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Glu Reports Third Quarter 2013 Financial Results

  Glu Reports Third Quarter 2013 Financial Results

  *GAAP revenues of $21.7 million; non-GAAP revenues of $22.6 million exceed
    guidance
  *Cash balance of $27.7 million and no debt as of September 30, 2013
  *Deer Hunter 2014 sets new Glu Mobile download, DAU and single-day revenue
    records
  *Q4 non-GAAP smartphone revenue guidance increased; expect to achieve Q4
    adjusted EBITDA profitability

Business Wire

SAN FRANCISCO -- October 30, 2013

Glu Mobile Inc. (NASDAQ:GLUU), a leading global developer and publisher of
free-to-play games for smartphone and tablet devices, today announced
financial results for its third quarter ended September 30, 2013.

“Our third quarter results were boosted by the exceptional early performance
of Deer Hunter 2014,” stated Niccolo de Masi, Chief Executive Officer of Glu.
“Deer Hunter 2014 has broken Glu daily revenue and DAU records and
consistently remained in or near the top 10 on both the Apple App Store and
Google Play US top grossing charts. As a result of this title’s momentum, we
now expect record topline non-GAAP revenue and adjusted EBITDA profitability
in Q4.”

De Masi continued, “In December we expect to launch Eternity Warriors 3, a
sequel of one of Glu’s most successful franchises to date. The combination of
upcoming title launches, Deer Hunter 2014’s momentum, and a strengthened
balance sheet position us well for 2014.”

Third Quarter 2013 Financial Highlights:

All financial information in this press release reflects the recognition on a
gross basis of smartphone revenues attributable to sales to end customers
through third party digital storefronts.

  *Revenues: Total GAAP revenues were $21.7 million in the third quarter of
    2013 compared to $26.1 million in the third quarter of 2012. Total
    non-GAAP revenues were $22.6 million in the third quarter of 2013 compared
    to $25.9 million in the third quarter of 2012. Non-GAAP revenues exclude
    changes in deferred revenues.
  *Gross Margin: GAAP gross margin was 59% in the third quarter of 2013
    compared to 69% in the third quarter of 2012. Non-GAAP gross margin was
    66% in the third quarter of 2013 compared to 73% in the third quarter of
    2012. Non-GAAP gross margin excludes changes in deferred revenues and cost
    of revenues, amortization of intangible assets and non-cash warrant
    expense.
  *GAAP Operating Loss: GAAP operating loss was $(7.8) million in the third
    quarter of 2013 compared to a $(4.2) million loss in the third quarter of
    2012.
  *Non-GAAP Operating Loss: Non-GAAP operating loss was $(4.8) million in the
    third quarter of 2013 compared to a loss of $(2.7) million during the
    third quarter of 2012. Non-GAAP operating loss excludes changes in
    deferred revenues and deferred cost of revenues, amortization of
    intangible assets, non-cash warrant expense, stock-based compensation
    expense, restructuring charges, change in fair value of the Blammo
    earnout, transitional costs and impairment of goodwill.
  *Adjusted EBITDA: Adjusted EBITDA was a $(4.1) million loss for the third
    quarter of 2013 compared to a $(2.1) million loss during the third quarter
    of 2012. Adjusted EBITDA is defined as non-GAAP operating income/(loss)
    less depreciation.
  *GAAP Net Loss and EPS: GAAP net loss  was $(8.0) million for the third
    quarter of 2013 compared to a loss of $(3.6) million for the third quarter
    of 2012. GAAP EPS was a loss of $(0.11) for the third quarter of 2013,
    based on 71.5 million weighted-average basic shares outstanding, compared
    to a loss of $(0.06) for the third quarter of 2012, based on 64.6 million
    weighted-average basic shares outstanding.
  *Non-GAAP Net Loss and EPS: Non-GAAP net loss was $(4.7) million for the
    third quarter of 2013 compared to a loss of $(1.6) million for the third
    quarter of 2012. Non-GAAP EPS was a loss of $(0.07) for the third quarter
    of 2013 based on 71.5 million weighted-average basic shares outstanding,
    compared to a loss of $(0.03) for the third quarter of 2012 based on 64.6
    million weighted-average basic shares outstanding.
  *Cash Flows Used in Operations: Cash flows used in operations were $(5.9)
    million for the third quarter of 2013 compared to cash flows used in
    operations of $(2.6) million for the third quarter of 2012.

