Business Wire | Aug 4, 2020 04:06PM EDT

Glu Reports Second Quarter 2020 Financial Results

Aug. 04, 2020

SAN FRANCISCO--(BUSINESS WIRE)--Aug. 04, 2020--Glu Mobile Inc. (NASDAQ: GLUU), a leading global developer and publisher of mobile games, today announced financial results for its second quarter ended June 30, 2020. The company also provided an outlook for its financial performance in the third quarter and raised its financial guidance for the full year 2020.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200804005964/en/

(Graphic: Business Wire)

"The second quarter financial results were the best in Glu's history," said Nick Earl, Chief Executive Officer. "We saw record quarterly bookings in all three of our Growth Games and the continued resurgence of Kim Kardashian: Hollywood and Diner DASH Adventures. Additionally, our latest launch, Disney Sorcerer's Arena, showed strength in its first full quarter. This progress reinforces our growth objective of stacking bookings that scale and increase profitability over time. Looking ahead, our focus is to continue to drive strong Growth Game performance through our live ops, develop our robust pipeline of new potential Growth Games, and strategically layer on accretive acquisitions."

Second Quarter 2020 Financial Highlights:

Three Months Ended

June 30, June 30,in millions, except per share data 2020 2019

Revenue $133.3 $95.5

Gross margin 64.3% 64.6%

Net income/(loss) ($8.6) $2.5

Net income/(loss) per share - basic ($0.05) $0.02

Net income/(loss) per share - diluted ($0.05) $0.02

Weighted-average common shares outstanding - basic 156.6 145.5

Weighted-average common shares outstanding - diluted 156.6 159.7

Cash generated from operations excluding royalty advances 23.7 $12.5

Cash paid for royalty advances that are included in cash (9.8) ($3.2)used in operationsCash and cash equivalents $283.1 $99.5

Additional Financial Information

Guidance Three Months provided for Ended three months ended June 30, 2020

June 30, June 30, Low High 2020 2019

Bookings $182.0 $101.9 $162.5 $167.5

Platform commissions, excluding any impact of $49.6 $26.7 $44.2 $45.6deferred platform commissions *Royalties, excluding any impact of deferred $14.0 $7.3 $12.4 $12.7royalties*Hosting costs $2.1 $1.8 $2.3 $2.3

User acquisition and marketing expenses $57.0 $30.1 $56.1 $56.1

Adjusted other operating expenses* $35.9 $28.0 $37.0 $37.3

Depreciation $1.4 $1.1 $1.5 $1.5

* Platform commissions, excluding any impact of deferred platformcommissions, Royalties, excluding any impact of deferred royalties, andAdjusted other operating expenses are non-GAAP financial measures. Thesenon-GAAP financial items should be considered in addition to, but not as asubstitute for, the information provided in accordance with GAAP.Reconciliations for these non-GAAP financial items to the most directlycomparable financial items based on GAAP are provided in GAAP to Adjustedresults reconciliation table.

Eric R. Ludwig, Chief Operating Officer and Chief Financial Officer, stated, "In the second quarter, the positive player engagement and monetization trends we experienced in the prior quarter accelerated and drove significantly better than expected top and bottom-line results. We were able to achieve these results while investing in user acquisition to build a larger player base. Our strong free cash flow generation in 2020, plus our recent capital raise, provides us with the firepower and flexibility to pursue an expanded pool of acquisition opportunities. We expect to end the year with at least $325 million of cash and no debt. We will continue to balance incremental bottom line flow through with strategic investments that we expect will stack bookings and expand margins."

Financial Outlook as of August 4, 2020:

Glu is providing its financial outlook for the third quarter of 2020 and updating guidance for the full year 2020 as follows:

Third Quarter 2020 Guidance:

in millions Low High

Bookings $130.0 $135.0

Platform commissions, excluding any impact of deferred platform $35.6 $36.9commissionsRoyalties, excluding any impact of deferred royalties $9.0 $9.3

Hosting costs $2.1 $2.3

User acquisition and marketing expenses $36.9 $37.9

Adjusted other operating expenses $38.9 $39.1

Depreciation $1.5 $1.5



Supplemental information:

