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Glu Reports Second Quarter 2012 Financial Results

“Our strong second quarter results were driven by the success of games such as Deer Hunter Reloaded, Frontline Commando and Samurai vs. Zombies Defense,” stated Eric R. Ludwig, Glu’s Chief Financial Officer. “We also benefitted from the timely acquisition of the Deer Hunter brand, which resulted in our ability to achieve record gross margins during the quarter. The combination of our better than expected second quarter performance and increased expectation for the year will result in our ability to end the year with more than $21.0 million in cash.”

Business Outlook as of August 2, 2012:

The following forward-looking statements reflect expectations as of August 2, 2012. Results may be materially different and are affected by many factors, such as: consumer demand for mobile entertainment and specifically Glu’s mobile products; consumer demand for mobile handsets, including smartphones, tablets and next-generation platforms; development delays on Glu's products; continued uncertainty in the global economic environment; competition in the industry; storefront featuring and premium deck placement; smartphone storefronts, carriers and other distributors maintaining their networks and provisioning systems to enable consumer purchases; changes in foreign exchange rates; Glu's effective tax rate and other factors detailed in this release and in Glu's SEC filings.

Third Quarter Expectations – Quarter Ending September 30, 2012:

  • Non-GAAP revenue is expected to be between $20.25 million and $21.25 million and non-GAAP smartphone revenue is expected to be between $17.5 million and $18.5 million.
  • Non-GAAP gross margin is expected to be approximately 89%.
  • Non-GAAP operating expenses are expected to be approximately $22.6 million.
  • Adjusted EBITDA loss, defined as non-GAAP operating loss excluding depreciation of approximately $600,000, is expected to range from a loss of $(3.1) million to a loss of $(4.0) million.
  • Income tax expense is expected to be $(0.2) million.
  • Non-GAAP net loss is expected to be between $(3.9) million and $(4.8) million, or a net loss of $(0.06) to $(0.07) per weighted-average basic share.
  • Weighted average common shares outstanding for the third quarter of 2012 are expected to be approximately 64.5 million basic and 70.8 million diluted.
  • Glu’s cash balance at September 30, 2012 is expected to be approximately $21.0 million.

2012 Expectations – Full Year Ending December 31, 2012:

  • Non-GAAP revenue is expected to be between $94.4 million and $96.4 million and non-GAAP smartphone revenue is expected to be between $81.9 million and $83.9 million.
  • We expect to achieve profitability for non-GAAP operating income and generate cash flows from operations in the fourth quarter of 2012.
  • We expect to achieve better than break even Adjusted EBITDA for the full year in fiscal 2012.
  • Glu’s cash balance at December 31, 2012 is expected to be more than $21.5 million with no debt and we will not need to raise debt or issue equity to support our operations in 2012.
  • We expect to launch a total of 23 titles in fiscal 2012.

Quarterly Conference Call

Glu will discuss its quarterly results via teleconference today at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). Please dial (888) 634-0559, or if outside the U.S., (817) 385-9380, with conference ID # 10555321 to access the conference call at least five minutes prior to the 1:30 p.m. Pacific Time start time. A live webcast and replay of the call will also be available on the investor relations portion of the company's website at www.glu.com/investors. An audio replay will be available between 3:10 p.m. Pacific Time, August 2, 2012, and 8:59 p.m. Pacific Time, August 9, 2012, by calling (855) 859-2056, or (404) 537-3406, with conference ID # 10555321.

Use of Non-GAAP Financial Measures

To supplement Glu's unaudited condensed consolidated financial data presented in accordance with GAAP, Glu uses certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Glu's results of operations as determined in accordance with GAAP. The non-GAAP financial measures used by Glu include historical and estimated non-GAAP revenues, non-GAAP smartphone revenues, non-GAAP freemium revenues, non-GAAP operating expenses, non-GAAP gross margins, non-GAAP operating income/(loss), non-GAAP net loss and non-GAAP basic and diluted net loss per share. These non-GAAP financial measures exclude the following items from Glu's unaudited consolidated statements of operations:

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

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

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