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, 2015.
“We were satisfied with our financial results in the third quarter, including our ability to exceed revenue and EBITDA expectations,” stated Niccolo de Masi, Chairman and Chief Executive Officer of Glu. “During the quarter, our results were driven by the ongoing strength of our catalog as well as the continued outperformance of our Cooking Dash game.”
de Masi continued, “The supermajority of titles launched in 2015 have underperformed as solid monetization rates were offset by significantly lower-than-expected install volumes. We have strengthened our studio with the hiring of a new CTO and President of Studios, as well as Board with the appointment ofGreg Brandeau. We remain on the lookout for accretive and strategic uses of our strong balance sheet.”
de Masi concluded, “We believe Glu is well positioned given the potential promotional power of our exclusive, multi-year celebrity gaming partnerships. We are proud to announce that Glu has now signed partnerships with celebrities who in turn have over 1 billion* social followers. We are similarly pleased with the opportunity to bring Tencent’s chart-topping shooter WeFire to new territories where Glu has a strong publishing operation.”
Third Quarter 2015 Financial Highlights:
- Revenue: Total GAAP revenue was $63.3 million in the third quarter of 2015 compared to $64.8 million in the third quarter of 2014. Total non-GAAP revenue was $64.4 million in the third quarter of 2015, compared to $83.6 million in the third quarter of 2014. Non-GAAP revenue excludes changes in deferred revenue and litigation settlement proceeds.
- Gross Margin: GAAP gross margin was 53% in the third quarter of 2015 compared to 58% in the third quarter of 2014. Non-GAAP gross margin was 59% in the third quarter of 2015 compared to 60% in the third quarter of 2014. Non-GAAP gross margin excludes changes in deferred revenue and litigation settlement proceeds, change in deferred cost of revenue, amortization of intangible assets and non-cash warrant expense.
- GAAP Operating Income/(Loss): GAAP operating income was $389,000 in the third quarter of 2015 compared to a loss of $(106,000) in the third quarter of 2014.
- Non-GAAP Operating Income: Non-GAAP operating income was $7.7 million in the third quarter of 2015 compared to $14.8 million during the third quarter of 2014. Non-GAAP operating income excludes changes in deferred revenue and deferred cost of revenue, 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 litigation costs and settlement proceeds.
- Adjusted EBITDA: Adjusted EBITDA was $8.5 million for the third quarter of 2015, compared to $15.4 million during the third quarter of 2014. Adjusted EBITDA is defined as non-GAAP operating income excluding depreciation.
- GAAP Net Income and EPS: GAAP net income was $158,000 for the third quarter of 2015 compared to$10.4 million for the third quarter of 2014. GAAP diluted EPS was approximately breakeven for the third quarter of 2015, based on 131.5 million weighted-average diluted shares outstanding, compared to a GAAP diluted EPS of $0.10 for the third quarter of 2014, based on 105.4 million diluted weighted-average shares outstanding.
- Non-GAAP Net Income and EPS: Non-GAAP net income was $7.7 million for the third quarter of 2015 compared to $17.3 million for the third quarter of 2014. Non-GAAP diluted EPS was $0.06 for the third quarter of 2015 based on 131.5 million weighted-average diluted shares outstanding, compared to non-GAAP diluted EPS of $0.16 for the third quarter of 2014 based on 105.4 million weighted-average diluted shares outstanding.
- Cash and Cash Flows: As of September 30, 2015, Glu had cash and cash equivalents of $182.3 millioncompared to $189.7 million at the end of the prior quarter. The company continues to have no debt. Cash flows used in operations were $(7.8) million for the third quarter of 2015 compared to $2.5 million cash generated from operations for the third quarter of 2014.
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 “Use of Non-GAAP Financial Measures.”
Recent Developments and Strategic Initiatives:
- Today we announced the hiring of new President of Studios, Nick Earl. Nick is a seasoned gaming veteran, having most recently held senior studio roles at Electronic Arts and Kabam.
- Today we announced a partnership to bring Tencent’s chart-topping shooter game, WeFire, to North and South America, EMEA, Australia and New Zealand.
