a result of such activities. We have also employed technological measures to help detect unauthorized transactions and continue to develop additional methods and processes by which we can identify unauthorized transactions and block such transactions. However, there can be no assurance that our efforts to prevent or minimize these unauthorized or fraudulent transactions will be successful.

If we do not adequately protect our intellectual property rights, it may be possible for third parties to obtain and improperly use our intellectual property and our business and operating results may be harmed.

Our intellectual property is essential to our business.  We rely on a combination of patent, copyright, trademark, trade secret and other intellectual property laws and contractual restrictions on disclosure to protect our intellectual property rights.  To date, we have only fifteen issued U.S. patents and four U.S. patent applications currently outstanding, including two that we inherited through acquisitions, so we will not be able to protect the majority of our technologies from independent invention by third parties.  In addition, we have filed foreign patent applications on two of the issued U.S. patents.  

Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology and games, and some parties have distributed “jail broken” versions of our games where all of the content has been unlocked and made available for free.  Further, some of our competitors have released games that are nearly identical to successful games released by their competitors in an effort to confuse the market and divert users from the competitor’s game to the copycat game. To the extent third parties copy our games, it could reduce the amount of revenue we are able to generate from any infringed games.  Monitoring unauthorized use of our games is difficult and costly, and we cannot be certain that the steps we have taken will prevent piracy and other unauthorized distribution and use of our technology and games, particularly in certain international jurisdictions, such as China, where the laws may not protect our intellectual property rights as fully as in the United States. We may institute litigation to enforce our intellectual property rights, which could result in substantial costs and divert our management’s attention and our resources.

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In addition, although we require our third-party developers to sign agreements not to disclose or improperly use our trade secrets, to acknowledge that all inventions, trade secrets, works of authorship, developments and other processes generated by them on our behalf are our property and to assign to us any ownership they may have in those works, it may still be possible for third parties to obtain and improperly use our intellectual properties without our consent.  This could harm our brand, business, operating results and financial condition.

We are, and in the future may become, involved in intellectual property disputes, which may disrupt our business, require us to pay significant damage awards and could limit our ability to use certain technologies in the future.  

Third parties may sue us for intellectual property infringement, or initiate proceedings to invalidate our intellectual property, which, if successful, could disrupt our business, cause us to pay significant damage awards or require us to pay licensing fees.  For example, in July 2018, SwiftLife, Inc. filed a complaint in the U.S. District Court for the Eastern District of New York against us, our wholly owned subsidiary Glu Games Inc., and Taylor Swift, Taylor Swift Productions, Inc. and TAS Rights Management, LLC. The complaint alleged eight causes of action, including that Glu and the other defendants infringe the plaintiff’s federally registered trademark, SwiftLife. While we were able to successfully resolve this matter without paying any amounts to the plaintiff, the outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on us because of defense costs, potential negative publicity, diversion of management resources and other factors. In addition, any claims brought against us in the future could result in our being enjoined from using our intellectual property or licensed intellectual property, and we might incur significant licensing fees and could be forced to develop alternative technologies.  We may also be required to pay penalties, judgments, royalties or significant settlement costs.  If we fail or are unable to develop non-infringing technology or games or to license the infringed or similar technology or games on a timely basis, we may be forced to withdraw games from the market or be prevented from introducing new games. We might also incur substantial expenses in defending against third-party claims, regardless of their merit.

In addition, we use open source software in some of our games and expect to continue to use open source software in the future.  We may face claims from companies that incorporate open source software into their products, claiming ownership of, or demanding release of, the source code, the open source software and/or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open source license.  These claims could also result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to change our games, any of which would have a negative effect on our business and operating results.

We are, and in the future may become a party to litigation and regulatory inquiries, which could result in an unfavorable outcome and have an adverse effect on our business, financial condition, results of operation and cash flows.

We are, and may become in the future, subject to various legal proceedings, claims and regulatory inquiries that arise out of the ordinary conduct of our business. The outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on us because of defense costs, potential negative publicity, diversion of management resources and other factors. In addition, events may occur that give rise to a potential risk of litigation. The number and significance of regulatory inquiries have increased as our business has grown and evolved.  Any proceedings, claims or inquiries initiated by or against us, whether successful or not, may be time consuming; result in costly litigation, damage awards, consent decrees, injunctive relief or increased costs of doing business, require us to change our business practices or products, require significant amounts of management time, result in diversion of significant operations resources or otherwise harm our business and future financial results.

Unanticipated changes in our income tax rates or exposure to additional tax liabilities may affect our future financial results.

Our future effective income tax rates may be favorably or unfavorably affected by unanticipated changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws or their interpretation. Determining our worldwide provision for income taxes requires significant judgments. The estimation process and applicable laws are inherently uncertain, and our estimates are not binding on tax authorities. Our effective tax rate could also be adversely

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affected by a variety of factors, many of which are beyond our control. Recent and contemplated changes to U.S. tax laws, including limitations on a taxpayer’s ability to claim and utilize foreign tax credits and defer certain tax deductions until earnings outside of the United States are repatriated to the United States, could impact the tax treatment of our foreign earnings. Further, the taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing, or determine that the manner in which we operate our business is not consistent with the manner in which we report our income to the jurisdictions, which could increase our worldwide effective tax rate and unfavorably impact our financial position and results of operations. Foreign tax authorities may also interpret or change tax regulations such that we may be subject to tax liabilities upon closure or liquidation of a foreign subsidiary. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and state and foreign tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine if our provision for income taxes is adequate. These continuous examinations may result in unforeseen tax-related liabilities, which may unfavorably impact our future financial results.

We must charge, collect and/or pay taxes other than income taxes, such as payroll, value-added, sales and use, net worth, property and goods and services taxes, in both the United States and foreign jurisdictions. If tax authorities assert that we have taxable nexus in a jurisdiction, they may seek to impose past as well as future tax liability and/or penalties. Any such impositions could also cause significant administrative burdens and decrease our future sales. Moreover, state and federal legislatures have been considering various initiatives that could change our tax position regarding sales and use taxes.

Finally, if we change our international operations, adopt new products and new distribution models, implement changes to our operating structure or undertake intercompany transactions in light of changing tax laws, our tax expense could increase.

Our facilities are located near known earthquake fault zones, and the occurrence of an earthquake or other natural disaster could damage our facilities and equipment, which could require us to curtail or cease operations.

Our principal offices are located in the San Francisco Bay Area, an area known for earthquakes. We are also vulnerable to damage from other types of disasters, including power loss, fires, explosions, floods, communications failures, terrorist attacks and similar events. If any natural or other disaster were to occur, our ability to operate our business could be impaired.

Our stock price has fluctuated and may continue to fluctuate, and may be affected by third party data regarding our games.

The trading price of our common stock has fluctuated in the past and may continue to fluctuate in the future, as a result of a number of factors, many of which are outside our control, such as changes in the operating performance and stock market valuations of other technology companies generally, or those in our industry in particular, such as Activision, Electronic Arts, and Zynga. We also experience stock price volatility as security analysts and investors base their views and monitor the performance of our games on third party data, like App Annie, AppData, Apptopia, comScore, or SensorTower.  Third parties publish daily data about us and other mobile gaming companies with respect to downloads of our games, daily and monthly active users and estimated revenue generated by our games.  These metrics can be volatile, particularly for specific games, and in many cases do not accurately reflect the actual levels of usage of our games across all platforms or the revenue generated by our games.

In addition, The Nasdaq Global Select Market on which our common stock is listed has in the past and more recently due to the COVID-19 pandemic experienced extreme price and volume fluctuations that have affected the market prices of many companies, some of which appear to be unrelated or disproportionate to their operating performance. These broad market fluctuations could and did adversely affect the market price of our common stock. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. Securities class action litigation against us could result in substantial costs and divert our management’s attention and resources.

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If securities or industry analysts do not publish research about our business, or publish negative or misinformed reports about our business, our share price and trading volume could decline and/or become more volatile.

The trading market for our common stock is affected by the research and reports that securities or industry analysts publish about our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or lower their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline. In addition, our share price and the volatility of our shares can be affected by misinformed or mistaken research reports on our business.

Sales of substantial amounts of our common stock in the public markets, or the perception that such sales might occur, could reduce the price that our common stock might otherwise attain and may dilute a stockholder’s voting power and ownership interest in us.

The market price of shares of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors and their affiliates, executive officers, employees and significant stockholders, under our current shelf registration statements, through a large number of shares of our common stock becoming available for sale, or the perception in the market that holders of a large number of shares intend to sell their shares. For example, Tencent is free to sell the 21,000,000 shares it acquired from us in the second quarter of 2015 on the open-market, subject only to our black-out periods and other limitations under our insider trading policy. On June 2, 2020, we filed with the Securities and Exchange Commission, or SEC, a shelf registration statement on Form S-3, which became automatically effective upon filing. Under this shelf registration statement, we may, from time to time, sell common stock, such as our recent public offering of 17,250,000 shares of our common stock sold at $9.25 per share.  

Some provisions in our certificate of incorporation and bylaws, as well as Delaware law, may deter third parties from seeking to acquire us.

Our certificate of incorporation and bylaws contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors, including the following:

●our board of directors is classified into three classes of directors with staggered three-year terms;

●only our chairman of the board, our lead independent director, our Chief Executive Officer, our president or a majority of our board of directors is authorized to call a special meeting of stockholders;

●our stockholders are able to take action only at a meeting of stockholders and not by written consent;

●only our board of directors and not our stockholders is able to fill vacancies on our board of directors;

●our certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval; and

●advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before a meeting of stockholders.

In addition, as a Delaware corporation, we are subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents certain stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of at least two-thirds of our outstanding common stock not held by such 15% or greater stockholder, although our board of directors waived this provision with respect to Tencent’s potential acquisition of greater than 15% of our shares in connection with the transaction in which we initially sold shares of our common stock to an affiliate of Tencent.

We have no plans to pay dividends for the foreseeable future.

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We have never declared or paid any cash dividends on our common stock and do not have any plans to pay cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The exhibits listed on the Exhibit Index are incorporated by reference into this Item 6.

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EXHIBIT INDEX

			Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
3.1	Amended and Restated Bylaws of Glu Mobile Inc., as adopted April 23, 2020.	8-K	001-33368	3.01	04/28/2020
10.01	Amended & Restated 2007 Equity Incentive Plan, as amended and restated through June 18, 2020					X
31.01	Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a).					X
31.02	Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a).					X
32.01*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).					X
32.02*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).					X
101.INS	Inline XBRL Report Instance Document - the instance document does not appear in the Interactive Data File because its Inline XBRL tags are embedded within the Inline XBRL document.					X
101.SCH	Inline XBRL Taxonomy Extension Schema Document					X

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101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document	X
101.LAB	Inline XBRL Taxonomy Label Linkbase Document	X
101.PRE	Inline XBRL Presentation Linkbase Document	X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	X
104	Cover Page Interactive Data File - the cover page from the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 is formatted in Inline XBRL.	X

*  This exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that Glu Mobile Inc. specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GLU MOBILE INC.
Date: August 7, 2020	By:	/s/ Nick Earl
		Nick Earl
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: August 7, 2020	By:	/s/ Eric R. Ludwig
		Eric R. Ludwig
		Executive Vice President, Chief Operating Officer and Chief Financial Officer
		(Principal Financial Officer)

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EX-10.01

Exhibit 10.01

GLU MOBILE INC.

Amended & Restated 2007 Equity Incentive Plan

(As Amended through June 18, 2020)

1. PURPOSE.  The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, and any Parents and Subsidiaries that exist now or in the future, by offering them an opportunity to participate in the Company’s future performance through the grant of Awards.  Capitalized terms not defined elsewhere in the text are defined in Section 27.

2. SHARES SUBJECT TO THE PLAN.

2.1 Number of Shares Available.   Subject to Sections 2.5 and 22 and any other applicable provisions hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan is Fifty-Eight Million Five Hundred Seventy-Three Thousand One Hundred Ninety-One (58,573,191) Shares plus (i) any reserved shares not issued or subject to outstanding grants under the Company’s 2001 Stock Option Plan (the “Prior Plan”) on the Effective Date (as defined below),  (ii) shares that are subject to stock options granted under the Prior Plan that cease to be subject to such stock options after the Effective Date and (iii) shares issued under the Prior Plan before or after the Effective Date pursuant to the exercise of stock options that are, after the Effective Date, forfeited or shares issued under the Prior Plan that are repurchased by the Company at the original issue price.

2.2 Lapsed, Returned Awards.  Shares subject to Awards, and Shares issued upon exercise of Awards, will again be available for grant and issuance in connection with subsequent Awards under this Plan to the extent such Shares:  (i) are subject to issuance upon exercise of an Option or SAR granted under this Plan but which cease to be subject to the Option or SAR for any reason other than exercise of the Option or SAR; (ii) are subject to Awards granted under this Plan that are forfeited or are repurchased by the Company at the original issue price; (iii) are surrendered pursuant to an Exchange Program; (iv) are subject to Awards granted under this Plan that otherwise terminate without such Shares being issued; or (v) are used to satisfy applicable tax withholding obligations with respect to all types of Awards, except for Options and SARs.  Any Award other than an Option or a SAR shall reduce the number of Shares available for issuance by 1.32 Shares.  With respect to SARs and Options, the gross number of Shares subject to a SAR or Option will cease to be available under the Plan.  Shares used to pay the exercise price of an Award or to satisfy the tax withholding obligations related to an Option or SAR will not become available for future grant or sale under the Plan. Shares used to satisfy up to the minimum statutory tax withholding obligations related to any Award other than an Option or SAR will become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan.  To the extent that any Award other than an Option or a SAR is forfeited, repurchased or terminates without Shares being issued pursuant to this Section 2.2, Shares may again be available for issuance under this Plan at the rate of 1.32 Shares for every such Share returned to the Plan.

2.3 Minimum Share Reserve.  At all times the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Awards granted under this Plan and all other outstanding but unvested Awards granted under this Plan.

2.4 Limitations.  No more than Sixteen Million Six Hundred Sixty-Six Thousand Sixty-Six (16,666,666) Shares shall be issued pursuant to the exercise of ISOs.

2.5 Adjustment of Shares.  If the number of outstanding Shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then (a) the number of Shares reserved for issuance and future grant under the Plan set forth in Section 2.1, (b) the Exercise Prices of and number of Shares subject to outstanding Options and SARs, (c) the number of Shares subject to other outstanding Awards, (d) the maximum number of shares that may be issued as ISOs set forth in Section 2.4 and (e) the number of Shares that are granted as Awards to Outside Directors as set forth in Section 12, shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities laws; provided that fractions of a Share will not be issued.

