Glu Reports Third Quarter 2012 Financial Results

Glu Mobile Inc. (NASDAQ:GLUU), a leading global developer and publisher of freemium games for smartphone and tablet devices, today announced financial results for its third quarter ended September 30, 2012.

“We are satisfied with our 73% year-over-year growth in non-GAAP smartphone revenue. User reviews remained strong, with growth in daily active users from July to September,” stated Niccolo de Masi, Chief Executive Officer of Glu. “Q3 was underpinned by the strength of newly launched Eternity Warriors 2 across iOS and Android and the continued success of catalog titles Frontline Commando and Deer Hunter Reloaded. As expected, both consumer adoption of new hardware, and advertising demand, slowed over the summer in anticipation of new device launches. These industry headwinds, along with weaker-than-anticipated monetization from most new launches during the quarter, resulted in a sequential decline in smartphone revenue from Q2 2012.”

De Masi continued, “We are confident in Glu’s long-term ability to drive higher monetization and lifetime value through the inclusion of robust multiplayer and community functionality. The acquisition of GameSpy and appointment of our first President of Studios accelerate our ability to enhance average revenue per day per daily active user. We anticipate Adjusted EBITDA improvement in Q1 2013 from Q4 2012 guidance levels.”

Third Quarter 2012 Financial Highlights:

• Revenue: Total GAAP revenue was $21.3 million in the third quarter of 2012 compared to $16.9 million in the third quarter of 2011. Total non-GAAP revenue was $21.2 million in the third quarter of 2012 compared to $17.8 million in the third quarter of 2011. Non-GAAP revenue excludes changes in deferred revenue and amortization of in-process development contracts.
• Gross Margin: GAAP gross margin was 85% in the third quarter of 2012 compared to 66% in the third quarter of 2011. Non-GAAP gross margin was 89% in the third quarter of 2012 compared to 81% in the third quarter of 2011. Non-GAAP gross margin excludes changes in deferred revenue and royalties and amortization of intangible assets.
• GAAP Operating Loss: GAAP operating loss was $(4.2) million in the third quarter of 2012 compared to a $(7.3) million loss in the third quarter of 2011.
• Non-GAAP Operating Loss: Non-GAAP operating loss was $(2.7) million in the third quarter of 2012 compared to a loss of $(2.1) million during the third quarter of 2011. Non-GAAP operating loss excludes changes in deferred revenue and royalty expense, amortization of in-process development contracts, stock-based compensation expense, amortization of intangible assets, restructuring charges, change in fair value of the Blammo earnout, transitional costs and impairment of goodwill.
• Adjusted EBITDA: Adjusted EBITDA was a $(2.1) million loss for the third quarter of 2012 compared to a $(1.6) million loss during the third quarter of 2011. Adjusted EBITDA is defined as non-GAAP operating income/(loss) less depreciation.
• GAAP Net Loss and EPS: GAAP net loss was $(3.6) million for the third quarter of 2012 compared to a GAAP net loss of $(6.2) million for the third quarter of 2011. GAAP EPS was a loss of $(0.06) for the third quarter of 2012, based on 64.6 million weighted-average basic shares outstanding, compared to a loss of $(0.10) for the third quarter of 2011, based on 60.5 million weighted-average basic shares outstanding.
• Non-GAAP Net Loss and EPS: Non-GAAP net loss was $(1.6) million for the third quarter of 2012 compared to a loss of $(1.3) million for the third quarter of 2011. Non-GAAP EPS was a loss of $(0.03) for the third quarter of 2012 based on 64.6 million weighted-average basic shares outstanding, compared to a loss of $(0.02) for the third quarter of 2011 based on 60.5 million weighted-average basic shares outstanding.
• Cash Flows Used in Operations: Cash flows used in operations were $(2.6) million for the third quarter of 2012 compared to cash flows used in operations of $(108,000) for the third quarter of 2011.

Selected Third Quarter of 2012 Operating Highlights and Metrics :

• We launched eleven new freemium games: Blood & Glory: Legend, Bombshells: Hell’s Belles, Campers!, Enchant U, Eternity Warriors 2, Gears & Guts, Ham on the Run!, Indestructible, Mutant Roadkill, My Dragon and Tavern Quest.
• Our total GAAP smartphone revenue of $18.4 million grew 91% from Q3 2011 and comprised 86% of total GAAP revenue.
• Our non-GAAP smartphone revenue of $18.3 million grew 73% from Q3 2011 and was 86% of total non-GAAP revenue.
• Our non-GAAP freemium revenue (micro-transactions, in-game advertising and offers) grew 103% to $16.5 million compared to $8.1 million in Q3 2011.

Recent Developments and Strategic Initiatives:

• We launched two new freemium games, Contract Killer 2 and Death Dome, on the Apple App Store and Google Play.
• We launched five freemium games, Bombshells: Hell’s Belles, Deer Hunter Reloaded, Samurai vs. Zombies Defense, Small Street and Stardom: The A-List, on the Mac App Store.
• We partnered with Probability PLC for mobile gambling, expanding our mobile portfolio to reach new international audiences with Glu original IP-branded casino games.
• We announced the optimization of our leading freemium titles for the iPhone 5.
• We hired Matthew Ricchetti as our new President of Studios.

A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

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