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.”

Selected Third Quarter of 2013 Operating Highlights and Metrics:

  *We launched four new 1^st party titles – Deer Hunter 2014, Zombies Ate My
    Friends, Tons of Guns, and Gang Lords – as well as two 3^rd party titles
    by Glu Publishing – Black Gate: Inferno and Odyssey: Age of Gods.
  *Our total GAAP smartphone revenues for the third quarter of 2013 were
    $20.4 million and comprised 94% of total GAAP revenues.
  *Our non-GAAP smartphone revenues for the third quarter of 2013 were $21.3
    million and comprised 94% of total non-GAAP revenues.
  *Our non-GAAP freemium revenues (micro-transactions, in-game advertising
    and offers) for the third quarter of 2013 were $20.0 million, or 94% of
    non-GAAP smartphone revenues.

Recent Developments and Strategic Initiatives:

  *Deer Hunter 2014, the first game from Glu Mobile supported by GluOn, set
    new company download, DAU and single-day revenue records.
  *We closed an underwritten public offering of 7,245,000 shares of common
    stock with net proceeds of approximately $14.0 million, after deducting
    underwriter fees and offering expenses.
  *We expanded our operations in Asia by opening an office in Korea and
    establishing a legal entity in Japan, as well as adding senior executives
    with deep knowledge of these markets.
  *Eric Ball, currently Senior Vice President of Finance for Oracle, joined
    Glu’s Board of Directors and Audit Committee.

“We were very pleased with our execution during the third quarter, highlighted
by our ability to exceed expectations across all key operating metrics,”
stated Eric R. Ludwig, Glu’s Chief Financial Officer. “Our results were driven
by continued strength in our catalog titles along with the strong initial
demand of Deer Hunter 2014. The completion of our recent follow-on offering
provides Glu with additional resources to execute our strategy and maintain
our momentum in 2014.”

Business Outlook as of October 30, 2013:

The following forward-looking statements reflect expectations as of October
30, 2013. Results may be materially different and are affected by many
factors, such as: consumer demand for mobile entertainment and specifically
Glu’s products; consumer demand for smartphones, tablets and next-generation
platforms; our ability to improve the monetization of our titles and evolve
our studio and begin to launch true games-as-a-service; development delays on
Glu's products; continued uncertainty in the global economic environment;
competition in the industry; storefront featuring; changes in foreign exchange
rates; Glu's effective tax rate and other factors detailed in this release and
in Glu's SEC filings.

Fourth Quarter Expectations – Quarter Ending December 31, 2013:

As discussed above, all financial information in this press release for future
periods reflects the recognition on a gross basis of smartphone revenues
attributable to sales to end customers through digital storefronts.

  *Non-GAAP revenues are expected to be between $31.5 million and $32.5
    million and non-GAAP smartphone revenues are expected to be between $30.8
    million and $31.8 million.
  *Non-GAAP gross margin is expected to be approximately 72%.
  *Non-GAAP operating expenses are expected to range from $22.7 million to
    $22.9 million.
  *Adjusted EBITDA, defined as non-GAAP operating income excluding
    depreciation of approximately $700,000, is expected to range from $750,000
    to $1.25 million.
  *Income tax expense is expected to be $(150,000).
  *Non-GAAP net income is expected to be between breakeven and $400,000, or
    between breakeven and $0.01 per weighted-average diluted share
    outstanding.
  *Weighted-average common shares outstanding are expected to be
    approximately 78.0 million basic and 81.3 million diluted.

2013 Expectations – Full Year Ending December 31, 2013:

As discussed above, all financial information in this press release for future
periods reflects the recognition on a gross basis of smartphone revenues
attributable to sales to end customers through digital storefronts.