2.6. Limitation on Outside Director Awards.  No Outside Director may be granted any Awards or Awards denominated in shares that exceed in the aggregate six hundred thousand dollars ($600,000) in value (such value computed as of the date of grant in accordance with applicable financial accounting rules) in any calendar year, plus an additional aggregate six hundred thousand dollars ($600,000) in value for one-time awards to a newly appointed or elected Outside Director. The foregoing limit shall not apply to any Award made pursuant to deferred compensation arrangements in lieu of all or a portion of cash retainers.

2.7. Vesting/Acceleration Restriction.   No portion of any Award shall vest prior to the first anniversary of the date of grant of the Award; provided, that vesting may accelerate in connection with death, Disability, or a Corporate Transaction. For purposes of Awards to Outside Directors, a vesting period will be deemed to be one year if it runs from the date of one annual meeting of the Company’s stockholders to the next annual meeting of the Company’s stockholders provided that such annual meetings are at least 50 weeks apart. Notwithstanding the foregoing, up to 5% of the Shares authorized for grant pursuant to Section 2.1 may be granted with a minimum vesting schedule of less than one year.

3. ELIGIBILITY.  ISOs may be granted only to Employees.  All other Awards may be granted to Employees, Consultants, Directors and Outside Directors of the Company or any Parent or Subsidiary of the Company; provided such Consultants, Directors and Outside Directors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction.

4. ADMINISTRATION.

4.1 Committee Composition; Authority.  This Plan will be administered by the Committee or by the Board acting as the Committee.  Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan, except, however, the Board shall establish the terms for the grant of an Award to Outside Directors.  The Committee will have the authority to:

(a) construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;

(b) prescribe, amend and rescind rules and regulations relating to this Plan or any Award;

(c) select persons to receive Awards;

(d) determine the form and terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Committee will determine;

(e) determine the number of Shares or other consideration subject to Awards;

(f) determine the Fair Market Value in good faith, if necessary;

(g) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company;

(h) grant waivers of Plan or Award conditions;

(i) determine the vesting, exercisability and payment of Awards;

(j) correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement;

(k) determine whether an Award has been earned;

(l) determine the terms and conditions of any, and to institute any Exchange Program;

(m) reduce or waive any criteria with respect to Performance Factors;

(n) adjust Performance Factors to take into account changes in law and accounting or tax rules as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships provided that such adjustments are consistent with the regulations

promulgated under Section 162(m) of the Code with respect to persons whose compensation is subject to Section 162(m) of the Code (to the extent necessary for purposes of Section 162(m) of the Code); and

(o) make all other determinations necessary or advisable for the administration of this Plan.

4.2 Committee Interpretation and Discretion.  Any determination made by the Committee with respect to any Award shall be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination shall be final and binding on the Company and all persons having an interest in any Award under the Plan.  Any dispute regarding the interpretation of the Plan or any Award Agreement shall be submitted by the Participant or Company to the Committee for review.  The resolution of such a dispute by the Committee shall be final and binding on the Company and the Participant.  The Committee may delegate to one or more executive officers the authority to review and resolve disputes with respect to Awards held by Participants who are not Insiders, and such resolution shall be final and binding on the Company and the Participant.

4.3 [intentionally left blank]

4.4 Awards subject to Company Clawback or Recoupment Policy.  All Awards granted after the adoption of the Company's Compensation Recovery Policy (the "Policy") and subject to applicable law, shall be subject to clawback or recoupment pursuant to the Policy or any other compensation clawback or recoupment policy that may be adopted by the Board (or its Compensation Committee) from time to time thereafter or required by law during the term of Participant’s employment or other service with the Company that is applicable to executive officers, employees, directors or other service providers of the Company, which such policy may, in addition to any other remedies available under such policy and applicable law, require the cancellation of outstanding Awards and the recoupment of any gains realized with respect to Awards.

5. OPTIONS.  The Committee may grant Options to Participants and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or Nonqualified Stock Options (“NQSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, and all other terms and conditions of the Option, subject to the following:

5.1 Option Grant.  Each Option granted under this Plan will identify the Option as an ISO or an NQSO.  An Option may be, but need not be, awarded upon satisfaction of such Performance Factors during any Performance Period as are set out in advance in the Participant’s individual Award Agreement.  If the Option is being earned upon the satisfaction of Performance Factors, then the Committee will: (x) determine the nature, length and starting date of any Performance Period for each Option; and (y) select from among the Performance Factors to be used to measure the performance, if any.  Performance Periods may overlap and Participants may participate simultaneously with respect to Options that are subject to different performance goals and other criteria.

5.2 Date of Grant.  The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, or a specified future date.  The Award Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option.

5.3 Exercise Period.  Options may be exercisable within the times or upon the conditions as set forth in the Award Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted; and provided further that no ISO granted to a person who, at the time the ISO is granted, directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company (“Ten Percent Shareholder”) will be exercisable after the expiration of five (5) years from the date the ISO is granted.  The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.

5.4 Exercise Price.  The Exercise Price of an Option will be determined by the Committee when the Option is granted; provided that: (i) the Exercise Price of any Option (both ISOs and NQOs) will be not less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant and (ii) the Exercise Price of any ISO granted to a Ten Percent Shareholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant.  Payment for the Shares purchased may be made in accordance with Section 11.  Notwithstanding the foregoing, NQSOs may be granted with an exercise price of less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant solely pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.

5.5 Method of Exercise.  Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Committee and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.  An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Committee may specify from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 2.5 of the Plan. Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

5.6 Termination.  The exercise of an Option will be subject to the following (except as may be otherwise provided in an Award Agreement):

(a) If the Participant is Terminated for any reason except for Cause or the Participant’s death or Disability, then the Participant may exercise such Participant’s Options only to the extent that such Options would have been exercisable by the Participant on the Termination Date no later than three (3) months after the Termination Date (or such shorter time period or longer time period not exceeding five (5) years as may be determined by the Committee, with any exercise beyond three (3) months after the Termination Date deemed to be an NQSO), but in any event no later than the expiration date of the Options.

(b) If the Participant is Terminated because of the Participant’s death (or the Participant dies within three (3) months after a Termination other than for Cause or because of the Participant’s Disability), then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the Termination Date and must be exercised by the Participant’s legal representative, or authorized assignee, no later than twelve (12) months after the Termination Date (or such shorter time period not less than six (6) months or longer time period not exceeding five (5) years as may be determined by the Committee, with any exercise beyond (a) three (3) months after the Termination Date when the Termination is for any reason other than the Participant’s death, or (b) twelve (12) months after the Termination Date when the Termination is for the Participant’s death, deemed to be an NQSO), but in any event no later than the expiration date of the Options.

(c) If the Participant is Terminated because of the Participant’s Disability, then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the Termination Date and must be exercised by the Participant (or the Participant’s legal representative or authorized assignee) no later than twelve (12) months after the Termination Date (with any exercise beyond (a) three (3) months after the Termination Date when the Termination is for a Disability that is not a “permanent and total disability” as defined in Section 22(e)(3) of the Code, or (b) twelve (12) months after the Termination Date when the Termination is for a Disability that is a “permanent and total disability” as defined in Section 22(e)(3) of the Code, deemed to be exercise of an NQSO), but in any event no later than the expiration date of the Options.

(d) If the Participant is terminated for Cause, then Participant’s Options shall expire on such Participant’s Termination Date, or at such later time and on such conditions as are determined by the Committee, but in any no event later than the expiration date of the Options.

5.7 Limitations on Exercise.  The Committee may specify a minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent any Participant from exercising the Option for the full number of Shares for which it is then exercisable.

5.8 Limitations on ISOs.  With respect to Awards granted as ISOs, to the extent that the aggregate Fair Market Value of the Shares with respect to which such ISOs are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as NQSOs. For purposes of this Section 5.8, ISOs will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted.  In the event that the Code or the regulations promulgated

thereunder are amended after the Effective Date to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.

5.9 Modification, Extension or Renewal.  The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted.  Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code.  Subject to Section 18 of this Plan, by written notice to affected Participants, the Committee may reduce the Exercise Price of outstanding Options without the consent of such Participants; provided, however, that the Exercise Price may not be reduced below the Fair Market Value on the date the action is taken to reduce the Exercise Price.

5.10 No Disqualification.  Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.

6. RESTRICTED STOCK AWARDS.

6.1 Awards of Restricted Stock.  A Restricted Stock Award is an offer by the Company to sell to a Participant Shares that are subject to restrictions (“Restricted Stock”).  The Committee will determine to whom an offer will be made, the number of Shares the Participant may purchase, the Purchase Price, the restrictions under which the Shares will be subject and all other terms and conditions of the Restricted Stock Award, subject to the Plan.

6.2 Restricted Stock Purchase Agreement.  All purchases under a Restricted Stock Award will be evidenced by an Award Agreement.  A Participant accepts a Restricted Stock Award by signing and delivering to the Company an Award Agreement with full payment of the Purchase Price, within thirty (30) days from the date the Award Agreement was delivered to the Participant.  If the Participant does not accept such Award within thirty (30) days, then the offer of such Restricted Stock Award will terminate, unless the Committee determines otherwise.

6.3 Purchase Price.  The Purchase Price for a Restricted Stock Award will be determined by the Committee and may be less than Fair Market Value on the date the Restricted Stock Award is granted.  Payment of the Purchase Price must be made in accordance with Section 11 of the Plan, and the Award Agreement.

6.4 Terms of Restricted Stock Awards.  Restricted Stock Awards will be subject to such restrictions as the Committee may impose or are required by law.  These restrictions may be based on completion of a specified number of years of service with the Company or upon completion of Performance Factors, if any, during any Performance Period as set out in advance in the Participant’s Award Agreement.  Prior to the grant of a Restricted Stock Award, the Committee shall: (a) determine the nature, length and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the Participant.  Performance Periods may overlap and a Participant may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria.

6.5 Termination of Participant.  Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such Participant’s Termination Date (unless determined otherwise by the Committee).

7. STOCK BONUS AWARDS.

7.1 Awards of Stock Bonuses.  A Stock Bonus Award is an award to an eligible person of Shares (which may consist of Restricted Stock or Restricted Stock Units) for services to be rendered or for past services already rendered to the Company or any Parent or Subsidiary.  All Stock Bonus Awards shall be made pursuant to an Award Agreement.  No payment from Participant will be required for Shares awarded pursuant to a Stock Bonus Award.

7.2 Terms of Stock Bonus Awards.  The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus Award and any restrictions thereon.  These restrictions may be based upon completion of a specified number of years of service with the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in advance in the Participant’s Stock Bonus Agreement.  Prior to the grant of any Stock Bonus Award the Committee shall: (a) determine the nature, length

and starting date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance Factors to be used to measure performance goals; and (c) determine the number of Shares that may be awarded to the Participant.  Performance Periods may overlap and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject to different Performance Periods and different performance goals and other criteria.

7.3 Form of Payment to Participant.  Payment may be made in the form of cash, whole Shares, or a combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus Award on the date of payment.

7.4 Termination of Participation.  Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such Participant’s Termination Date (unless determined otherwise by the Committee).

8. STOCK APPRECIATION RIGHTS.

8.1 Awards of SARs.  A Stock Appreciation Right (“SAR”) is an award to a Participant that may be settled in cash, or Shares (which may consist of Restricted Stock), having a value equal to (a) the difference between the Fair Market Value on the date of exercise over the Exercise Price multiplied by (b) the number of Shares with respect to which the SAR is being settled (subject to any maximum number of Shares that may be issuable as specified in an Award Agreement).  All SARs shall be made pursuant to an Award Agreement.

8.2 Terms of SARs.  The Committee will determine the terms of each SAR including, without limitation: (a) the number of Shares subject to the SAR; (b) the Exercise Price and the time or times during which the SAR may be settled; (c) the consideration to be distributed on settlement of the SAR; and (d) the effect of the Participant’s Termination on each SAR.  The Exercise Price of the SAR will be determined by the Committee when the SAR is granted, and may not be less than Fair Market Value.  A SAR may be awarded upon satisfaction of Performance Factors, if any, during any Performance Period as are set out in advance in the Participant’s individual Award Agreement.  If the SAR is being earned upon the satisfaction of Performance Factors, then the Committee will: (x) determine the nature, length and starting date of any Performance Period for each SAR; and (y) select from among the Performance Factors to be used to measure the performance, if any.  Performance Periods may overlap and Participants may participate simultaneously with respect to SARs that are subject to different Performance Factors and other criteria.

8.3 Exercise Period and Expiration Date.  A SAR will be exercisable within the times or upon the occurrence of events determined by the Committee and set forth in the Award Agreement governing such SAR.  The SAR Agreement shall set forth the expiration date; provided that no SAR will be exercisable after the expiration of ten (10) years from the date the SAR is granted.  The Committee may also provide for SARs to become exercisable at one time or from time to time, periodically or otherwise (including, without limitation, upon the attainment during a Performance Period of performance goals based on Performance Factors), in such number of Shares or percentage of the Shares subject to the SAR as the Committee determines.  Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such Participant’s Termination Date (unless determined otherwise by the Committee).  Notwithstanding the foregoing, the rules of Section 5.6 also will apply to SARs.

8.4 Form of Settlement.  Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying (i) the difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price; times (ii) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment from the Company for the SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof.

9. RESTRICTED STOCK UNITS.

9.1 Awards of Restricted Stock Units.  A Restricted Stock Unit (“RSU”) is an award to a Participant covering a number of Shares that may be settled in cash, or by issuance of those Shares (which may consist of Restricted Stock).  All RSUs shall be made pursuant to an Award Agreement.

9.2 Terms of RSUs.  The Committee will determine the terms of an RSU including, without limitation: (a) the number of Shares subject to the RSU; (b) the time or times during which the RSU may be settled; and (c) the consideration to be distributed on settlement, and the effect of the Participant’s Termination on each RSU.  An RSU may be awarded upon satisfaction of such Performance Factors (if any) during any Performance Period as are set out in advance in the Participant’s Award Agreement.  If the RSU is being earned upon satisfaction of Performance Factors, then the Committee will: (x) determine the nature, length and starting date of any Performance Period for the RSU; (y) select from among the Performance Factors to be used to measure the performance, if any;

and (z) determine the number of Shares deemed subject to the RSU.  Performance Periods may overlap and participants may participate simultaneously with respect to RSUs that are subject to different Performance Periods and different performance goals and other criteria.