Income tax $3.4 $3.4

Stock-based compensation $7.3 $7.3

Amortization of intangible assets $0.9 $0.9

Weighted-average common shares outstanding - basic 171.6 171.6

Weighted-average common shares outstanding - diluted 185.1 185.1

Full Year 2020 Guidance:

in millions Low High

Bookings $538.0 $548.0

Platform commissions, excluding any impact of deferred platform $146.3 $149.1commissionsRoyalties, excluding any impact of deferred royalties $36.1 $36.7

Hosting costs $7.8 $7.9

User acquisition and marketing expenses $149.0 $153.0

Adjusted other operating expenses $151.5 $152.0

Depreciation $5.7 $5.7



Supplemental information:

Income tax $1.3 $1.3

Stock-based compensation $30.3 $30.3

Amortization of intangible assets $3.3 $3.3

Weighted-average common shares outstanding - basic 162.7 162.7

Weighted-average common shares outstanding - diluted 175.2 175.2

At leastCash and cash equivalent balance $325.0

Glu does not provide guidance on a GAAP basis primarily due to the fact that Glu is unable to predict, with reasonable accuracy, future changes in its deferred revenue and corresponding cost of revenue. The amount of Glu's deferred revenue and cost of revenue for any given period is difficult to predict due to differing estimated useful lives of paying users across games, variability of monthly revenue, platform commissions and royalties by game and unpredictability of revenue from new game releases. Future changes in deferred revenue and deferred cost of revenue are uncertain and could be material to Glu's results computed in accordance with GAAP. Accordingly, Glu is unable to provide a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure without unreasonable effort.

Quarterly Conference Call Information:

Glu will discuss its quarterly results via teleconference today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Please dial (866) 582-8907 (domestic), or (760) 298-5046 (international), with conference ID # 8084577 to access the conference call at least five minutes prior to the 2:00 p.m. Pacific Time start time. A live webcast and replay of the call will also be available on the investor relations portion of the company's website at www.glu.com/investors. An audio replay will be available between 5:00 p.m. Pacific Time, August 4, 2020, and 8:59 p.m. Pacific Time, August 11, 2020, by calling (855) 859-2056, or (404) 537-3406, with conference ID # 8084577.

Disclosure Using Social Media Channels

Glu currently announces material information to its investors using SEC filings, press releases, public conference calls and webcasts. Glu uses these channels as well as social media channels to announce information about the company, games, employees and other issues. Given SEC guidance regarding the use of social media channels to announce material information to investors, Glu is notifying investors, the media, its players and others interested in the company that in the future, it might choose to communicate material information via social media channels or, it is possible that information it discloses through social media channels may be deemed to be material. Therefore, Glu encourages investors, the media, players and others interested in Glu to review the information posted on the company forum ( http://ggnbb.glu.com/forum.php) and the company Facebook site ( https://www.facebook.com/glumobile) and the company twitter account ( https://twitter.com/glumobile). Investors, the media, players or other interested parties can subscribe to the company blog and twitter feed at the addresses listed above. Any updates to the list of social media channels Glu will use to announce material information will be posted on the Investor Relations page of the company's website at www.glu.com/investors.

Use of Non-GAAP Financial Measures

To supplement Glu's unaudited condensed consolidated financial data presented in accordance with GAAP, Glu uses certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Glu's results of operations as determined in accordance with GAAP. The non-GAAP financial measures used by Glu include historical and estimated bookings, platform commissions, excluding any impact of deferred platform commissions, royalties, excluding any impact of deferred royalties, and adjusted operating expenses. These non-GAAP financial measures exclude the following items from Glu's unaudited consolidated statements of operations:

* Change in deferred platform commissions; * Change in deferred royalties; * Amortization of intangible assets; * Stock-based compensation expense; * Transitional costs; and * Litigation costs

Bookings do not reflect the deferral of certain game revenue that Glu recognizes over the estimated useful lives of paying users of Glu's games and excludes changes in deferred revenue.

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

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

Cautions Regarding Forward-Looking Statements

This news release contains forward-looking statements, including those regarding our "Financial Outlook as of August 4, 2020" ("Third Quarter 2020 Guidance," "Full Year 2020 Guidance"), and the statements regarding our growth objective of stacking bookings that scale and increase profitability over time; that our focus is to continue to drive strong Growth Game performance through our live ops, develop our robust pipeline of new potential Growth Games, and strategically layer on accretive acquisitions; that our strong free cash flow generation in 2020, plus our recent capital raise, provides us with the firepower and flexibility to pursue an expanded pool of acquisition opportunities; that we expect to end the year with at least $325 million of cash and no debt; and that we will continue to balance incremental bottom line flow through with strategic investments that we expect will stack bookings and expand margins.