  *Non-GAAP revenues are expected to be between $102.0 million and $103.0
    million and non-GAAP smartphone revenues are expected to be between $96.7
    million and $97.7 million.
  *Non-GAAP gross margin is expected to be approximately 69%.
  *Adjusted EBITDA is expected to range from a loss of between $(7.3) million
    to $(7.8) million.
  *Non-GAAP net loss is expected to be a loss between $(10.5) million and
    $(11.0) million, or a net loss of $(0.15) per weighted-average basic share
    outstanding.
  *Weighted-average common shares outstanding are expected to be
    approximately 71.4 million basic and 74.2 million diluted.
  *We expect to have a cash balance on December 31, 2013 of over $27.7
    million with no debt.

2014 Expectations – Full Year Ending December 31, 2014:

The company is providing an estimated initial baseline total non-GAAP revenue
growth rate of approximately 15% to 20% for 2014 from the full year 2013
guidance set forth above. However, investors should bear in mind that this
estimated growth reflects current estimates as Glu is in the early stages of
its 2014 planning process.

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 (866) 582-8907, or if
outside the U.S., (760) 298-5046, with conference ID # 76395760 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 4:30 p.m.
Pacific Time, October 30, 2013, and 8:59 p.m. Pacific Time, November 6, 2013,
by calling (855) 859-2056, or (404) 537-3406, with conference ID # 76395760.

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 the recent 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 non-GAAP revenues, non-GAAP smartphone
revenues, non-GAAP cost of revenues, non-GAAP operating expenses, non-GAAP
gross profit, 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 deferred cost of revenues;
  *Amortization of intangible assets;
  *Non-cash warrant expense;
  *Stock-based compensation expense;
  *Restructuring charges;
  *Change in fair value of Blammo earnout;
  *Transitional costs;
  *Impairment of goodwill;
  *Release of tax liabilities; and
  *Foreign currency exchange gains and losses primarily related to the
    revaluation of assets and liabilities.

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

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

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

Cautions Regarding Forward-Looking Statements

This news release contains forward-looking statements, including those
regarding our “Business Outlook as of October 30, 2013” (“Fourth Quarter
Expectations – Quarter Ending December 31, 2013,” “2013 Expectations – Full
Year Ending December 31, 2013” and “2014 Expectations – Full Year Ending
December 31, 2014”) and the statements that: we now expect record topline
non-GAAP revenue and adjusted EBITDA profitability in Q4; we expect to launch
Eternity Warriors 3 in December; the combination of upcoming title launches,
Deer Hunter 2014’s momentum, and a strengthened balance sheet position us well
for 2014; and the completion of our recent follow-on offering provides Glu
with additional resources to execute our strategy and maintain our momentum in
2014. These forward-looking statements are subject to material risks and
uncertainties that could cause actual results to differ materially from those
in the forward-looking statements. Investors should consider important risk
factors, which include: the risks identified under "Business Outlook as of
October 30, 2013"; 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 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; and other risks detailed under the caption "Risk
Factors" in our Form 10-Q filed with the Securities and Exchange Commission on
August 9, 2013 and our other SEC filings. You can locate these reports through
our website at http://www.glu.com/investors. We are under no obligation, and
expressly disclaim any obligation, to update or alter our forward-looking
statements whether as a result of new information, future events or otherwise.

About Glu Mobile

Glu Mobile (NASDAQ:GLUU) is a leading global developer and publisher of
free-to-play games for smartphone and tablet devices. Glu is focused on
creating compelling original IP games such as CONTRACT KILLER, DEER HUNTER,
ETERNITY WARRIORS, and FRONTLINE COMMANDO on a wide range of platforms
including iOS, Android, Windows Phone, and MAC OS. Glu’s unique technology
platform enables its titles to be accessible to a broad audience of consumers
globally. Founded in 2001, Glu is headquartered in San Francisco with a major
office outside Seattle, and international locations in Canada, China, India,
Korea, and Russia. Consumers can find high-quality entertainment wherever they
see the ‘g’ character logo or at www.glu.com. For live updates, please follow
Glu via Twitter at www.twitter.com/glumobile or become a Glu fan at
www.facebook.com/glumobile.