9.3 Form and Timing of Settlement.  Payment of earned RSUs shall be made as soon as practicable after the date(s) determined by the Committee and set forth in the Award Agreement. The Committee, in its sole discretion, may settle earned RSUs in cash, Shares, or a combination of both.

9.4 Termination of Participant.  Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such Participant’s Termination Date (unless determined otherwise by the Committee).

10. PERFORMANCE SHARES.

10.1 Awards of Performance Shares.  A Performance Share Award is an award to a Participant denominated in Shares that may be settled in cash, or by issuance of those Shares (which may consist of Restricted Stock).  Grants of Performance Shares shall be made pursuant to an Award Agreement.

10.2 Terms of Performance Shares.  The Committee will determine, and each Award Agreement shall set forth, the terms of each award of Performance Shares including, without limitation: (a) the number of Shares deemed subject to such Award; (b) the Performance Factors and Performance Period that shall determine the time and extent to which each award of Performance Shares shall be settled; (c) the consideration to be distributed on settlement, and the effect of the Participant’s Termination on each award of Performance Shares.  In establishing Performance Factors and the Performance Period the Committee will: (x) determine the nature, length and starting date of any Performance Period; (y) select from among the Performance Factors to be used; and (z) determine the number of Shares deemed subject to the award of Performance Shares.  Prior to settlement the Committee shall determine the extent to which Performance Shares have been earned.  Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Shares that are subject to different Performance Periods and different performance goals and other criteria.

10.3 Value, Earning and Timing of Performance Shares.  Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant.  After the applicable Performance Period has ended, the holder of Performance Shares will be entitled to receive a payout of the number of Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Factors or other vesting provisions have been achieved. The Committee, in its sole discretion, may pay earned Performance Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Shares at the close of the applicable Performance Period) or in a combination thereof.

10.4 Termination of Participant.  Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such Participant’s Termination Date (unless determined otherwise by the Committee).

11. PAYMENT FOR SHARE PURCHASES.

Payment from Participant for Shares purchased pursuant to this Plan may be made in cash or by check or, where expressly approved for the Participant by the Committee and where permitted by law (and to the extent not otherwise set forth in the applicable Award Agreement):

(a) by cancellation of indebtedness of the Company to the Participant;

(b) by surrender of shares of the Company held by the Participant that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Award will be exercised or settled;

(c) by waiver of compensation due or accrued to the Participant for services rendered or to be rendered to the Company or a Parent or Subsidiary of the Company;

(d) by consideration received by the Company pursuant to a broker-assisted and/or same day sale (or other) cashless exercise program implemented by the Company in connection with the Plan;

(e) by any combination of the foregoing; or

(f) by any other method of payment as is permitted by applicable law.

12. GRANTS TO OUTSIDE DIRECTORS.

12.1 Types of Awards.  Outside Directors are eligible to receive any type of Award offered under this Plan except ISOs.  Awards pursuant to this Section 12 may be automatically made pursuant to policy adopted by the Board, or made from time to time as determined in the discretion of the Board.

12.2 Eligibility.  Awards pursuant to this Section 12 shall be granted only to Outside Directors.  An Outside Director who is elected or re-elected as a member of the Board will be eligible to receive an Award under this Section 12.

12.3 Vesting, Exercisability and Settlement.  Except as set forth in Section 21, Awards shall vest, become exercisable and be settled as determined by the Board.  With respect to Options and SARs, the exercise price granted to Outside Directors shall not be less than the Fair Market Value of the Shares at the time that such Option or SAR is granted.

13. WITHHOLDING TAXES.

13.1 Withholding Generally.  Whenever Shares are to be issued in satisfaction of Awards granted under this Plan, the Company may require the Participant to remit to the Company an amount sufficient to satisfy applicable federal, state, local and international withholding tax requirements prior to the delivery of Shares pursuant to exercise or settlement of any Award.  Whenever payments in satisfaction of Awards granted under this Plan are to be made in cash, such payment will be net of an amount sufficient to satisfy applicable federal, state, local and international withholding tax requirements.

13.2 Stock Withholding.  The Committee, in its sole discretion and pursuant to such procedures as it may specify from time to time, may require or permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (i) paying cash, (ii) electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to up to the maximum statutory amount permitted to be withheld, including withholding from the proceeds of the sale of otherwise deliverable Shares acquired pursuant to an Award either through a voluntary sale or through a mandatory sale arranged by the Company, or (iii) delivering to the Company already-owned Shares having a Fair Market Value equal to up to the maximum statutory amount permitted to be withheld. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.

14. TRANSFERABILITY.  Unless determined otherwise by the Committee, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution.  If the Committee makes an Award transferable, such Award will contain such additional terms and conditions as the Committee deems appropriate.  Notwithstanding the foregoing, in no event shall the Committee institute an Award Transfer Program without first receiving the consent of the Company’s stockholders.  All Awards shall be exercisable: (i) during the Participant’s lifetime only by (A) the Participant, or (B) the Participant’s guardian or legal representative; and (ii) after the Participant’s death, by the legal representative of the Participant’s heirs or legatees.

15. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.

15.1 Voting and Dividends.  No Participant will have any of the rights of a shareholder with respect to any Shares until the Shares are issued to the Participant.  After Shares are issued to the Participant, the Participant will be a shareholder and have all the rights of a shareholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided, further, that the Participant will have no right to retain such stock dividends or stock distributions with respect to Shares that are repurchased at the Participant’s Purchase Price or Exercise Price, as the case may be, pursuant to Section 15.2. The Committee may not provide for the current payment of dividends with respect to any shares of Common Stock subject to an outstanding Award granted under the Plan (or portion thereof) that has not vested. For any such Award, the Committee may provide only for the accrual of dividends that will not be payable to the Participant unless and until, and only to the extent that, such Award vests. No dividends shall be paid on Options or Stock Appreciation Rights.

15.2 Restrictions on Shares.  At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) a right to repurchase (a “Right of Repurchase”) a portion of any or all Unvested Shares held by

a Participant following such Participant’s Termination at any time within ninety (90) days after the later of the Participant’s Termination Date and the date the Participant purchases Shares under this Plan, for cash and/or cancellation of purchase money indebtedness, at the Participant’s Purchase Price or Exercise Price, as the case may be.

16. CERTIFICATES.  All certificates for Shares or other securities delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted.

17. ESCROW; PLEDGE OF SHARES.  To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates.  Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of the Participant’s obligation to the Company under the promissory note; provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral.  In connection with any pledge of the Shares, the Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve.  The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.

18. REPRICING; EXCHANGE AND BUYOUT OF AWARDS.  Provided that stockholder approval is first obtained, the Committee (a) may reprice (i.e., reduce the Exercise Price) of) Options or SARs; (b) may, at any time or from time to time, implement an Exchange Program; or (c) may reduce the Exercise Price of outstanding Options or SARs without the consent of affected Participants by a written notice to them.

19. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.  An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance.  Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (b) completion of any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable.  The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.

20. NO OBLIGATION TO EMPLOY.  Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Participant’s employment or other relationship at any time.

21. CORPORATE TRANSACTIONS.

21.1 Assumption or Replacement of Awards by Successor.  In the event of a Corporate Transaction any or all outstanding Awards may be assumed or replaced by the successor corporation, which assumption or replacement shall be binding on all Participants.  In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to stockholders (after taking into account the existing provisions of the Awards).  The successor corporation may also issue, in place of outstanding Shares of the Company subject to repurchase and held by the Participant, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Participant.  In the event such successor or acquiring

corporation (if any) refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, then notwithstanding any other provision in this Plan to the contrary, such Awards will expire on such transaction at such time and on such conditions as the Board will determine; the Board (or, the Committee, if so designated by the Board) may, in its sole discretion, accelerate the vesting of such Awards in connection with such a Corporate Transaction in which the successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute Awards.  In addition, in the event such successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, the Committee will notify the Participant in writing or electronically that such Award will be exercisable for a period of time determined by the Committee in its sole discretion, and such Award will terminate upon the expiration of such period.  Awards need not be treated similarly in a Corporate Transaction.

Notwithstanding anything to the contrary in this Section 21.1, the Committee, in its sole discretion, may grant Awards that provide for acceleration upon a Corporate Transaction or in other events in the specific Award Agreements.

21.2 Assumption of Awards by the Company.  The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either; (a) granting an Award under this Plan in substitution of such other company’s award; or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan.  Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant.  In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the Purchase Price or the Exercise Price, as the case may be, and the number and nature of Shares issuable upon exercise or settlement of any such Award will be adjusted appropriately pursuant to Section 424(a) of the Code).

21.3 Outside Directors’ Awards.  Notwithstanding any provision to the contrary herein, in the event of a Corporate Transaction, the vesting of all Awards granted to Outside Directors shall accelerate and such Awards shall become exercisable (as applicable) in full prior to the consummation of such event at such times and on such conditions as the Committee determines.

22. ADOPTION AND SHAREHOLDER APPROVAL.  This Plan shall be submitted for the approval of the Company’s shareholders, consistent with applicable laws, within twelve (12) months before or after the date this Plan is adopted by the Board.

23. TERM OF PLAN.  Unless earlier terminated as provided herein, this Plan will become effective on the Effective Date and will terminate on June 4, 2025.  This Plan and all Awards granted hereunder shall be governed by and construed in accordance with the laws of the State of Delaware.

24. AMENDMENT OR TERMINATION OF PLAN.  The Board may at any time terminate or amend this Plan in any respect, including, without limitation, amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that the Board will not, without the approval of the shareholders of the Company, amend this Plan in any manner that requires such shareholder approval; provided further, that a Participant’s Award shall be governed by the version of this Plan then in effect at the time such Award was granted.

25. NONEXCLUSIVITY OF THE PLAN.  Neither the adoption of this Plan by the Board, the submission of this Plan to the shareholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock awards and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

26. INSIDER TRADING POLICY.  Each Participant who receives an Award shall comply with any policy adopted by the Company from time to time covering transactions in the Company’s securities by Employees, officers and/or directors of the Company.

27. DEFINITIONS.  As used in this Plan, and except as elsewhere defined herein, the following terms will have the following meanings:

“Award” means any award under the Plan, including any Option, Restricted Stock, Stock Bonus, Stock Appreciation Right, Restricted Stock Unit or award of Performance Shares.

“Award Agreement” means, with respect to each Award, the written or electronic agreement between the Company and the Participant setting forth the terms and conditions of the Award, which shall be in substantially a form (which need not be the same for each Participant) that the Committee has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan.

“Award Transfer Program” means any program instituted by the Committee that would permit Participants the opportunity to transfer for value any outstanding Awards to a financial institution or other person or entity approved by the Committee. A transfer for “value” shall not be deemed to occur under this Plan where an Award is transferred by a Participant for bona fide estate planning purposes to a trust or other testamentary vehicle approved by the Committee.

“Board” means the Board of Directors of the Company.

“Cause” means (a) the commission of an act of theft, embezzlement, fraud, dishonesty, (b) a breach of fiduciary duty to the Company or a Parent or Subsidiary, or (c) a failure to materially perform the customary duties of Employee’s employment.

“Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

“Committee” means the Compensation Committee of the Board or those persons to whom administration of the Plan, or part of the Plan, has been delegated as permitted by law.

“Company” means Glu Mobile Inc., or any successor corporation.

“Consultant” means any person, including an advisor or independent contractor, engaged by the Company or a Parent or Subsidiary to render services to such entity.

“Corporate Transaction” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then-outstanding voting securities; (ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this Plan by reason of a Corporate Transaction, such amount shall become payable only if the event constituting a Corporate Transaction would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time.

“Director” means a member of the Board.

“Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided, however, that except with respect to Awards granted as ISOs, the Committee in its discretion may determine whether a total and permanent disability exists in accordance with non-discriminatory and uniform standards adopted by the Committee from time to time, whether temporary or permanent, partial or total, as determined by the Committee.

“Effective Date” means the date of the underwritten initial public offering of the Company’s Common Stock pursuant to a registration statement is declared effective by the SEC.

“Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

“Exercise Price” means the price at which a holder of an Option or SAR may purchase the Shares issuable upon exercise of an Option or SAR.

“Exchange Program” means a program pursuant to which (i) outstanding Awards are surrendered, cancelled or exchanged for cash, the same type of Award or a different Award (or combination thereof) or (ii) Participants would have the opportunity to participate in an Award Transfer Program.

“Fair Market Value” means, as of any date, the value of a share of the Company’s Common Stock determined as follows:

(a) if such Common Stock is then quoted on the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market (collectively, the “Nasdaq Market”), its closing price on the Nasdaq Market on the date of determination, or if there are no sales for such date, then the last preceding business day on which there were sales, as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;

(b) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;

(c) if such Common Stock is publicly traded but is neither quoted on the Nasdaq Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;

(d) in the case of an Option or SAR made on the Effective Date, the price per share at which shares of the Company’s Common Stock are initially offered for sale to the public by the Company’s underwriters in the initial public offering of the Company’s Common Stock pursuant to a registration statement filed with the SEC under the Securities Act; or

(e) if none of the foregoing is applicable, by the Board or the Committee in good faith.

“Insider” means an officer or director of the Company or any other person whose transactions in the Company’s Common Stock are subject to Section 16 of the Exchange Act.

“Option” means an award of an option to purchase Shares pursuant to Section 5.

“Outside Director” means a Director who is not an Employee of the Company or any Parent or Subsidiary.

“Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

“Participant” means an Employee, Consultant or Director (including Outside Directors) who receives an Award under this Plan.

“Performance Factors” means the factors selected by the Committee, which may include, but are not limited to the, the following measures (whether or not in comparison to other peer companies) to determine whether the performance goals established by the Committee and applicable to Awards have been satisfied:

·Net revenue and/or net revenue growth;

·Earnings per share and/or earnings per share growth;

·Earnings before income taxes and amortization and/or earnings before income taxes and amortization growth;

·Operating income and/or operating income growth;

·Net income and/or net income growth;

·Total stockholder return and/or total stockholder return growth;

·Return on equity;

·Operating cash flow return on income;

·Adjusted operating cash flow return on income;

·Economic value added;

·Individual business objectives; and

·   Company specific operational metrics.