These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Investors should consider important risk factors, which include: the risk that consumer demand for smartphones, tablets and next-generation platforms does not grow as significantly as we anticipate or that we will be unable to capitalize on any such growth; the risk that we do not realize a sufficient return on our investment with respect to our efforts to develop free-to-play games for smartphones, tablets and next-generation platforms, the risk that we will be unable build successful Growth Games that provide predictable bookings and year over year growth; the risk that we will not be able to maintain our good relationships with Apple and Google; the risk that our development expenses for games for smartphones, tablets and next-generation platforms are greater than we anticipate; the risk that our recently and newly launched games are less popular than anticipated or decline in popularity and monetization rate more quickly than we anticipate; the risk that our newly released games will be of a quality less than desired by reviewers and consumers; the risk that the mobile games market, particularly with respect to free-to-play gaming, is smaller than anticipated; the risk that we may lose a key intellectual property license; the risk that we are unable to recruit and retain qualified personnel for developing and maintaining the games in our product pipeline resulting in reduced monetization of a game, product launch delays or games being eliminated from our pipeline altogether; the risks related to the COVID-19 pandemic; and other risks detailed under the caption "Risk Factors" in our Form 10-Q filed with the Securities and Exchange Commission on May 11, 2020 and our other SEC filings. You can locate these reports through our website at http://www.glu.com/investors. We are under no obligation, and expressly disclaim any obligation, to update or alter our forward-looking statements whether as a result of new information, future events or otherwise.

About Glu Mobile

Glu Mobile (NASDAQ: GLUU) is a leading developer and publisher of mobile games. Founded in 2001, Glu is headquartered in San Francisco with additional locations in Foster City, Toronto and Hyderabad. With a history spanning over a decade, Glu's culture is rooted in taking smart risks and fostering creativity to deliver world-class interactive experiences for our players. Glu's diverse portfolio features top-grossing and award-winning original and licensed IP titles including, Covet Fashion, Deer Hunter, Design Home, Diner DASH Adventures, Disney Sorcerer's Arena,Kim Kardashian: Hollywood and MLB Tap Sports Baseball available worldwide on various platforms including the App Store and Google Play. For more information, visit www.glu.com or follow Glu on Twitter, Facebook and Instagram.

Covet Fashion, Deer Hunter, Design Home, Diner DASH, Tap Sports, Glu and Glu Mobile are trademarks of Glu Mobile Inc.

Glu Mobile Inc.Condensed ConsolidatedStatements of Operations(in thousands, except pershare data)(unaudited) Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2020 2019 2020 2019

Revenue $ 133,316 $ 95,540 $ 240,590 $ 191,425

Cost of revenue:Platform commissions, 46,727 32,806 83,701 66,076 royalties and otherAmortization of intangible 887 1,056 1,775 2,308 assetsTotal 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 (15,187 ) 1,951 (24,716 ) 2,028 operations Interest and other income/ 434 556 369 1,320 (expense), net: Income/(loss) before income (14,753 ) 2,507 (24,347 ) 3,348 taxesIncome tax benefit/ 6,187 - 7,508 (178 )(provision)Net income/(loss) $ (8,566 ) $ 2,507 $ (16,839 ) $ 3,170

Net income/(loss) per $ (0.05 ) $ 0.02 $ (0.11 ) $ 0.02 common share - basicNet income/(loss) per $ (0.05 ) $ 0.02 $ (0.11 ) $ 0.02 common share - diluted Weighted average common 156,583 145,451 153,106 144,951 shares outstanding - basicWeighted average common 156,583 159,682 153,106 159,556 shares outstanding -diluted

Glu Mobile Inc.Condensed Consolidated Balance Sheets(in thousands)(unaudited) June 30, December 31, 2020 2019

ASSETSCash 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' EQUITYAccounts 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

Common stock 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



Glu Mobile Inc. GAAP to Adjusted Results Reconciliation (in thousands) (unaudited) Three Months Ended March 31, June 30, September December March 31, June 30, 30, 31, 2019 2019 2019 2019 2020 2020