CONTRACT KILLER, DEER HUNTER, ETERNITY WARRIORS, FRONTLINE COMMANDO, GLU, GLU
MOBILE and the 'g' character logo are trademarks of Glu Mobile Inc.



Glu Mobile Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
                                             September 30,   December 31,
                                               2013              2012
                                                                 (Restated)
                                                                 
ASSETS
Cash and cash equivalents                      $  27,658         $ 22,325
Accounts receivable, net                          11,282           11,881
Prepaid royalties                                 41               -
Prepaid expenses and other current assets        4,615          5,167    
Total current assets                              43,596           39,373
                                                                 
Property and equipment, net                       5,149            5,026
Restricted cash                                   1,730            -
Other long-term assets                            566              227
Intangible assets, net                            6,465            10,889
Goodwill                                         19,477         19,440   
Total assets                                   $  76,983        $ 74,955   
                                                                 
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable                               $  8,540          $ 7,269
Accrued liabilities                               2,170            2,124
Accrued compensation                              3,620            5,989
Accrued royalties                                 1,250            2,781
Accrued restructuring                             -                4
Deferred revenues                                10,544         11,711   
Total current liabilities                         26,124           29,878
Other long-term liabilities                      2,706          6,190    
Total liabilities                                28,830         36,068   
                                                                 
Common stock                                      8                6
Additional paid-in capital                        296,611          271,016
Accumulated other comprehensive income            222              167
Accumulated deficit                              (248,688 )      (232,302 )
Stockholders' equity                             48,153         38,887   
Total liabilities and stockholders' equity     $  76,983        $ 74,955   



Glu Mobile Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
                    Three Months Ended             Nine Months Ended
                     September 30,   September 30,   September     September
                     2013           2012            30,          30,
                                                     2013          2012
                                     (Restated)                    (Restated)
                                                                   
Revenues             $  21,722       $  26,099       $ 70,772      $ 81,872
                                                                   
Cost of revenues:
Platform
commissions,            7,436           6,946          22,568        22,248
royalties and
other
Impairment of
prepaid royalties       435             -              435           -
and guarantees
Amortization of        1,082         1,025        3,234       2,710   
intangible assets
Total cost of          8,953         7,971        26,237      24,958  
revenues
Gross profit           12,769        18,128       44,535      56,914  
                                                                   
Operating
expenses:
Research and            11,405          9,979          34,259        40,709
development
Sales and               5,361           5,545          15,512        14,621
marketing
General and             3,617           2,466          11,388        11,388
administrative
Amortization of         229             495            1,219         1,485
intangible assets
Restructuring           -               213            1,448         533
charge
Impairment of          -             3,613        -           3,613   
goodwill
Total operating        20,612        22,311       63,826      72,349  
expenses
                                                                   
Loss from               (7,843  )       (4,183  )      (19,291 )     (15,435 )
operations
                                                                   
Interest and other
income/(expense),
net:
Interest income         4               5              11            17
Other
income/(expense),      (159    )      (460    )     129         (628    )
net
Interest and other
income/(expense),      (155    )      (455    )     140         (611    )
net
                                                                   
Loss before income      (7,998  )       (4,638  )      (19,151 )     (16,046 )
taxes
Income tax benefit     30            1,075        2,765       2,654   
Net loss             $  (7,968  )    $  (3,563  )    $ (16,386 )   $ (13,392 )
                                                                   
Net loss per share
- basic and          $  (0.11   )    $  (0.06   )    $ (0.24   )   $ (0.21   )
diluted
                                                                   
Weighted average
common shares           71,529          64,562         69,246        63,865
outstanding -
basic and diluted
                                                                   
Stock-based
compensation
expense included
in:
Research and         $  268          $  (3,388  )    $ 1,099       $ 2,268
development
Sales and               40              73             200           343
marketing
General and            412           437          1,402       1,385   
administrative
Total stock-based
compensation         $  720         $  (2,878  )    $ 2,701      $ 3,996   
expense