“Performance Period” means the period of service determined by the Committee, not to exceed five (5) years, during which years of service or performance is to be measured for the Award.

“Performance Share” means an Award granted pursuant to Section 10 of the Plan.

“Plan” means this Glu Mobile Inc. 2007 Equity Incentive Plan.

“Purchase Price” means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an Option or SAR.

“Restricted Stock Award” means an award of Shares pursuant to Section 6 of the Plan, or issued pursuant to the early exercise of an Option.

“Restricted Stock Unit” means an Award granted pursuant to Section 9 of the Plan.

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the United States Securities Act of 1933, as amended.

“Shares” means shares of the Company’s Common Stock, as adjusted pursuant to Sections 2 and 21, and any successor security.

“Stock Appreciation Right” means an Award granted pursuant to Section 8 of the Plan.

“Stock Bonus” means an Award granted pursuant to Section 7 of the Plan.

“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

“Termination” or “Terminated” means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, director, consultant, independent contractor or advisor to the Company or a Parent or Subsidiary of the Company.  An employee will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Committee; provided, that such leave is for a period of not more than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute or unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated to employees in writing.  In the case of any employee on an approved leave of absence or upon a reduction in hours worked (for illustrative purposes only, a change in schedule from that of full-time to part-time), the Committee may make such provisions respecting suspension of vesting of the Award while on leave from the employ of the Company or a Parent or Subsidiary of the Company or during such change in working hours as it may deem appropriate, except that in no event may an Award be exercised after the expiration of the term set forth in the applicable Award Agreement.  The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the “Termination Date”).

“Unvested Shares” means Shares that have not yet vested or are subject to a right of repurchase in favor of the Company (or any successor thereto).

EX-31.01

Exhibit 31.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A)/15D-14(A)
OF THE SECURITIES EXCHANGE ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Nick Earl, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Glu Mobile Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2020	By:	/s/ Nick Earl
		Nick Earl
		President and Chief Executive Officer

EX-31.02

Exhibit 31.02

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A)/15D-14(A)
OF THE SECURITIES EXCHANGE ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Eric R. Ludwig, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Glu Mobile Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2020	By:	/s/ Eric R. Ludwig
		Eric R. Ludwig
		Executive Vice President, Chief Operating Officer and Chief Financial Officer

EX-32.01

Exhibit 32.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350

The undersigned, Nick Earl, the President and Chief Executive Officer of Glu Mobile Inc. (the “Company”), pursuant to 18 U.S.C. §1350, hereby certifies that:

(i) the Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 7, 2020	By:	/s/ Nick Earl
		Nick Earl
		President and Chief Executive Officer (Principal Executive Officer)

EX-32.02

Exhibit 32.02

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350

The undersigned, Eric R. Ludwig, Executive Vice President, Chief Operating Officer and Chief Financial Officer of Glu Mobile Inc. (the “Company”), pursuant to 18 U.S.C. §1350, hereby certifies that:

(i) the Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 7, 2020	By:	/s/ Eric R. Ludwig
		Eric R. Ludwig
		Executive Vice President, Chief Operating Officer and Chief Financial Officer
		(Principal Financial Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Aug. 04, 2020
Document And Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2020
Entity File Number	001-33368
Entity Registrant Name	Glu Mobile Inc
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	91-2143667
Entity Address, Address Line One	875 Howard Street, Suite 100
Entity Address, City or Town	San Francisco
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94103
City Area Code	415
Local Phone Number	800-6100
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	GLUU
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		170,853,481
Entity Central Index Key	0001366246
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 283,057	$ 127,053
Accounts receivable, net	64,658	29,304
Prepaid royalties	17,633	15,347
Deferred royalties	9,489	5,067
Deferred platform commission fees	43,619	29,239
Prepaid expenses and other assets	18,125	8,629
Total current assets	436,581	214,639
Property and equipment, net	17,779	17,643
Operating lease right of use assets	33,553	35,170
Long-term prepaid royalties	22,100	26,879
Other long-term assets	2,738	2,733
Intangible assets, net	2,983	4,758
Goodwill	116,227	116,227
Total assets	631,961	418,049
Current liabilities:
Accounts payable and accrued liabilities	27,331	17,535
Accrued compensation	15,752	11,260
Accrued royalties	15,987	20,802
Short-term operating lease liabilities	4,434	3,528
Deferred revenue	145,498	97,629
Total current liabilities	209,002	150,754
Long-term accrued royalties	20,783	26,842
Long-term operating lease liabilities	36,877	37,351
Other long-term liabilities	325	15
Total liabilities	266,987	214,962
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock, $0.0001 par value; 5,000 shares authorized at June 30, 2020 and December 31, 2019; no shares issued and outstanding at June 30, 2020 and December 31, 2019	0	0
Common stock, $0.0001 par value; 250,000 shares authorized at June 30, 2020 and December 31, 2019; 170,709 and 147,778 shares issued and outstanding at June 30, 2020 and December 31, 2019	17	15
Additional paid-in capital	813,468	634,721
Accumulated other comprehensive loss	(60)	(37)
Accumulated deficit	(448,451)	(431,612)
Total stockholders' equity	364,974	203,087
Total liabilities and stockholders' equity	$ 631,961	$ 418,049

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares shares in Thousands	Jun. 30, 2020	Dec. 31, 2019
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000	5,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	250,000	250,000
Common stock, shares issued	170,709	147,778
Common stock, shares outstanding	170,709	147,778

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Revenue	$ 133,316	$ 95,540	$ 240,590	$ 191,425
Cost of revenue:
Platform commissions, royalties and other	46,727	32,806	83,701	66,076
Amortization of intangible assets	887	1,056	1,775	2,308
Total cost of revenue	47,614	33,862	85,476	68,384
Gross profit	85,702	61,678	155,114	123,041
Operating expenses:
Research and development	28,420	19,736	57,951	46,282
Sales and marketing	65,203	35,040	107,946	63,145
General and administrative	7,266	4,951	13,933	11,586
Total operating expenses	100,889	59,727	179,830	121,013
Income/(loss) from operations	(15,187)	1,951	(24,716)	2,028
Interest and other income, net	434	556	369	1,320
Income/(loss) before income taxes	(14,753)	2,507	(24,347)	3,348
Income tax benefit/(provision)	6,187	0	7,508	(178)
Net income/(loss)	$ (8,566)	$ 2,507	$ (16,839)	$ 3,170
Net income/(loss) per common share - basic	$ (0.05)	$ 0.02	$ (0.11)	$ 0.02
Net income/(loss) per common share - diluted	$ (0.05)	$ 0.02	$ (0.11)	$ 0.02
Weighted average common shares outstanding:
Basic	156,583	145,451	153,106	144,951
Diluted	156,583	159,682	153,106	159,556

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (Unaudited)
Net income/(loss)	$ (8,566)	$ 2,507	$ (16,839)	$ 3,170
Other comprehensive income/(loss):
Foreign currency translation adjustments		(30)	(23)	(15)
Other comprehensive income/(loss)		(30)	(23)	(15)
Comprehensive income/(loss)	$ (8,566)	$ 2,477	$ (16,862)	$ 3,155

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Common stock	Additional Paid-In Capital	Accumulated other comprehensive income (loss)	Accumulated Deficit	Total
Beginning balance at Dec. 31, 2018	$ 14	$ 617,781	$ 1	$ (440,483)	$ 177,313
Beginning balances (in shares) at Dec. 31, 2018	143,870
Net income (loss)				663	663
Stock-based compensation expense		6,807			6,807
Issuance of common stock upon exercise of stock options		1,313			1,313
Issuance of common stock upon exercise of stock options (in shares)	468
Taxes paid related to net share settlement of equity awards	$ 1	(3,957)			(3,956)
Taxes paid related to net share settlement of equity awards (in shares)	560
Issuance of common stock pursuant to Employee Stock Purchase Plan		1,665			1,665
Issuance of common stock pursuant to Employee Stock Purchase Plan (in shares)	278
Other comprehensive income (loss)			15		15
Ending balance at Mar. 31, 2019	$ 15	623,609	16	(439,820)	183,820
Ending balances (in shares) at Mar. 31, 2019	145,176
Beginning balance at Dec. 31, 2018	$ 14	617,781	1	(440,483)	177,313
Beginning balances (in shares) at Dec. 31, 2018	143,870
Net income (loss)					3,170
Other comprehensive income (loss)					(15)
Ending balance at Jun. 30, 2019	$ 15	623,652	(14)	(437,313)	186,340
Ending balances (in shares) at Jun. 30, 2019	145,784
Beginning balance at Mar. 31, 2019	$ 15	623,609	16	(439,820)	183,820
Beginning balances (in shares) at Mar. 31, 2019	145,176
Net income (loss)				2,507	2,507
Stock-based compensation expense		2,035			2,035
Issuance of common stock upon exercise of stock options		469			469
Issuance of common stock upon exercise of stock options (in shares)	209
Taxes paid related to net share settlement of equity awards		(2,461)			(2,461)
Taxes paid related to net share settlement of equity awards (in shares)	399
Other comprehensive income (loss)			(30)		(30)
Ending balance at Jun. 30, 2019	$ 15	623,652	(14)	(437,313)	186,340
Ending balances (in shares) at Jun. 30, 2019	145,784
Beginning balance at Dec. 31, 2019	$ 15	634,721	(37)	(431,612)	203,087
Beginning balances (in shares) at Dec. 31, 2019	147,778
Net income (loss)				(8,273)	(8,273)
Stock-based compensation expense		6,238			6,238
Issuance of common stock upon exercise of stock options		9,526			9,526
Issuance of common stock upon exercise of stock options (in shares)	2,921
Issuance of common stock upon exercise of warrants (in shares)	115
Taxes paid related to net share settlement of equity awards		(1,720)			(1,720)
Taxes paid related to net share settlement of equity awards (in shares)	320
Issuance of common stock pursuant to Employee Stock Purchase Plan		1,705			1,705
Issuance of common stock pursuant to Employee Stock Purchase Plan (in shares)	450
Other comprehensive income (loss)			(23)		(23)
Ending balance at Mar. 31, 2020	$ 15	650,470	(60)	(439,885)	210,540
Ending balances (in shares) at Mar. 31, 2020	151,584
Beginning balance at Dec. 31, 2019	$ 15	634,721	(37)	(431,612)	203,087
Beginning balances (in shares) at Dec. 31, 2019	147,778
Net income (loss)					(16,839)
Other comprehensive income (loss)					(23)
Ending balance at Jun. 30, 2020	$ 17	813,468	(60)	(448,451)	364,974
Ending balances (in shares) at Jun. 30, 2020	170,709
Beginning balance at Mar. 31, 2020	$ 15	650,470	(60)	(439,885)	210,540
Beginning balances (in shares) at Mar. 31, 2020	151,584
Net income (loss)				(8,566)	(8,566)
Stock-based compensation expense		7,620			7,620
Issuance of common stock upon exercise of stock options		5,347			5,347
Issuance of common stock upon exercise of stock options (in shares)	1,464
Taxes paid related to net share settlement of equity awards		(1,740)			(1,740)
Taxes paid related to net share settlement of equity awards (in shares)	411
Issuance of common stock upon follow-on public offering, net of issuance costs	$ 2	151,771			151,773
Issuance of common stock upon follow-on public offering, net of issuance costs (in shares)	17,250
Ending balance at Jun. 30, 2020	$ 17	$ 813,468	$ (60)	$ (448,451)	$ 364,974
Ending balances (in shares) at Jun. 30, 2020	170,709

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities:
Net income/(loss)	$ (16,839)	$ 3,170
Adjustments to reconcile net income/(loss) to net cash used in operating activities:
Stock-based compensation	14,488	8,842
Depreciation	2,709	2,088
Non-cash lease expense	2,013	1,409
Amortization of intangible assets	1,775	2,308
Other non-cash adjustments	225	448
Changes in operating assets and liabilities:
Accounts receivable	(35,310)	(12,782)
Prepaid royalties	(6,562)	(578)
Deferred royalties	(4,422)	(475)
Deferred platform commission fees	(14,380)	(752)
Prepaid expenses and other assets	(9,599)	70
Accounts payable and other accrued liabilities	12,052	13,648
Accrued compensation	4,492	(10,367)
Accrued royalties	(1,962)	(1,760)
Deferred revenue	47,869	3,084
Other long-term liabilities	310	12
Operating lease liabilities	134	(1,476)
Net cash generated from/(used in) operating activities	(3,007)	6,889
Cash flows from investing activities:
Purchase of property and equipment	(5,733)	(2,127)
Other investing activities		(155)
Net cash used in investing activities	(5,733)	(2,282)
Cash flows from financing activities:
Proceeds from exercise of stock options and purchases under the ESPP	16,578	3,447
Proceeds from follow-on public offering, net of issuance costs	151,773
Taxes paid related to net share settlement of equity awards	(3,460)	(6,417)
Net cash provided by/(used in) financing activities	164,891	(2,970)
Effect of exchange rate changes on cash	(147)	(83)
Net increase in cash, cash equivalents and restricted cash	156,004	1,554
Cash, cash equivalents and restricted cash at beginning of period	127,053	97,944
Cash, cash equivalents at end of period	283,057	99,498
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash, cash equivalents and restricted cash	$ 283,057	$ 99,498

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The Company, Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

The Company, Basis of Presentation and Summary of Significant Accounting Policies

The Company, Basis of Presentation and Summary of Significant Accounting Policies

Note 1 — The Company, Basis of Presentation and Summary of Significant Accounting Policies

Glu Mobile Inc. (the “Company” or “Glu”) was incorporated in the state of Nevada in May 2001 and reincorporated in the state of Delaware in March 2007. The Company develops, publishes, and markets a portfolio of games designed for users of smartphones and tablet devices who download and make purchases within its games through direct-to-consumer digital storefronts, such as the Apple App Store, Google Play Store and others (“Digital Storefronts”). The Company creates games based on its own original brands, as well as third-party licensed brands, properties and other content.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 28, 2020. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, which the Company believes are necessary for a fair statement of the Company’s financial position as of June 30, 2020 and its condensed consolidated results of operations for the three and six months ended June 30, 2020 and 2019, respectively. These unaudited condensed consolidated financial statements are not necessarily indicative of the results to be expected for the entire year. The condensed consolidated balance sheet presented as of December 31, 2019 has been derived from the audited consolidated financial statements as of that date, and the condensed consolidated balance sheet presented as of June 30, 2020 has been derived from the unaudited condensed consolidated financial statements as of that date. Certain prior year balances have been reclassified to conform to the current year presentation. Such reclassifications did not materially affect revenue, operating income/(loss), net income/(loss), cash flows, total assets, total liabilities or stockholders’ equity.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its unaudited condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Estimates and assumptions reflected in the unaudited condensed consolidated financial statements include, but are not limited to, estimation of the average playing period of paying users associated with durable virtual items, the allowance for doubtful accounts, useful lives of property and equipment and intangible assets, valuation and realizability of deferred tax assets and uncertain tax positions, fair value of stock awards issued, fair value of warrants issued, accounting for business combinations, evaluating goodwill, long-lived assets for impairment, and realization of prepaid royalties and fair value of investments. Actual results may differ from these estimates due to risks and uncertainties, and these differences may be material, including uncertainty in the current economic environment due to the novel strain of coronavirus, SARS-CoV-2 (“COVID-19”) pandemic. Management will continue to actively monitor the impact of the COVID-19 pandemic on the Company’s assumptions and estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and accounts receivable.