GAAP platform $ 25,148 $ 24,799 $ 28,122 $ 30,092 $ 28,727 $ 35,032 commissions Change in deferred (1,109 ) 1,860 3,972 (1,345 ) (232 ) 14,613 platform commissions Platform Commissions, excluding any 24,039 $ 26,659 $ 32,094 $ 28,747 $ 28,495 $ 49,645 impact of $ deferred platform commissions GAAP royalties (including impairment of $ 6,605 $ 6,245 $ 6,643 $ 6,285 $ 6,381 $ 9,617 royalties and minimum guarantees) Change in (596 ) 1,071 592 (410 ) 1 4,420 deferred royalties Royalties, excluding any 6,009 $ 7,316 $ 7,235 $ 5,875 $ 6,382 $ 14,037 impact of $ deferred royalties GAAP other operating expenses (GAAP operating 38,314 $ 29,652 $ 34,791 $ 37,904 $ 43,307 $ 43,921 expenses $ excluding user acquisition and marketing expenses) Stock-based (6,807 ) (2,035 ) (4,080 ) (4,461 ) (6,382 ) (8,106 ) compensation Transitional (998 ) (5 ) (5 ) (1 ) (4 ) - costs Litigation (28 ) 416 - - - - Costs Adjusted other 30,481 $ 28,028 $ 30,706 $ 33,442 $ 36,921 $ 35,815 operating $ expenses

In addition to the reasons stated above, which are generally applicable to each of the items Glu excludes from its non-GAAP financial measures, Glu believes it is appropriate to exclude certain items for the following reasons:

Change in Deferred Platform Commissions and Deferred Royalties. At the date we sell certain premium games and micro-transactions, Glu has an obligation to provide additional services and incremental unspecified digital content in the future without an additional fee. In these cases, we recognize any associated cost of revenue, including platform commissions and royalties, on a straight-line basis over the estimated life of the paying user. Internally, Glu's management excludes the impact of the changes in deferred platform commissions and deferred royalties related to its premium and free-to-play games in its non-GAAP financial measures when evaluating the company's operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. Glu believes that excluding the impact of the changes in deferred platform commissions and deferred royalties from its operating results is important to facilitate comparisons to prior periods and to understand Glu's operations.

Amortization of Intangible Assets. When analyzing the operating performance of an acquired entity or intangible asset, Glu's management focuses on the total return provided by the investment (i.e., operating profit generated from the acquired entity as compared to the purchase price paid) without taking into consideration any allocations made for accounting purposes. Because the purchase price for an acquisition necessarily reflects the accounting value assigned to intangible assets (including acquired in-process technology and goodwill), when analyzing the operating performance of an acquisition in subsequent periods, Glu's management excludes the GAAP impact of acquired intangible assets to its financial results. Glu believes that such an approach is useful in understanding the long-term return provided by an acquisition, and that investors benefit from a supplemental non-GAAP financial measure that excludes the accounting expense associated with acquired intangible assets.

Stock-Based Compensation Expense. Glu applies the fair value provisions of Accounting Standard Codification Topic 718, Compensation-Stock Compensation ("ASC 718"). ASC 718 requires the recognition of compensation expense, using a fair-value based method, for costs related to all share-based payments. Glu's management team excludes stock-based compensation expense from its short and long-term operating plans. In contrast, Glu's management team is held accountable for cash-based compensation and such amounts are included in its operating plans. Further, when considering the impact of equity award grants, Glu places a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants. Glu believes it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of its business.

Transitional Costs. GAAP requires expenses to be recognized for various types of events associated with a business acquisition such as legal, accounting and other deal related expenses. Transitional costs also include divestiture related expenses and termination of certain game related contracts. Glu believes that these transitional costs affect comparability from period to period and that investors benefit from a supplemental non-GAAP financial measure that excludes these expenses.

Litigation Costs. Glu incurred legal costs related to the complaint filed by the former Chief Executive Officer of Crowdstar in the Superior Court of the State of California for the County of Santa Clara against Glu, Time Warner Inc., Intel Capital Corporation, Middlefield Ventures Inc., Rachel Lam, and Jose Blanc. Glu believes that these legal costs have no direct correlation to the operation of its ongoing core business and affect comparability from period to period and, as a result, that investors benefit from a supplemental non-GAAP financial measure that excludes these expenses.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200804005964/en/

CONTACT: Investor Relations Contact: Bob Jones / Taylor Krafchik Ellipsis IR@glu.com 646-776-0886