                                                                               
                                                                                  
Glu Mobile Inc.
GAAP to Non-GAAP Reconciliation
(in thousands, except per share data)
(unaudited)
                 For the Three Months Ended
                 March 31,    June 30,     September    December     March 31,    June 30,     September
                 2012        2012        30,         31,         2013         2013        30,
                                           2012         2012                                   2013
                 (Restated)   (Restated)   (Restated)   (Restated)   (Restated)
                                                                                               
GAAP revenues
Featurephone     $ 4,165      $ 3,710      $ 2,924      $ 2,336      $ 1,856      $ 1,423      $ 1,305
Smartphone        22,344     25,554     23,175     23,975     22,749     23,022     20,417 
Total GAAP        26,509     29,264     26,099     26,311     24,605     24,445     21,722 
revenues
                                                                                               
Change in
deferred
revenues
Featurephone
change in          (7     )     17           (21    )     17           29           (46    )     (43    )
deferred
revenues
Smartphone
change in         380        479        (197   )    71         82         (1,205 )    929    
deferred
revenues
Total change
in deferred       373        496        (218   )    88         111        (1,251 )    886    
revenues
                                                                                               
Non-GAAP
Revenues
Featurephone       4,158        3,727        2,903        2,353        1,885        1,377        1,262
Smartphone        22,724     26,033     22,978     24,046     22,831     21,817     21,346 
Total non-GAAP    26,882     29,760     25,881     26,399     24,716     23,194     22,608 
Revenues
                                                                                               
GAAP gross         18,234       20,552       18,128       17,856       16,069       15,697       12,769
profit
Change in
deferred           373          496          (218   )     88           111          (1,251 )     886
revenues
Amortization
of intangible      753          932          1,025        1,073        1,074        1,078        1,082
assets
Non-cash
warrant            -            -            -            -            -            -            427
expense
Change in
deferred
platform          (263   )    122        -          (359   )    (138   )    419        (245   )
commissions
and royalty
expense
Non-GAAP gross    19,097     22,102     18,935     18,658     17,116     15,943     14,919 
profit
                                                                                               
GAAP operating     24,269       25,769       22,311       24,527       21,563       21,651       20,612
expense
Stock-based        (3,836 )     (3,038 )     2,878        (1,826 )     (1,245 )     (736   )     (720   )
compensation
Amortization
of intangible      (495   )     (495   )     (495   )     (495   )     (495   )     (495   )     (229   )
assets
Transitional       (173   )     (30    )     (192   )     (94    )     -            -            -
costs
Change in fair
value of           (645   )     (386   )     954          (90    )     (29    )     47           31
Blammo earnout
Impairment of      -            -            (3,613 )     -            -            -            -
goodwill
Restructuring     -          (320   )    (213   )    (838   )    (511   )    (937   )    -      
charge
Non-GAAP
operating         19,120     21,500     21,630     21,184     19,283     19,530     19,694 
expense
                                                                                               
GAAP operating     (6,035 )     (5,217 )     (4,183 )     (6,671 )     (5,494 )     (5,954 )     (7,843 )
loss
Change in
deferred           373          496          (218   )     88           111          (1,251 )     886
revenues
Non-GAAP cost
of revenues        490          1,054        1,025        714          936          1,497        1,264
adjustment
Stock-based        3,836        3,038        (2,878 )     1,826        1,245        736          720
compensation
Amortization
of intangible      495          495          495          495          495          495          229
assets
Transitional       173          30           192          94           -            -            -
costs
Change in fair
value of           645          386          (954   )     90           29           (47    )     (31    )
Blammo earnout
Impairment of      -            -            3,613        -            -            -            -
goodwill
Restructuring     -          320        213        838        511        937        -      
charge
Non-GAAP
operating         (23    )    602        (2,695 )    (2,526 )    (2,167 )    (3,587 )    (4,775 )
income/(loss)
                                                                                               