The Company derives its accounts receivable from revenue earned from customers located worldwide. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers. The Company bases its allowance for doubtful accounts on management’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company writes off accounts receivable balances against the allowance when it determines that the amount will not be recovered.

The following table summarizes the revenue from customers in excess of 10% of the Company’s revenue:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Apple	55.5	%	52.6	%	56.4	%	52.8	%
Google	32.7	%	34.6	%	32.3	%	34.4	%

At June 30, 2020, Apple Inc. (“Apple”) and Google Inc. (“Google”) accounted for 66.1% and 20.4%, respectively, of total accounts receivable. At December 31, 2019, Apple, Google, and Tapjoy Inc. (“Tapjoy”) accounted for 47.2%, 28.5%, and 17.8%, respectively, of total accounts receivable. No other customer or Digital Storefront represented more than 10% of the Company’s total accounts receivable as of these dates.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost and replaces the existing incurred loss impairment model with an expected loss methodology, which will result in earlier recognition of credit losses. The ASU requires a cumulative-effect adjustment to retained earnings transition approach and is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This new accounting standard update simplifies the measurement of goodwill by eliminating the Step 2 impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The new guidance requires an entity to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, limited to the amount of goodwill. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.  The new guidance becomes effective for goodwill impairment tests in fiscal years beginning after December 15, 2019. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This guidance adds, modifies and removes several disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with Topic 820, Fair Value Measurement. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

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Net Income/(Loss) Per Share

6 Months Ended

Jun. 30, 2020

Net Income/(Loss) Per Share

Net Income/(Loss) Per Share

Note 2 — Net Income/(Loss) Per Share

The Company computes basic net income/(loss) per share by dividing its net income/(loss) for the period by the weighted average number of common shares outstanding during the period.

Diluted net loss per share for the three and six months ended June 30, 2020 has been computed by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for common share equivalents as their effect would have been antidilutive. Diluted net income per share for the three and six months ended June 30, 2019 is computed by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period, including potentially dilutive common stock instruments.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net income/(loss)	$	(8,566)	$	2,507	$	(16,839)	$	3,170
Shares used to compute net income/(loss) per share:
Weighted average shares used to compute basic net income/(loss) per share		156,583		145,451		153,106		144,951
Dilutive potential common shares		—		14,231		—		14,605
Weighted average shares used to compute diluted net income/(loss) per share		156,583		159,682		153,106		159,556
Basic net income/(loss) per share	$	(0.05)	$	0.02	$	(0.11)	$	0.02
Diluted net income/(loss) per share	$	(0.05)	$	0.02	$	(0.11)	$	0.02

The following equity awards outstanding at the end of each period presented have been excluded from the computation of diluted net income/(loss) per share of common stock for the periods presented because including them would have had an anti-dilutive effect: 

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Warrants to purchase common stock		1,125		—		1,125		—
Options to purchase common stock		12,751		579		12,751		579
Restricted stock units ("RSUs")		5,889		8		5,889		8
Performance stock options ("PSOs")		2,800		3,382		2,800		3,382
Performance stock units ("PSUs")		—		2,972		—		2,972
Employee stock purchase plan ("ESPP")		358		—		358		—
Total		22,923		6,941		22,923		6,941

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Revenue from Contracts with Customers

6 Months Ended

Jun. 30, 2020

Revenue from Contracts with Customers

Revenue from Contracts with Customers

Note 3 — Revenue from Contracts with Customers

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the three and six months ended June 30, 2020 and June 30, 2019:
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	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
In-App Purchases (over-time revenue recognition)	$	116,907	$	82,659	$	212,846	$	166,203
Advertisements and offers (point-in-time revenue recognition)		16,374		12,864		27,703		25,194
Other (point-in-time revenue recognition)		35		17		41		28
Total revenue	$	133,316	$	95,540	$	240,590	$	191,425

The Company operates in a single reportable segment. In the table above, revenue is disaggregated by type of revenue stream, indicating whether it is recognized over-time or at a point-in-time.

Contract Balances

The following table provides information about receivables and contract liabilities from contracts with customers:

	June 30, 2020		December 31, 2019
Receivables, which are included in accounts receivable, net	$	64,658	$	29,304
Contract liabilities, which are included in deferred revenue		145,498		97,629

The Company receives payments from customers based on billing terms established in the Company’s contracts. Contract assets relate to the Company’s right to consideration for its completed performance under the contract before the customer pays consideration or before payment is due. At June 30, 2020 and December 31, 2019, there were no contract assets recorded in the Company’s condensed consolidated balance sheets. Accounts receivable are recorded when the right to consideration becomes unconditional.

Deferred revenue relates to payments received in advance of performance under the contract.  Deferred revenue is recognized as revenue as the Company performs under the contract. The Company had $97,629 in deferred revenue as of December 31, 2019, of which $24,604 and $96,371 was recognized as revenue in the three and six months ended June 30, 2020, respectively. The Company had $85,736 in deferred revenue as of December 31, 2018, of which $21,914 and $84,612 was recognized as revenue in the three and six months ended June 30, 2019, respectively.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2020

Fair Value Measurements

Fair Value Measurements

Note 4 — Fair Value Measurements

Fair Value Measurements

The Company accounts for fair value in accordance with Accounting Standard Codification 820, Fair Value Measurements and Disclosures (“ASC 820”). Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a three-tier hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s financial assets as of June 30, 2020 are presented below at fair value and were classified within the fair value hierarchy as follows:

	Level 1		Level 2		Level 3		June 30, 2020
Financial Assets
Cash and cash equivalents	$	283,057	$	—	$	—	$	283,057
Other investments		—		—		1,565		1,565
Total financial assets	$	283,057	$	—	$	1,565	$	284,622

The Company’s financial assets as of December 31, 2019 are presented below at fair value and were classified within the fair value hierarchy as follows:

	Level 1		Level 2		Level 3		December 31, 2019
Financial Assets
Cash and cash equivalents	$	127,053	$	—	$	—	$	127,053
Other investments		—		—		1,565		1,565
Total financial assets	$	127,053	$	—	$	1,565	$	128,618

The Company’s cash and cash equivalents, which were held in operating bank and money market accounts, are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. The carrying value of accounts receivable and payables approximates fair value due to the short time to expected payment or receipt of cash. The carrying value of other investments approximates fair value, and there are no unrealized gains or losses, as there have been no events or changes in circumstances that would have had a significant effect on the fair value of these investments at June 30, 2020 and December 31, 2019.

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Balance Sheet Components

6 Months Ended

Jun. 30, 2020

Balance Sheet Components

Balance Sheet Components

Note 5 — Balance Sheet Components

Accounts Receivable, net

	June 30,		December 31,
	2020		2019
Accounts receivable	$	64,658	$	29,304
Less: Allowance for doubtful accounts		—		—
Accounts receivable, net	$	64,658	$	29,304

Accounts receivable includes amounts billed and unbilled as of the respective balance sheet dates, but net of platform commissions paid to the Digital Storefronts. The Company had no bad debts during the three and six months ended June 30, 2020 and 2019.

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Note 6 — Goodwill and Intangible Assets

Intangible Assets

The Company’s intangible assets were acquired primarily in various acquisitions as well as in connection with the purchase of certain trademarks, brand assets and licensed content. The carrying amounts and accumulated amortization expense of the acquired intangible assets at June 30, 2020 and December 31, 2019 were as follows:

		June 30, 2020						December 31, 2019
	Estimated	Gross		Accumulated		Net		Gross		Accumulated		Net
	Useful	Carrying		Amortization		Carrying		Carrying		Amortization		Carrying
	Life	Value		Expense		Value		Value		Expense		Value
Intangible assets amortized to cost of revenue:
Titles, content and technology	3 - 5 yrs	$	21,117	$	(18,134)	$	2,983	$	21,117	$	(16,359)	$	4,758
Customer contracts and related relationships	5 yrs		700		(700)		—		700		(700)		—
Trademarks	7 yrs		5,000		(5,000)		—		5,000		(5,000)		—
		$	26,817	$	(23,834)	$	2,983	$	26,817	$	(22,059)	$	4,758

Acquisition-related intangibles included in the above table are finite-lived and are being amortized on a straight-line basis over their estimated useful lives, which approximate the pattern in which the economic benefits of the intangible assets are realized. The Company has included amortization of acquired intangible assets directly attributable to revenue-generating activities in cost of revenue.

During the three months ended June 30, 2020 and 2019, the Company recorded amortization expense in cost of revenue of $887 and $1,056, respectively. During the six months ended June 30, 2020 and 2019, the Company recorded amortization expense in cost of revenue of $1,775 and $2,308, respectively.

As of June 30, 2020, total expected future amortization related to intangible assets was as follows:

	Amortization
	to Be Included in
	Cost of
Year Ending December 31,	Revenue
2020 (remaining 6 months)	$	1,483
2021		1,500
Total intangible assets	$	2,983

Goodwill

The Company had $116,227 in goodwill as of June 30, 2020 and December 31, 2019, respectively. There were no indicators of impairment as of June 30, 2020.

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Leases

6 Months Ended

Jun. 30, 2020

Leases

Leases

Note 7 – Leases

The Company currently leases real estate space under non-cancelable operating lease agreements for its corporate headquarters in San Francisco, California and its operations in Toronto, Canada, Hyderabad, India, Foster City, California, Burlingame, California and Orlando, Florida. These operating leases have remaining lease terms ranging from 5 months to 7.42 years, some of which include the option to extend the lease, with the longest extension option being 6 years.

The Company does not include any of its renewal options when calculating its lease liability as the Company is not reasonably certain whether it will exercise these renewal options at this time. Rent expense for the three months

ended June 30, 2020 and 2019 was $1,712 and $653, respectively. Rent expense for the six months ended June 30, 2020 and 2019 was $2,883 and $2,004, respectively.

The future minimum lease payments to be paid under noncancelable leases in effect at June 30, 2020, are as follows:

	Operating
Year Ending December 31,	Leases
2020 (remaining 6 months)		3,422
2021		7,104
2022		7,015
2023		6,980
2024 and thereafter		27,667
Total lease payments	$	52,188
Less: imputed interest		(10,877)
Total	$	41,311

Supplemental information related to the Company’s leases for the six months ended June 30, 2020 is as follows:

	June 30, 2020
Weighted average remaining lease term	7.06	yrs
Weighted average discount rate	6.7	%

	Six Months Ended
	June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	$	1,320

		Three Months Ended		Six Months Ended
	June 30, 2020		June 30, 2020
Right of use assets obtained in exchange for new lease obligations:
Operating leases	$	73	$	407

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies

Commitments and Contingencies

Note 8 — Commitments and Contingencies

Minimum Guaranteed Royalties and Developer Commitments

The Company has entered into license and publishing agreements with various celebrities, athletes, sports and entertainment organizations, and other well-known brands and properties to develop and publish games for mobile devices. Pursuant to some of these agreements, the Company is required to make minimum guaranteed royalty payments regardless of revenue generated by the applicable game, which may not be dependent on any deliverables. The significant majority of these minimum guaranteed royalty payments are recoupable against future royalty obligations that would otherwise become payable, or in certain circumstances, where not recoupable, are capitalized and amortized over the lesser of (1) the estimated life of the title incorporating licensed content or (2) the term of the license agreement.

At June 30, 2020, future unpaid minimum guaranteed royalty commitments were as follows:

	Future
	Minimum
	Guarantee
Year Ending December 31,	Commitments
2020 (remaining 6 months)	$	2,660
2021		10,829
2022		6,855
2023		6,690
2024		6,150
	$	33,184

The amounts represented in the table above reflect the Company’s minimum cash obligations for the respective calendar years, but do not necessarily represent the periods in which they will be expensed in the Company’s unaudited condensed consolidated financial statements.

Licensor commitments include $31,238 of commitments due to licensors that have been recorded in current and long-term liabilities and a corresponding amount in current and long-term assets because payment is not contingent upon performance by the licensor. The classification of commitments between long-term and short-term is determined based on the timing of expected recoupment of earned royalties calculated on projected revenue for the licensed intellectual property games.

Indemnification Arrangements

The Company has entered into agreements under which it indemnifies each of its officers and directors during his or her lifetime for certain events or occurrences while the officer or director is or was serving at the Company’s request in that capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and enables the Company to recover a portion of any future amounts paid.

In the ordinary course of its business, the Company includes standard indemnification provisions in most of its commercial agreements with Digital Storefronts and licensors. Pursuant to these provisions, the Company generally indemnifies these parties for losses suffered or incurred in connection with its games, including as a result of intellectual property infringement, viruses, worms and other malicious software, and legal or regulatory violations. The term of these indemnity provisions is generally perpetual after execution of the corresponding license agreement, and the maximum potential amount of future payments the Company could be required to make under these provisions is often unlimited. To date, the Company has not incurred costs to defend lawsuits or settle indemnified claims of these types and, accordingly, has recorded no liabilities for these provisions as of June 30, 2020 and December 31, 2019.

Contingencies

From time to time, the Company is subject to various claims, complaints and legal actions in the normal course of business. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using available information. The Company’s estimate of losses is developed in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. After taking all of the above factors into account, the Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed reasonably probable and the amount can be reasonably estimated. The Company further determines whether an estimated loss from a contingency should be disclosed by assessing whether a material loss is deemed reasonably possible. Such disclosure will include an estimate of the additional loss or range of loss or will state that an estimate cannot be made.