- Announced today that we have signed exclusive partnerships with celebrities totaling over one billion social followers whose games will be live by the end of 2017*.
- In October, Tim Wilson joined Glu as Global Chief Technology Officer, bringing to the company a strong background in global technology and engineering leadership acquired through his extensive career in gaming, including serving in multiple CTO positions at Electronic Arts.
- In September, we announced the availability of Deer Hunter 2016 as well as Deer Hunter VR, the company’s first title developed exclusively for Oculus.
- In September, Greg Brandeau, former CTO of Walt Disney Animation Studios and former SVP of Technology for Pixar Animation Studios, joined Glu’s Board of Directors.
“The ongoing traction with our catalog titles resulted in a better-than-expected third quarter,” stated Eric R. Ludwig, Chief Operating Officer and Chief Financial Officer. “We are confident that the combination of our long-term strategy and strong balance sheet, positions us well to scale Glu to the next level and generate greater shareholder value over time.”
Business Outlook as of November 5, 2015:
The following forward-looking statements reflect expectations as of November 5, 2015. 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 continue to successfully launch and update new games; 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, 2015:
- Non-GAAP revenue is expected to be between $50.0 million and $52.0 million.
- Non-GAAP gross margin is expected to be approximately 62.7%.
- Non-GAAP operating expenses are expected to be between $35.1 million and $35.3 million.
- Adjusted EBITDA, defined as non-GAAP operating income/(loss) excluding depreciation of approximately$0.7 million, is expected to range from a loss of $(2.0) million to $(3.0) million.
- Income tax is expected to be an expense of approximately $0.2 million.
- Non-GAAP net income/(loss) is expected to be between $(2.9) million and ($3.9) million, or between$(0.02) and $(0.03) per weighted-average basic share outstanding, which excludes approximately $3.5 million of anticipated stock-based compensation expense and $2.3 million for amortization of intangibles.
- Weighted-average common shares outstanding are expected to be approximately 128.0 million basic and 129.3 million diluted.
2015 Expectations – Full Year Ending December 31, 2015:
- Non-GAAP revenue is expected to be between $234.3 million and $236.3 million.
- Non-GAAP gross margin is expected to be approximately 61.5%.
- Adjusted EBITDA is expected to range from $11.0 million to $12.0 million.
- Non-GAAP net income is expected to be between $7.6 million and $8.6 million, or between $0.06 and $0.07 per weighted-average diluted share outstanding, which excludes approximately $11.7 million of anticipated stock-based compensation expense, $9.7 million for amortization of intangibles and the proceeds from the settlement of the Hothead Games litigation, net of costs incurred.
- Weighted-average common shares outstanding are expected to be approximately 118.8 million basic and 122.8 million diluted.
- We expect to have cash and short-term investments at December 31, 2015 of at least $170.0 million with no debt. (Original Source)
Shares of Glu Mobile are down 16.12% to $3.07 in after-hours trading. GLUU has a 1-year high of $7.03 and a 1-year low of $3.27. The stock’s 50-day moving average is $4.28 and its 200-day moving average is $5.40.
On the ratings front, Glu Mobile has been the subject of a number of recent research reports. In a report issued on October 2, Canaccord Genuity analyst Michael Graham reiterated a Buy rating on GLUU, with a price target of $9, which represents a potential upside of 142.6% from where the stock is currently trading. Separately, on September 23, Cowen’s Doug Creutz reiterated a Buy rating on the stock and has a price target of $8.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Michael Graham and Doug Creutz have a total average return of 11.9% and 16.5% respectively. Graham has a success rate of 52.9% and is ranked #189 out of 3824 analysts, while Creutz has a success rate of 61.3% and is ranked #503.
Glu Mobile Inc develops, publishes & markets games designed to appeal to users of smartphones & tablet devices. Its gaming brands include Blood & Glory, Contract Killer, Deer Hunter, Eternity Warriors, Frontline Commando, Gun Bros, & Heroes of Destiny.