GAAP net loss      (6,841 )     (2,988 )     (3,563 )     (7,067 )     (5,497 )     (2,921 )     (7,968 )
Change in
deferred           373          496          (218   )     88           111          (1,251 )     886
revenues
Non-GAAP cost
of revenues        490          1,054        1,025        714          936          1,497        1,264
adjustment
Non-GAAP
operating          5,149        4,269        681          3,343        2,280        2,121        918
expense
adjustment
Foreign
currency           373          (205   )     460          (263   )     (129   )     (137   )     159
exchange
loss/(gain)
Release of tax    -          (2,427 )    -          -          -          (3,148 )    -      
liabilities
Non-GAAP net     $ (456   )   $ 199       $ (1,615 )   $ (3,185 )   $ (2,299 )   $ (3,839 )   $ (4,741 )
income/(loss)
                                                                                               
                                                                                               
Reconciliation
of net loss
and net loss
per share:
GAAP net loss
per share -      $ (0.11  )   $ (0.05  )   $ (0.06  )   $ (0.11  )   $ (0.08  )   $ (0.04  )   $ (0.11  )
basic and
diluted
Non-GAAP net
income/(loss)
per share -      $ (0.01  )   $ 0.00       $ (0.03  )   $ (0.05  )   $ (0.03  )   $ (0.05  )   $ (0.07  )
basic and
diluted
Shares used in
computing
Non-GAAP basic     63,229       63,802       64,562       65,678       66,397       69,812       71,529
net
income/(loss)
per share
Shares used in
computing
Non-GAAP           63,229       69,490       64,562       65,678       66,397       69,812       71,529
diluted net
income/(loss)
per share
                                                                                               
Non-GAAP
operating
expense
break-out:
GAAP research
and              $ 15,033     $ 15,697     $ 9,979      $ 13,566     $ 11,630     $ 11,224     $ 11,405
development
expense
Transitional       (68    )     (1     )     (45    )     (70    )     -            -            -
costs
Stock-based       (3,260 )    (2,396 )    3,388      (1,223 )    (668   )    (163   )    (268   )
compensation
Non-GAAP
research and      11,705     13,300     13,322     12,273     10,962     11,061     11,137 
development
expense
                                                                                               
GAAP sales and
marketing          4,375        4,701        5,545        6,272        5,008        5,143        5,361
expense
Transitional       -            -            (15    )     (24    )     -            -            -
costs
Stock-based       (115   )    (155   )    (73    )    (43    )    (67    )    (93    )    (40    )
compensation
Non-GAAP sales
and marketing     4,260      4,546      5,457      6,205      4,941      5,050      5,321  
expense
                                                                                               
GAAP general &
administrative     4,366        4,556        2,466        3,356        3,919        3,852        3,617
expense
Transitional       (105   )     (29    )     (132   )     -            -            -            -
costs
Change in fair
value of           (645   )     (386   )     954          (90    )     (29    )     47           31
Blammo earnout
Stock-based       (461   )    (487   )    (437   )    (560   )    (510   )    (480   )    (412   )
compensation
Non-GAAP
general and      $ 3,155     $ 3,654     $ 2,851     $ 2,706     $ 3,380     $ 3,419     $ 3,236  
administrative
expense

                                                                                     
                                                                                       
Glu Mobile Inc.
Non-GAAP Adjusted EBITDA
(in thousands)
(unaudited)
                     For the Three Months Ended
                      March 31,    June 30,     September    December     March 31,    June 30,     September
                      2012        2012        30,         31,         2013         2013        30,
                                                2012         2012                                   2013
                      (Restated)   (Restated)   (Restated)   (Restated)   (Restated)
                                                                                                    