The Company does not believe it is party to any currently pending litigation, the outcome of which is reasonably possible to have a material adverse effect on its operations, financial position or liquidity. However, the ultimate

outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on the Company because of defense costs, potential negative publicity, diversion of management resources and other factors.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2020

Stockholders' Equity

Stockholders' Equity

Note 9 — Stockholders’ Equity

Warrants to Purchase Common Stock

Warrants outstanding at June 30, 2020 were as follows:

	Number	Weighted
	of Shares	Average
	Outstanding	Exercise		Average
	Under	Price per		Contractual
	Warrant	Share		Term (Years)
Warrants outstanding, December 31, 2019	1,600	$	4.61	5.44
Exercised	(475)	$	4.99	5.00
Warrants outstanding, June 30, 2020	1,125	$	4.46	5.44

No expenses with respect to these warrants were recognized during the three and six months ended June 30, 2020 and 2019.

Follow-on Public Offering

In June 2020, the Company completed a follow-on public offering of 17,250 shares of its common stock, which included an over-allotment option to purchase an additional 2,250 shares, at a public offering price of $9.25 per share (the “Offering”). The aggregate gross proceeds from the Offering, including the exercise of the over-allotment, were approximately $159,563, and net proceeds received after underwriting fees and offering expenses totalled approximately $151,773. The Company does not have specific uses of the net proceeds from the Offering but intends to use the net proceeds for working capital and other general corporate purposes, which may include potential acquisitions and strategic transactions.

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Stock Incentive Plans

6 Months Ended

Jun. 30, 2020

Stock Incentive Plans

Stock Incentive Plans

Note 10 — Stock Incentive Plans

2007 Equity Incentive Plan

In April 2020, the Company’s Board of Directors approved, and in June 2020, the Company’s stockholders approved, the sixth Amended and Restated 2007 Equity Incentive Plan (the “Sixth Amended 2007 Plan”). The Sixth Amended 2007 Plan included an increase of 7,000 shares in the aggregate number of shares of common stock authorized for issuance under the plan.

Performance-based equity awards

The Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) has awarded PSOs and/or PSUs to the Company’s executives and certain other employees. These performance-based awards are subject to the achievement of specified annual performance goals. They become eligible to vest only if the applicable performance goals are achieved and will vest only if the grantee remains employed with the Company through each applicable vesting date. The number of shares that may vest depend on the extent to which the Company achieves the specified annual performance goals. The fair value of these awards is estimated on the date of grant. The PSOs have a contractual term of 10 years. If the performance goals are not met as of the end of the performance period, no compensation expense is recognized, and any previously recognized expense is reversed. The expected cost is based on the awards that are probable to vest and is recognized over the service period.

2007 Employee Stock Purchase Plan

In April 2017, the Company’s Board of Directors approved, and in June 2017, the Company’s stockholders approved, the Amended and Restated 2007 Employee Stock Purchase Plan (the “Amended 2007 Purchase Plan”). The Amended 2007 Purchase Plan included an increase of 4,000 shares in the aggregate number of shares of common stock authorized for issuance under the plan and removal of the expiration date of the plan.

2018 Equity Inducement Plan

In April 2018, the Compensation Committee of the Company’s Board of Directors adopted the 2018 Equity Inducement Plan (the “2018 Plan”). The 2018 Plan replaced the Company’s 2008 Equity Inducement Plan that expired by its terms in March 2018, and is intended to augment the shares available for issuance under the Fourth Amended 2007 Plan. The Company did not seek stockholder approval for the 2018 Plan. As such, awards under the Inducement Plan will be granted in accordance with Nasdaq Listing Rule 5635(c)(4) and only to persons not previously considered an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such individuals entering into employment with the Company. The Company initially reserved 400 shares of common stock for issuance under the 2018 Plan.

RSU Activity

A summary of the Company’s RSU activity for the six months ended June 30, 2020 is as follows:

		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Units	Grant Date		Contractual		Intrinsic
	Outstanding	Fair Value		Term (Years)		Value
Awarded and unvested, December 31, 2019	3,951	$	5.66
Granted	3,013	$	6.40
Vested	(885)	$	4.88
Forfeited	(190)	$	5.78
Awarded and unvested, June 30, 2020	5,889	$	6.15	1.73	$	54,592

PSU Activity

A summary of the Company’s PSU activity for the six months ended June 30, 2020 is as follows:

		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Units	Grant Date		Contractual		Intrinsic
	Outstanding	Fair Value		Term (Years)		Value
Awarded and unvested, December 31, 2019	5,417	$	6.06
Vested	(276)	$	3.61
Forfeited	(1,370)	$	6.85
Awarded and unvested, June 30, 2020	3,771	$	5.95	1.24	$	34,953
PSUs expected to vest at June 30, 2020	1,625	$	5.56	0.63	$	15,068

PSO Activity

A summary of the Company’s PSO activity for the six months ended June 30, 2020 is as follows:

		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Shares	Exercise		Contractual		Intrinsic
	Outstanding	Price		Term (Years)		Value
Balance as of December 31, 2019	6,583	$	4.54
Canceled	(1,377)	$	6.18
Exercised	(948)	$	3.61
Balance as of June 30, 2020	4,258	$	4.21	7.53	$	21,531
PSOs expected to vest at June 30, 2020	526	$	3.60	7.35	$	2,984
PSOs exercisable at June 30, 2020	2,800	$	3.59	7.30	$	15,892

Stock Option Activity

The following table summarizes the Company’s stock option activity for the six months ended June 30, 2020:

	Options Outstanding
		Weighted		Weighted
	Number	Average		Average Remaining	Aggregate
	of	Exercise		Contractual	Intrinsic
	Shares	Price		Term (Years)	Value
Balances at December 31, 2019	16,288	$	3.56
Options granted	210	$	9.00
Options canceled	(287)	$	5.35
Options exercised	(3,460)	$	3.36
Balances at June 30, 2020	12,751	$	3.66	6.98	$	71,487
Options exercisable at June 30, 2020	8,619	$	3.28	6.71	$	51,668

The aggregate intrinsic value in the preceding table is calculated as the difference between the exercise price of the underlying awards and the quoted closing price of the Company’s common stock on The Nasdaq Global Select Market of $9.27 per share as of June 30, 2020 (the last trading day in the quarter). Cash proceeds, net of taxes, from option exercises were $14,873 and $860 during the six months ended June 30, 2020 and 2019, respectively.

Stock-Based Compensation

The cost of RSUs and PSUs are determined using the fair value of the Company’s common stock based on the quoted closing price of the Company’s common stock on the date of grant. RSUs typically vest and are settled over approximately a four-year period with 25% of the shares vesting on or around the one-year anniversary of the grant date and the remaining shares vesting quarterly thereafter. Compensation cost for stock options, RSUs and performance-based awards with a single vesting date is amortized ratably over the requisite service period. For performance-based awards that have multiple vesting dates, the compensation cost is recognized ratably over the requisite service period for each tranche, whereby each vesting tranche is treated as a separate award for determining the requisite service period. The compensation cost for performance-based awards may be adjusted over the vesting period based on interim estimates of performance against the pre-set financial performance measures.

Under Accounting Standard Codification 718, Compensation-Stock Compensation (“ASC 718”), the Company estimated the fair value of each option award on the grant date using the Black-Scholes option valuation model and the weighted average assumptions noted in the following tables:

Stock Options
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Dividend yield	—	%	—	%	—	%	—	%
Risk-free interest rate	0.28	%	2.07	%	0.28	%	2.15	%
Expected volatility	69.3	%	56.1	%	69.3	%	56.1	%
Expected term (years)	4.00		4.00		4.00		4.00

The expected term of stock options gave consideration to early exercises, post-vesting cancellations and the options’ contractual term ranging from 6 to 10 years. The Company based its expected volatility on its own historical volatility. The Company did not grant any PSOs during the three and six months ended June 30, 2020 and 2019. The weighted-average fair value of stock options granted during the three and six months ended June 30, 2020 was $4.63 per share. The weighted-average fair value of stock options granted during the three and six months ended June 30, 2019 was $3.88 and $3.94 per share, respectively.

The following table summarizes the consolidated stock-based compensation expense by line items in the condensed consolidated statement of operations:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Research and development (1)	$	5,298	$	1,128	$	9,260	$	5,074
Sales and marketing		1,013		55		1,888		881
General and administrative		1,795		852		3,340		2,887
Total stock-based compensation expense (2)	$	8,106	$	2,035	$	14,488	$	8,842

(1) For the three and six months ended June 30, 2020, stock-based compensation expense recorded in research and development includes $486 and $630 from PSUs classified as liabilities.

(2) Stock-based compensation expense for the three and six months ended June 30, 2019 included a reversal of previously accrued expense of $2,526 due to a decrease in the vesting probability of certain performance-based equity awards.

The following table summarizes total compensation expense related to unvested awards not yet recognized as of June 30, 2020:

	Unrecognized Compensation
	Expense for Unvested
	Awards
Stock options	$	8,276
RSUs		33,063
PSUs (1)		7,048
PSOs		638
Total unrecognized compensation expense	$	49,025

(1) The unrecognized compensation expense for PSUs classified as equity and vesting in fiscal years 2022 and 2023, except for PSUs classified as liabilities, is excluded in the table above as the Company does not have a reasonable basis upon which to estimate the vesting probability of such awards in those future periods.

The unrecognized compensation expense related to stock options and RSUs will be recognized over a weighted average period of 1.47 years and 3.30 years, respectively. The unrecognized compensation expense related to PSOs and PSUs, except for performance awards classified as equity and vesting in fiscal years 2022 and 2023, will be recognized over a weighted average period of 0.63 years.

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Income Taxes

6 Months Ended

Jun. 30, 2020

Income Taxes

Income Taxes

Note 11 – Income Taxes

The Company recorded an income tax benefit of $6,187 and $7,508 for the three and six months ended June 30, 2020, respectively, and an income tax expense of $0 and $178 for the three and six months ended June 30, 2019,

respectively. The change in income tax provision was primarily due to changes in pretax income (loss) in the United States and certain foreign entities and changes in tax rates. The income tax rates vary from the Federal and State statutory rates due to the valuation allowances on the Company’s net operating losses, foreign tax rate differences and withholding taxes. The Company computes its quarterly income tax provision by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter.

The Company accounts for uncertain tax positions in accordance with Accounting Standards Codification 740, Income Taxes (“ASC 740”).  As of June 30, 2020, and December 31, 2019, the total amount of unrecognized tax benefits was $16,440 and $15,084, respectively. These unrecognized tax benefits are currently included in the Company’s deferred tax assets, which are subject to full valuation allowance. As such, these unrecognized tax benefits, if recognized, would not have an impact on the Company’s effective tax rate.

The Company is subject to taxation in the United States and various foreign jurisdictions. The material jurisdictions subject to examination by tax authorities are primarily the State of California, United States, Canada, and India. The Company’s federal tax returns are open by statute for tax years 1998 and forward and California tax returns are open by statute for tax years 2003 and forward and could be subject to examination by the tax authorities. The Company’s income tax returns in its international locations are open by statute for tax years 2012 and forward.

The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are to be reinvested indefinitely outside the U.S. 

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Segment Information and Operations by Geographic Area

6 Months Ended

Jun. 30, 2020

Segment Information and Operations by Geographic Area

Segment Information and Operations by Geographic Area

Note 12 — Segment Information and Operations by Geographic Area

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”), or decision making group, whose function is to allocate resources to and assess the performance of the operating segments. The Company has identified its Chief Executive Officer as the CODM. The Company operates in a single operating segment. The financial information reviewed by the CODM is included within one operating segment for purposes of allocating resources and evaluating financial performance.

The following tables set forth revenue and long-lived assets based on geography:

Revenue

Revenue by geography is primarily based on the geographic location of the Company’s payers. International revenue is revenue generated from distributors and advertising service providers whose principal operations are located outside the United States or, in the case of the Digital Storefronts, the revenue generated from end-user purchases made outside of the United States.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
United States of America	$	104,377	$	73,835	$	188,385	$	146,703
Americas, excluding the United States		7,827		5,979		14,447		12,197
EMEA		14,715		10,902		26,573		22,430
APAC		6,397		4,824		11,185		10,095
Total revenue	$	133,316	$	95,540	$	240,590	$	191,425

Long-Lived Assets

The Company attributes its long-lived assets, which primarily consist of property and equipment, to a country primarily based on the physical location of the assets. Property and equipment, net of accumulated depreciation and amortization, summarized by geographic location was as follows:

	June 30,		December 31,
	2020		2019
United States of America	$	16,812	$	16,738
Rest of the World		967		905
Total	$	17,779	$	17,643

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The Company, Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

The Company, Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 28, 2020. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, which the Company believes are necessary for a fair statement of the Company’s financial position as of June 30, 2020 and its condensed consolidated results of operations for the three and six months ended June 30, 2020 and 2019, respectively. These unaudited condensed consolidated financial statements are not necessarily indicative of the results to be expected for the entire year. The condensed consolidated balance sheet presented as of December 31, 2019 has been derived from the audited consolidated financial statements as of that date, and the condensed consolidated balance sheet presented as of June 30, 2020 has been derived from the unaudited condensed consolidated financial statements as of that date. Certain prior year balances have been reclassified to conform to the current year presentation. Such reclassifications did not materially affect revenue, operating income/(loss), net income/(loss), cash flows, total assets, total liabilities or stockholders’ equity.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its unaudited condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Estimates and assumptions reflected in the unaudited condensed consolidated financial statements include, but are not limited to, estimation of the average playing period of paying users associated with durable virtual items, the allowance for doubtful accounts, useful lives of property and equipment and intangible assets, valuation and realizability of deferred tax assets and uncertain tax positions, fair value of stock awards issued, fair value of warrants issued, accounting for business combinations, evaluating goodwill, long-lived assets for impairment, and realization of prepaid royalties and fair value of investments. Actual results may differ from these estimates due to risks and uncertainties, and these differences may be material, including uncertainty in the current economic environment due to the novel strain of coronavirus, SARS-CoV-2 (“COVID-19”) pandemic. Management will continue to actively monitor the impact of the COVID-19 pandemic on the Company’s assumptions and estimates.

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and accounts receivable.

The Company derives its accounts receivable from revenue earned from customers located worldwide. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers. The Company bases its allowance for doubtful accounts on management’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company writes off accounts receivable balances against the allowance when it determines that the amount will not be recovered.

The following table summarizes the revenue from customers in excess of 10% of the Company’s revenue:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Apple	55.5	%	52.6	%	56.4	%	52.8	%
Google	32.7	%	34.6	%	32.3	%	34.4	%

At June 30, 2020, Apple Inc. (“Apple”) and Google Inc. (“Google”) accounted for 66.1% and 20.4%, respectively, of total accounts receivable. At December 31, 2019, Apple, Google, and Tapjoy Inc. (“Tapjoy”) accounted for 47.2%, 28.5%, and 17.8%, respectively, of total accounts receivable. No other customer or Digital Storefront represented more than 10% of the Company’s total accounts receivable as of these dates.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost and replaces the existing incurred loss impairment model with an expected loss methodology, which will result in earlier recognition of credit losses. The ASU requires a cumulative-effect adjustment to retained earnings transition approach and is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This new accounting standard update simplifies the measurement of goodwill by eliminating the Step 2 impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The new guidance requires an entity to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, limited to the amount of goodwill. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.  The new guidance becomes effective for goodwill impairment tests in fiscal years beginning after December 15, 2019. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This guidance adds, modifies and removes several disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with Topic 820, Fair Value Measurement. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

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The Company, Basis of Presentation and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2020

The Company, Basis of Presentation and Summary of Significant Accounting Policies

Schedule of Revenue Concentration

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Apple	55.5	%	52.6	%	56.4	%	52.8	%
Google	32.7	%	34.6	%	32.3	%	34.4	%

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Net Income/(Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 2020

Net Income/(Loss) Per Share

Computation of Net Income/(Loss) Per Share

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net income/(loss)	$	(8,566)	$	2,507	$	(16,839)	$	3,170
Shares used to compute net income/(loss) per share:
Weighted average shares used to compute basic net income/(loss) per share		156,583		145,451		153,106		144,951
Dilutive potential common shares		—		14,231		—		14,605
Weighted average shares used to compute diluted net income/(loss) per share		156,583		159,682		153,106		159,556
Basic net income/(loss) per share	$	(0.05)	$	0.02	$	(0.11)	$	0.02
Diluted net income/(loss) per share	$	(0.05)	$	0.02	$	(0.11)	$	0.02

Schedule of Anti-Dilutive Securities Excluded from Computation of Net Income/(Loss) Per Share

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Warrants to purchase common stock		1,125		—		1,125		—
Options to purchase common stock		12,751		579		12,751		579
Restricted stock units ("RSUs")		5,889		8		5,889		8
Performance stock options ("PSOs")		2,800		3,382		2,800		3,382
Performance stock units ("PSUs")		—		2,972		—		2,972
Employee stock purchase plan ("ESPP")		358		—		358		—
Total		22,923		6,941		22,923		6,941

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Revenue from Contracts with Customers (Tables)

6 Months Ended

Jun. 30, 2020

Revenue from Contracts with Customers

Summary of Revenue from Contracts with Customers

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
In-App Purchases (over-time revenue recognition)	$	116,907	$	82,659	$	212,846	$	166,203
Advertisements and offers (point-in-time revenue recognition)		16,374		12,864		27,703		25,194
Other (point-in-time revenue recognition)		35		17		41		28
Total revenue	$	133,316	$	95,540	$	240,590	$	191,425

Information on Receivables, contract assets and contract liabilities

	June 30, 2020		December 31, 2019
Receivables, which are included in accounts receivable, net	$	64,658	$	29,304
Contract liabilities, which are included in deferred revenue		145,498		97,629

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Measurements

Schedule of Assets and Liabilities Presented at Fair Value

	Level 1		Level 2		Level 3		June 30, 2020
Financial Assets
Cash and cash equivalents	$	283,057	$	—	$	—	$	283,057
Other investments		—		—		1,565		1,565
Total financial assets	$	283,057	$	—	$	1,565	$	284,622

	Level 1		Level 2		Level 3		December 31, 2019
Financial Assets
Cash and cash equivalents	$	127,053	$	—	$	—	$	127,053
Other investments		—		—		1,565		1,565
Total financial assets	$	127,053	$	—	$	1,565	$	128,618

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Balance Sheet Components (Tables)

6 Months Ended

Jun. 30, 2020

Balance Sheet Components

Schedule of Components of Accounts Receivable, net

	June 30,		December 31,
	2020		2019
Accounts receivable	$	64,658	$	29,304
Less: Allowance for doubtful accounts		—		—
Accounts receivable, net	$	64,658	$	29,304

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets

Schedule of Carrying Amounts and Accumulated Amortization of Acquired Intangible Assets

		June 30, 2020						December 31, 2019
	Estimated	Gross		Accumulated		Net		Gross		Accumulated		Net
	Useful	Carrying		Amortization		Carrying		Carrying		Amortization		Carrying
	Life	Value		Expense		Value		Value		Expense		Value
Intangible assets amortized to cost of revenue:
Titles, content and technology	3 - 5 yrs	$	21,117	$	(18,134)	$	2,983	$	21,117	$	(16,359)	$	4,758
Customer contracts and related relationships	5 yrs		700		(700)		—		700		(700)		—
Trademarks	7 yrs		5,000		(5,000)		—		5,000		(5,000)		—
		$	26,817	$	(23,834)	$	2,983	$	26,817	$	(22,059)	$	4,758

Schedule of Expected Amortization Related to Intangible Assets

	Amortization
	to Be Included in
	Cost of
Year Ending December 31,	Revenue
2020 (remaining 6 months)	$	1,483
2021		1,500
Total intangible assets	$	2,983

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Leases (Tables)

6 Months Ended

Jun. 30, 2020

Leases

Schedule of future minimum lease payments

	Operating
Year Ending December 31,	Leases
2020 (remaining 6 months)		3,422
2021		7,104
2022		7,015
2023		6,980
2024 and thereafter		27,667
Total lease payments	$	52,188
Less: imputed interest		(10,877)
Total	$	41,311

Supplemental Information Operating Cash Flows from Operating Leases

	June 30, 2020
Weighted average remaining lease term	7.06	yrs
Weighted average discount rate	6.7	%

	Six Months Ended
	June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	$	1,320

		Three Months Ended		Six Months Ended
	June 30, 2020		June 30, 2020
Right of use assets obtained in exchange for new lease obligations:
Operating leases	$	73	$	407

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies

Schedule of Future Minimum Guaranteed Royalty Commitments

	Future
	Minimum
	Guarantee
Year Ending December 31,	Commitments
2020 (remaining 6 months)	$	2,660
2021		10,829
2022		6,855
2023		6,690
2024		6,150
	$	33,184

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2020

Stockholders' Equity

Schedule of Warrants Outstanding

	Number	Weighted
	of Shares	Average
	Outstanding	Exercise		Average
	Under	Price per		Contractual
	Warrant	Share		Term (Years)
Warrants outstanding, December 31, 2019	1,600	$	4.61	5.44
Exercised	(475)	$	4.99	5.00
Warrants outstanding, June 30, 2020	1,125	$	4.46	5.44

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Stock Incentive Plans (Tables)

6 Months Ended

Jun. 30, 2020

Summary of Stock Option Activity

	Options Outstanding
		Weighted		Weighted
	Number	Average		Average Remaining	Aggregate
	of	Exercise		Contractual	Intrinsic
	Shares	Price		Term (Years)	Value
Balances at December 31, 2019	16,288	$	3.56
Options granted	210	$	9.00
Options canceled	(287)	$	5.35
Options exercised	(3,460)	$	3.36
Balances at June 30, 2020	12,751	$	3.66	6.98	$	71,487
Options exercisable at June 30, 2020	8,619	$	3.28	6.71	$	51,668

Schedule of Assumptions Used to Estimate Fair Value of Options

Stock Options
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Dividend yield	—	%	—	%	—	%	—	%
Risk-free interest rate	0.28	%	2.07	%	0.28	%	2.15	%
Expected volatility	69.3	%	56.1	%	69.3	%	56.1	%
Expected term (years)	4.00		4.00		4.00		4.00

Schedule of Stock-Based Compensation Expense by Line Item

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Research and development (1)	$	5,298	$	1,128	$	9,260	$	5,074
Sales and marketing		1,013		55		1,888		881
General and administrative		1,795		852		3,340		2,887
Total stock-based compensation expense (2)	$	8,106	$	2,035	$	14,488	$	8,842

(1) For the three and six months ended June 30, 2020, stock-based compensation expense recorded in research and development includes $486 and $630 from PSUs classified as liabilities.

(2) Stock-based compensation expense for the three and six months ended June 30, 2019 included a reversal of previously accrued expense of $2,526 due to a decrease in the vesting probability of certain performance-based equity awards.

Schedule of compensation expense related to unvested awards

The following table summarizes total compensation expense related to unvested awards not yet recognized as of June 30, 2020:

	Unrecognized Compensation
	Expense for Unvested
	Awards
Stock options	$	8,276
RSUs		33,063
PSUs (1)		7,048
PSOs		638
Total unrecognized compensation expense	$	49,025

(1) The unrecognized compensation expense for PSUs classified as equity and vesting in fiscal years 2022 and 2023, except for PSUs classified as liabilities, is excluded in the table above as the Company does not have a reasonable basis upon which to estimate the vesting probability of such awards in those future periods.

Restricted stock units ("RSUs")

Summary of Company's Performance-based Awards

		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Units	Grant Date		Contractual		Intrinsic
	Outstanding	Fair Value		Term (Years)		Value
Awarded and unvested, December 31, 2019	3,951	$	5.66
Granted	3,013	$	6.40
Vested	(885)	$	4.88
Forfeited	(190)	$	5.78
Awarded and unvested, June 30, 2020	5,889	$	6.15	1.73	$	54,592

Performance stock units ("PSUs")

Summary of Company's Performance-based Awards

		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Units	Grant Date		Contractual		Intrinsic
	Outstanding	Fair Value		Term (Years)		Value
Awarded and unvested, December 31, 2019	5,417	$	6.06
Vested	(276)	$	3.61
Forfeited	(1,370)	$	6.85
Awarded and unvested, June 30, 2020	3,771	$	5.95	1.24	$	34,953
PSUs expected to vest at June 30, 2020	1,625	$	5.56	0.63	$	15,068

Performance stock options ("PSOs")

Summary of Stock Option Activity

		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Shares	Exercise		Contractual		Intrinsic
	Outstanding	Price		Term (Years)		Value
Balance as of December 31, 2019	6,583	$	4.54
Canceled	(1,377)	$	6.18
Exercised	(948)	$	3.61
Balance as of June 30, 2020	4,258	$	4.21	7.53	$	21,531
PSOs expected to vest at June 30, 2020	526	$	3.60	7.35	$	2,984
PSOs exercisable at June 30, 2020	2,800	$	3.59	7.30	$	15,892

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Segment Information and Operations by Geographic Area (Tables)

6 Months Ended

Jun. 30, 2020

Segment Information and Operations by Geographic Area

Schedule of Revenues by Geographic Region

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
United States of America	$	104,377	$	73,835	$	188,385	$	146,703
Americas, excluding the United States		7,827		5,979		14,447		12,197
EMEA		14,715		10,902		26,573		22,430
APAC		6,397		4,824		11,185		10,095
Total revenue	$	133,316	$	95,540	$	240,590	$	191,425

Schedule of Long-Lived Assets by Geographic Location

	June 30,		December 31,
	2020		2019
United States of America	$	16,812	$	16,738
Rest of the World		967		905
Total	$	17,779	$	17,643

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The Company, Basis of Presentation and Summary of Significant Accounting Policies - Concentration Risks (Details)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Revenues from customers | Apple
Concentration Risk [Line Items]
Concentration risk percentage from customers	55.5	52.6	56.4	52.8
Revenues from customers | Google
Concentration Risk [Line Items]
Concentration risk percentage from customers	32.7	34.6	32.3	34.4
Accounts Receivable | Customer Concentration Risk | Apple
Concentration Risk [Line Items]
Concentration risk percentage from customers			66.1		47.2
Accounts Receivable | Customer Concentration Risk | Google
Concentration Risk [Line Items]
Concentration risk percentage from customers			20.4		28.5
Accounts Receivable | Customer Concentration Risk | Tapjoy
Concentration Risk [Line Items]
Concentration risk percentage from customers					17.8

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Net Income/(Loss) Per Share - Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings Per Share, Basic and Diluted [Abstract]
Net income/(loss)	$ (8,566)	$ (8,273)	$ 2,507	$ 663	$ (16,839)	$ 3,170
Shares used to compute net income/(loss) per share:
Weighted average shares used to compute basic net income/(loss) per share	156,583		145,451		153,106	144,951
Dilutive potential common shares			14,231			14,605
Weighted average shares used to compute diluted net income/(loss) per share	156,583		159,682		153,106	159,556
Basic net income/(loss) per share	$ (0.05)		$ 0.02		$ (0.11)	$ 0.02
Diluted net income/(loss) per share	$ (0.05)		$ 0.02		$ (0.11)	$ 0.02

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Net Income/(Loss) Per Share - Antidilutive Shares (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti dilutive securities excluded from computation of diluted net loss per share	22,923	6,941	22,923	6,941
Warrants to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti dilutive securities excluded from computation of diluted net loss per share	1,125		1,125
Options to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti dilutive securities excluded from computation of diluted net loss per share	12,751	579	12,751	579
Restricted stock units ("RSUs")
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti dilutive securities excluded from computation of diluted net loss per share	5,889	8	5,889	8
Performance stock options ("PSOs")
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti dilutive securities excluded from computation of diluted net loss per share	2,800	3,382	2,800	3,382
Performance stock units ("PSUs")
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti dilutive securities excluded from computation of diluted net loss per share		2,972		2,972
Employee stock purchase plan ("ESPP")
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti dilutive securities excluded from computation of diluted net loss per share	358		358

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Revenue from Contracts with Customers - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation of Revenue [Line Items]
Total Revenue	$ 133,316	$ 95,540	$ 240,590	$ 191,425
Micro-Transactions | Over-time revenue recognition
Disaggregation of Revenue [Line Items]
Revenue from contracts with customers	116,907	82,659	212,846	166,203
Advertisements and offers | Point-in-time revenue recognition
Disaggregation of Revenue [Line Items]
Revenue from contracts with customers	16,374	12,864	27,703	25,194
Other | Point-in-time revenue recognition
Disaggregation of Revenue [Line Items]
Revenue from contracts with customers	$ 35	$ 17	$ 41	$ 28