GAAP net loss         $ (6,841 )   $ (2,988 )   $ (3,563 )   $ (7,067 )   $ (5,497 )   $ (2,921 )   $ (7,968 )
Change in deferred      373          496          (218   )     88           111          (1,251 )     886
revenues
Change in deferred
platform                (263   )     122          -            (359   )     (138   )     419          (245   )
commissions and
royalty expense
Non-cash warrant        -            -            -            -            -            -            427
expense
Amortization of         1,248        1,427        1,520        1,568        1,569        1,573        1,311
intangible assets
Depreciation            562          556          554          696          731          661          633
Stock-based             3,836        3,038        (2,878 )     1,826        1,245        736          720
compensation
Change in fair
value of Blammo         645          386          (954   )     90           29           (47    )     (31    )
earnout
Transitional costs      173          30           192          94           -            -            -
Impairment of           -            -            3,613        -            -            -            -
goodwill
Restructuring           -            320          213          838          511          937          -
charge
Foreign currency
exchange                373          (205   )     460          (263   )     (129   )     (137   )     159
loss/(gain)
Interest and other      (7     )     (5     )     (5     )     (1     )     (3     )     (26    )     (4     )
income
Income tax             440        (2,019 )    (1,075 )    660        135        (2,870 )    (30    )
provision/(benefit)
Total Non-GAAP        $ 539       $ 1,158     $ (2,141 )   $ (1,830 )   $ (1,436 )   $ (2,926 )   $ (4,142 )
Adjusted EBITDA

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 Revenues and Deferred Cost of Revenues. At the date we sell
certain premium games and micro-transactions, Glu has an obligation to provide
additional services and incremental unspecified digital content in the future
without an additional fee. In these cases, we recognize the revenues and any
associated cost of revenues, 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 revenue and
deferred cost of revenues 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 revenues and deferred cost of revenues
from its operating results is important to facilitate comparisons to prior
periods during which Glu did not delay the recognition of significant amounts
of revenue related to its games and to understand Glu’s operations.

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

Non-cash Warrant Expense. The Company recorded a non-cash charge related to
the vesting of warrants to purchase shares of common stock issued to a brand
holder as part of a third party licensing, development and publishing
arrangement. These charges are computed using the Black-Scholes valuation
model and are recorded in cost of revenues. When evaluating the performance of
its consolidated results, Glu does not consider non-cash warrant expense as it
places a greater emphasis on overall stockholder dilution rather than the
accounting charges associated with the vesting of any warrants. As the
non-cash warrant expense impacts comparability from period to period Glu
believes that investors benefit from a supplemental non-GAAP financial measure
that excludes these charges.

Stock-Based Compensation Expense. Glu adopted ASC 718, "Compensation – Stock
Compensation" beginning in its fiscal year ended December 31, 2006. Included
in the stock compensation expense is the contingent consideration potentially
issuable to the Blammo employees who were former shareholders of Blammo, which
is recorded as research and development expense over the term of the earn-out
periods, since these employees are primarily employed in product development.
Glu re-measures the fair value of the contingent consideration each reporting
period and only records a compensation expense for the portion of the earn-out
target which is likely to be achieved. In addition, Glu is exposed to
potential continued fluctuations in the fair market value of the contingent
consideration in each reporting period, since re-measurement is impacted by
changes in Glu’s share price and the assumptions used by Glu. When evaluating
the performance of its consolidated results, Glu does not consider stock-based
compensation charges. Likewise, Glu's management team excludes stock-based
compensation expense from its short and long-term operating plans. In
contrast, Glu's management team is held accountable for cash-based
compensation and such amounts are included in its operating plans. Further,
when considering the impact of equity award grants, Glu places a greater
emphasis on overall stockholder dilution rather than the accounting charges
associated with such grants. Glu believes it is useful to provide a non-GAAP
financial measure that excludes stock-based compensation in order to better
understand the long-term performance of its business.

Restructuring Charges. Glu undertook restructuring activities in the second,
third and fourth quarters of 2012 and the first and second quarters of 2013
and recorded (1) non-cash restructuring charges due to vacating a portion of
its offices in Washington, vacating its Brazil office and writing-off the
cumulative translation adjustment upon substantial liquidation of its
Brazilian entity; and (2) cash restructuring charges due to the termination of
certain employees in its Brazil, China, Europe and U.S. offices. Glu recorded
the severance costs as an operating expense when it communicated the benefit
arrangement to the employee and no significant future services, other than a
minimum retention period, were required of the employee to earn the
termination benefits. Glu believes that these restructuring charges do not
reflect its ongoing operations and that investors benefit from a supplemental
non-GAAP financial measure that excludes these charges.