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Revenue from Contracts with Customers - Contract Balances (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Dec. 31, 2018
Contract Balances
Receivables, which are included in accounts receivable, net	$ 64,658	$ 29,304
Contract assets	0	0
Contract liabilities, which are included in deferred revenue	$ 145,498	$ 97,629	$ 85,736

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Revenue from Contracts with Customers - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019	Dec. 31, 2018
Revenue from Contracts with Customers
Deferred revenue	$ 145,498		$ 145,498		$ 97,629	$ 85,736
Deferred revenue earned	$ 24,604	$ 21,914	$ 96,371	$ 84,612

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Fair Value Measurements (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Unrealized gains or losses from events or changes in circumstances that affect the fair value of investments	$ 0	$ 0
Cash and cash equivalents	283,057	127,053
Other Investments	1,565	1,565
Total financial assets	284,622	128,618
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	283,057	127,053
Total financial assets	283,057	127,053
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Investments	1,565	1,565
Total financial assets	$ 1,565	$ 1,565

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Balance Sheet Components - Accounts Receivable (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Balance Sheet Components
Accounts receivable	$ 64,658,000		$ 64,658,000		$ 29,304,000
Accounts receivable, net	64,658,000		64,658,000		$ 29,304,000
Bad debts	$ 0	$ 0	$ 0	$ 0

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Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Finite-Lived Intangible Assets
Gross Carrying Value	$ 26,817	$ 26,817
Accumulated Amortization Expense	(23,834)	(22,059)
Total intangible assets	2,983	4,758
Titles, content and technology
Finite-Lived Intangible Assets
Gross Carrying Value	21,117	21,117
Accumulated Amortization Expense	(18,134)	(16,359)
Total intangible assets	$ 2,983	4,758
Titles, content and technology | Minimum
Finite-Lived Intangible Assets
Estimated Useful Life	3 years
Titles, content and technology | Maximum
Finite-Lived Intangible Assets
Estimated Useful Life	5 years
Customer contracts and related relationships
Finite-Lived Intangible Assets
Estimated Useful Life	5 years
Gross Carrying Value	$ 700	700
Accumulated Amortization Expense	$ (700)	(700)
Trademarks
Finite-Lived Intangible Assets
Estimated Useful Life	7 years
Gross Carrying Value	$ 5,000	5,000
Accumulated Amortization Expense	$ (5,000)	$ (5,000)

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Goodwill and Intangible Assets - Future Amortization (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Cost of Goods and Services Sold, Depreciation and Amortization [Abstract]
Amortization expense, cost of revenues	$ 887	$ 1,056	$ 1,775	$ 2,308
Amortization of intangible assets	887	$ 1,056	1,775	$ 2,308
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
2020 (remaining 6 months)	1,483		1,483
2021	1,500		1,500
Total intangible assets	2,983		2,983
Goodwill	$ 116,227		$ 116,227		$ 116,227

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Leases - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Lease terms
Lessee, Operating Lease, Existence of Option to Extend [true false]			false
Longest extension option	6 years		6 years
Rent expense	$ 1,712	$ 653	$ 2,883	$ 2,004
ROU asset adjustment	$ 73		$ 407
Minimum
Lease terms
Operating leases, remaining lease terms			5 months
Maximum
Lease terms
Operating leases, remaining lease terms			7 years 5 months 1 day

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Leases - Future Minimum Lease Payments under Noncancelable Leases (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Leases
2020 (remaining 6 months)	$ 3,422
2021	7,104
2022	7,015
2023	6,980
2024 and thereafter	27,667
Total lease payments	52,188
Less imputed interest	(10,877)
Total	$ 41,311

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Leases - Supplemental Information (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2020 USD ($)	Jun. 30, 2020 USD ($)
Leases
Weighted-average remaining non-cancelable lease term	7 years 21 days	7 years 21 days
Weighted-average discount rate	6.70%	6.70%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases		$ 1,320
Right of use assets obtained in exchange for new lease obligations:
Operating leases	$ 73	$ 407

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Commitments and Contingencies - Minimum Guaranteed Royalties (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Future unpaid minimum guaranteed royalty commitments
2020 (remaining 6 months)	$ 2,660
2021	10,829
2022	6,855
2023	6,690
2024	6,150
Total future unpaid minimum guaranteed royalty commitments	$ 33,184

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Commitments and Contingencies - Other Commitments (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Indemnification Agreement | Digital Storefronts
Indemnification Agreements [Abstract]
Indemnification liability recorded	$ 0	$ 0
Current and long-term liabilities | Agreements With Various Licensors
Other agreements with commitments
Other Commitment	$ 31,238

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Stockholders' Equity - Warrants to Purchase Common Stock (Details) - Warrants to purchase common stock - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Number of Shares Outstanding Under Warrants
Warrants outstanding, beginning balance			$ 1,600
Number of Shares Outstanding Under Warrant, Exercised			(475)
Warrants outstanding, ending balance	$ 1,125		$ 1,125		$ 1,600
Weighted Average Exercise Price Per Share
Weighted average exercise price, beginning balance			$ 4.61
Weighted average exercise price, Exercised			4.99
Weighted average exercise price, ending balance	$ 4.46		$ 4.46		$ 4.61
Average Contractual Term (Years)
Warrants outstanding, Average Contractual term (Years)			5 years 5 months 8 days		5 years 5 months 8 days
Average contractual term, Exercised			5 years
Recognized expense with respect to warrants	$ 0	$ 0	$ 0	$ 0

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Stockholders' Equity - Follow-on Public Offering (Details) $ / shares in Units, shares in Thousands, $ in Thousands	1 Months Ended
	Jun. 30, 2020 USD ($) $ / shares shares
Follow-on Public Offering
Subsidiary, Sale of Stock [Line Items]
Shares issued | shares	17,250
Offering price per share | $ / shares	$ 9.25
Aggregate gross proceeds | $	$ 159,563
Net proceeds after underwriting fees and offering expenses | $	$ 151,773
Follow-on Public Offering, over-allotment option
Subsidiary, Sale of Stock [Line Items]
Shares issued | shares	2,250

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Stock Incentive Plans (Details) - shares shares in Thousands	1 Months Ended	6 Months Ended
	Apr. 30, 2017	Jun. 30, 2020	Apr. 30, 2020	Apr. 30, 2018
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Contractual term		6 years
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Contractual term		10 years
Performance stock options ("PSOs")
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Contractual term		10 years
Sixth Amendment 2007 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, reserved for future issuance			7,000
2007 Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock authorized for issuance, increased	4,000
2018 Equity Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, reserved for future issuance				400

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Stock Incentive Plans - RSU and PSU Activity (Details) $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($) $ / shares shares
Restricted stock units ("RSUs")
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awarded and unvested, Number of Units Outstanding, beginning balance | shares	3,951
Granted, Number of Units Outstanding | shares	3,013
Vested, Number of Units Outstanding | shares	(885)
Forfeited, Number of Units Outstanding | shares	(190)
Awarded and unvested, Number of Units Outstanding, ending balance | shares	5,889
Awarded and unvested, Weighted Average Grant Date Fair Value, beginning balance | $ / shares	$ 5.66
Granted, Weighted Average Grant Date Fair Value | $ / shares	6.40
Vested, Weighted Average Grant Date Fair Value | $ / shares	4.88
Forfeited, Weighted Average Grant Date Fair Value | $ / shares	5.78
Awarded and unvested, Weighted Average Grant Date Fair Value, ending balance | $ / shares	$ 6.15
Awarded and unvested, Weighted Average Remaining Contractual Term (Years)	1 year 8 months 23 days
Exercisable, Aggregate Intrinsic Value | $	$ 54,592
Performance stock units ("PSUs")
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awarded and unvested, Number of Units Outstanding, beginning balance | shares	5,417
Vested, Number of Units Outstanding | shares	(276)
Forfeited, Number of Units Outstanding | shares	(1,370)
Awarded and unvested, Number of Units Outstanding, ending balance | shares	3,771
Expected to vest, Number of Units Outstanding | shares	1,625
Awarded and unvested, Weighted Average Grant Date Fair Value, beginning balance | $ / shares	$ 6.06
Vested, Weighted Average Grant Date Fair Value | $ / shares	3.61
Forfeited, Weighted Average Grant Date Fair Value | $ / shares	6.85
Awarded and unvested, Weighted Average Grant Date Fair Value, ending balance | $ / shares	5.95
Expected to vest, Weighted Average Grant Date Fair Value | $ / shares	$ 5.56
Awarded and unvested, Weighted Average Remaining Contractual Term (Years)	1 year 2 months 26 days
Expected to vest, Weighted Average Remaining Contractual Term (Years)	7 months 17 days
Aggregate Intrinsic Value | $	$ 34,953
Expected to vest, Aggregate Intrinsic Value | $	$ 15,068

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Stock Incentive Plans - PSO and Stock Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended
	Jun. 30, 2020
Performance stock options ("PSOs")
Number of Shares Outstanding, beginning balances	6,583
Number of Shares Outstanding, Canceled	(1,377)
Number of Shares Outstanding, Exercised	(948)
Number of Shares Outstanding, ending balances	4,258
Number of Shares Outstanding, expected to vest	526
Number of Shares Outstanding, exercisable	2,800
Weighted Average Exercise Price, beginning balance	$ 4.54
Weighted Average Exercise Price, Canceled	6.18
Weighted Average Exercise Price, Exercised	3.61
Weighted Average Exercise Price, ending balance	4.21
Weighted Average Exercise Price, expected to vest	3.60
Weighted Average Exercise Price, exercisable	$ 3.59
Weighted Average Remaining Contractual Term, ending balance	7 years 6 months 10 days
Weighted Average Remaining Contractual Term, expected to vest	7 years 4 months 6 days
Weighted Average Remaining Contractual Term, exercisable	7 years 3 months 18 days
Aggregate Intrinsic Value, ending balance	$ 21,531
Aggregate Intrinsic Value, expected to vest	2,984
Aggregate Intrinsic Value, exercisable	$ 15,892
Stock Options
Number of Shares Outstanding, beginning balances	16,288
Options granted, number of shares	210
Number of Shares Outstanding, Canceled	(287)
Number of Shares Outstanding, Exercised	(3,460)
Number of Shares Outstanding, ending balances	12,751
Number of Shares Outstanding, exercisable	8,619
Weighted Average Exercise Price, beginning balance	$ 3.56
Options granted, weighted average exercise price	9.00
Weighted Average Exercise Price, Canceled	5.35
Weighted Average Exercise Price, Exercised	3.36
Weighted Average Exercise Price, ending balance	3.66
Weighted Average Exercise Price, exercisable	$ 3.28
Weighted Average Remaining Contractual Term, ending balance	6 years 11 months 23 days
Weighted Average Remaining Contractual Term, exercisable	6 years 8 months 15 days
Aggregate Intrinsic Value, ending balance	$ 71,487
Aggregate Intrinsic Value, exercisable	$ 51,668

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Stock Incentive Plans - Weighted Average Assumptions (Details) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Black-Sholes Valuation Assumptions
Expected term (years)		4 years
Stock Based Compensation Additional Details
Weighted-average fair value of stock options granted	$ 4.63	$ 3.88	$ 4.63	$ 3.94
Minimum
Stock Based Compensation Additional Details
Contractual term			6 years
Maximum
Stock Based Compensation Additional Details
Contractual term			10 years
Performance stock options ("PSOs")
Stock Based Compensation Additional Details
Contractual term			10 years
Options to purchase common stock
Black-Sholes Valuation Assumptions
Risk-free interest rate	0.28%	2.07%	0.28%	2.15%
Expected volatility	69.30%	56.10%	69.30%	56.10%
Expected term (years)	4 years		4 years	4 years

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Stock Incentive Plans - Stock-Based Compensation Expense (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 8,106	$ 2,035	$ 14,488	$ 8,842
Reversal of stock based compensation expense		2,526		2,526
Total compensation expense related to unvested awards not yet recognized	$ 49,025		$ 49,025
Unrecognized compensation expense recognized over weighted average period			1 year 5 months 19 days
Quoted closing price of Company's common stock	$ 9.27		$ 9.27
Cash proceed from option exercise, net			$ 14,873	860
25% of Shares
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Vesting period			1 year
Research and development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 5,298	1,128	$ 9,260	5,074
Sales and marketing
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	1,013	55	1,888	881
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	1,795	$ 852	3,340	$ 2,887
Options to purchase common stock
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total compensation expense related to unvested awards not yet recognized	8,276		$ 8,276
Restricted stock units ("RSUs")
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Vesting period			4 years
Vesting percentage on or around the one-year anniversary			25.00%
Total compensation expense related to unvested awards not yet recognized	33,063		$ 33,063
Unrecognized compensation expense recognized over weighted average period			3 years 3 months 18 days
Performance stock options ("PSOs")
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total compensation expense related to unvested awards not yet recognized	638		$ 638
Performance stock options ("PSOs") | Maximum
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Unrecognized compensation expense recognized over weighted average period			7 months 17 days
Performance stock units ("PSUs")
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	486		$ 630
Total compensation expense related to unvested awards not yet recognized	$ 7,048		$ 7,048

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Income Taxes - (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Income Taxes
Income tax (benefit) expense	$ (6,187)	$ 0	$ (7,508)	$ 178
Unrecognized tax benefits	$ 16,440		$ 16,440		$ 15,084

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Segment Information and Operations by Geographic Area - Revenue (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) segment	Jun. 30, 2019 USD ($)
Long-lived assets (primarily consist of property and equipment)
Number of Operating Segments | segment			1
Revenues	$ 133,316	$ 95,540	$ 240,590	$ 191,425
United States of America
Long-lived assets (primarily consist of property and equipment)
Revenues	104,377	73,835	188,385	146,703
Americas, excluding the United States
Long-lived assets (primarily consist of property and equipment)
Revenues	7,827	5,979	14,447	12,197
EMEA
Long-lived assets (primarily consist of property and equipment)
Revenues	14,715	10,902	26,573	22,430
APAC
Long-lived assets (primarily consist of property and equipment)
Revenues	$ 6,397	$ 4,824	$ 11,185	$ 10,095

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Segment Information and Operations by Geographic Area - Long-Lived Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Long-lived assets (primarily consist of property and equipment)
Long-Lived Assets	$ 17,779	$ 17,643
United States of America
Long-lived assets (primarily consist of property and equipment)
Long-Lived Assets	16,812	16,738
Rest of the World
Long-lived assets (primarily consist of property and equipment)
Long-Lived Assets	$ 967	$ 905