Change in Fair Value of Blammo Earnout. As part of the acquisition of Blammo,
Glu committed to issue additional consideration in the form of Glu’s common
stock to the former, non-employee Blammo shareholders if certain revenue
targets are achieved. Glu recorded the estimated contingent consideration
liability at acquisition and will adjust the fair value of the liability each
reporting period. When analyzing the operating performance of an acquired
entity, Glu’s management focuses on the total return provided by the
investment (i.e., operating profit generated from the acquired entity as
compared to the purchase price paid including the final amounts paid for
contingent consideration) without taking into consideration any expenses
recognized post-acquisition related to the change in fair value of the
contingent consideration. Because the final purchase price paid for an
acquisition necessarily reflects the accounting value assigned to both the
consideration, including the contingent consideration, paid and to the
intangible assets (including goodwill) acquired, when analyzing the operating
performance of an acquisition in subsequent periods, the Company’s management
excludes the GAAP impact of any adjustments to the fair value of these
acquisition-related balances to its financial results. Glu believes that the
fair value adjustments affect comparability from period to period and that
investors benefit from a supplemental non-GAAP financial measure that excludes
these charges.

Transitional Costs. GAAP requires expenses to be recognized for various types
of events associated with a business acquisition such as legal, accounting and
other deal related expenses.  Additionally, Glu has incurred various costs
related to the transition and integration of Blammo, GameSpy and Griptonite
into Glu’s operations. Glu recorded these non-recurring acquisition and
transitional costs as operating expenses when they were incurred. Glu believes
that these acquisition and transitional costs affect comparability from period
to period and that investors benefit from a supplemental non-GAAP financial
measure that excludes these expenses.

Impairment of Goodwill. In accordance with ASC 350 “Goodwill and Other
Intangible Assets” Glu performs its annual goodwill impairment test as of
September 30. Glu recorded a goodwill impairment charge in the third quarter
of 2012 as the fair value of one of its three reporting units was determined
to be below its carrying value. As this impairment is non-recurring, Glu
believes it does not reflect the Company’s ongoing operations and that
investors benefit from a supplemental non-GAAP financial measure that excludes
this impairment, enabling them to compare the Company’s core operating results
in different periods without this variability.

Release of tax liabilities. In the second quarter of 2012 and 2013, Glu
recorded non-cash income tax benefits related to the release of certain
foreign income tax liabilities upon the expiration of the statute of
limitations. Glu believes that this one-time tax benefit does not reflect its
ongoing operations and that investors benefit from a supplemental non-GAAP
financial measure that excludes this benefit.

Foreign currency exchange gains and losses. Foreign currency exchange gains
and losses represent the net gain or loss that Glu has recorded for the impact
of currency exchange rate movements on cash and other assets and liabilities
denominated in foreign currencies related to the revaluation of assets and
liabilities. Accordingly, foreign currency exchange gains and losses are
generally unpredictable and can cause Glu’s reported results to vary
significantly. Due to the unusual magnitude of these gains and losses, and the
fact that Glu has not engaged in hedging or taken other actions to reduce the
likelihood of incurring a sizeable net gain or loss in future periods, Glu
began, with the quarter ended December 31, 2008, to present non-GAAP net loss
and net loss per share excluding foreign exchange gains and losses for
comparability purposes. Glu believes that these gains and losses do not
reflect its ongoing operations and that investors benefit from a supplemental
non-GAAP financial measure that excludes these items, enabling investors to
compare Glu’s core operating results in different periods without this
variability. Foreign exchange gains/(losses) recognized during 2012 and 2013
were as follows (in thousands):

March 31, 2012       $ (373 )
June 30, 2012            205
September 30, 2012       (460 )
December 31, 2012       263  
FY 2012                $ (365 )
                       
                       
March 31, 2013         $ 129
June 30, 2013            137
September 30, 2013      (159 )
FY 2013                $ 107

Contact:

Media & Investor Relations:
ICR, Inc.
Seth Potter, 646-277-1230
ir@glu.com
 
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