Company Update (NASDAQ:GLUU): Glu Mobile Inc. Reports First Quarter 2016 Financial Results


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 first quarter ended March 31, 2016.

“Our first quarter guidance outperformance was primarily due to the strong Kendall and Kylie launch as well as the ongoing success of Kim Kardashian: Hollywoodand Cooking Dash,” stated Niccolo de Masi, Chairman and Chief Executive Officer of Glu. “We are delighted with the traction of our Tap Sports Baseball 2016 title which is currently the top grossing baseball game on the U.S. App Store for iPhone and has positioned us to grow revenues from this franchise for the third year in a row.”

De Masi continues, “During the quarter, our new studio leadership team implemented a number of operational improvements which we expect to enhance our product delivery as well as to reduce the run-rate revenue required for Glu to breakeven. The combination of the new studio label system, along with a strong line-up of new titles, including Britney Spears: American Dream and Gordon Ramsay: Dash, positions Glu for growth during the second half of 2016 and beyond.”

First Quarter 2016 Financial Highlights:

  • Revenue: Total GAAP revenue was $54.5 million in the first quarter of 2016 compared to $69.5 million in the first quarter of 2015. Total non-GAAP revenue was$54.0 million in the first quarter of 2016, compared to $62.4 million in the first quarter of 2015. Non-GAAP revenue excludes changes in deferred revenue and litigation settlement proceeds.
  • Gross Margin: GAAP gross margin was 58% in the first quarter of 2016 compared to 59% in the first quarter of 2015. Non-GAAP gross margin was 61% in the first quarter of 2016 compared to 63% in the first quarter of 2015. 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 loss was $(9.2) million in the first quarter of 2016 compared to income of $2.5 million in the first quarter of 2015.
  • Non-GAAP Operating Income/(Loss): Non-GAAP operating loss was $(4.4) million in the first quarter of 2016 compared to income of $3.2 million during the first quarter of 2015. Non-GAAP operating income/(loss) excludes changes in deferred revenue and deferred cost of revenue, amortization of intangible assets, non-cash warrant expense, stock-based compensation expense, restructuring charges, transitional costs and litigation costs and settlement proceeds.
  • Adjusted EBITDA: Adjusted EBITDA was a $(3.8) million loss for the first quarter of 2016 compared to a $3.9 million profit during the first quarter of 2015. Adjusted EBITDA is defined as non-GAAP operating income/(loss) excluding depreciation.
  • GAAP Net Income/(Loss) and EPS: GAAP net loss was $(8.6) million for the first quarter of 2016 compared to net income of $1.1 million for the first quarter of 2015. GAAP EPS loss was $(0.07) for the first quarter of 2016, based on 129.2 million weighted-average basic and diluted shares outstanding, compared to a GAAP diluted EPS of $0.01 for the first quarter of 2015, based on 107.9 million weighted-average diluted shares outstanding.
  • Non-GAAP Net Income/(Loss) and EPS: Non-GAAP net loss was $(4.2) millionfor the first quarter of 2016 compared to income of $2.1 million for the first quarter of 2015. Non-GAAP EPS loss was $(0.03) for the first quarter of 2016 based on 129.2 million weighted-average basic and diluted shares outstanding, compared to non-GAAP diluted EPS of $0.02 for the first quarter of 2015 based on 107.9 million weighted-average diluted shares outstanding.
  • Cash and Cash Flows: As of March 31, 2016, Glu had cash and cash equivalents of $159.3 million and no debt. Cash flows used from operations were $(11.8) million for the first quarter of 2016 compared to $(5.1) million used for the first quarter of 2015.

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:

  • In April, we implemented a restructuring plan designed to align our operations with evolving business needs and reduce fixed operating costs.
  • In March, we announced the availability of Tap Sports Baseball 2016.
  • In February, we announced the availability of Kendall and Kylie.

“We were pleased with our first quarter execution as we exceeded expectations across all key metrics,” stated Eric R. Ludwig, Chief Operating Officer and Chief Financial Officer. “The combination of Glu’s strong balance sheet, robust line up of new titles and reduced fixed cost structure positions the company to enhance stockholder value longer-term.”

Business Outlook as of May 3, 2016:

The following forward-looking statements reflect expectations as of May 3, 2016. 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.

Second Quarter Expectations – Quarter Ending June 30, 2016:

  • Non-GAAP revenue is expected to be between $46.0 million and $49.0 million.
  • Non-GAAP gross margin is expected to be approximately 61.2%.
  • Non-GAAP operating expenses are expected to be between $35.7 million and $36.1 million.
  • Adjusted EBITDA, defined as non-GAAP operating income/(loss) excluding depreciation of approximately $0.6 million, is expected to range from a loss of$(5.5) million to $(7.0) million.
  • Income tax is expected to be an expense of approximately $0.6 million.
  • Non-GAAP net loss is expected to be between $(6.7) million and $(8.2) million, or between $(0.05) and $(0.06) per weighted-average basic share outstanding, which excludes approximately $3.2 million of anticipated stock-based compensation expense, approximately $2.0 million of restructuring charges, $2.3 million for amortization of intangibles and any change in fair value of strategic investments.
  • Weighted-average common shares outstanding are expected to be approximately 131.1 million basic and 131.5 million diluted.

2016 Expectations – Full Year Ending December 31, 2016:

  • Non-GAAP revenue is expected to be between $215.0 million and $235.0 million.
  • Non-GAAP gross margin is expected to be approximately 58.7%.
  • Adjusted EBITDA is expected to range from a loss of $(12.0) million to $(18.0) million.
  • Non-GAAP net loss is expected to be between a loss of $(14.9) million and$(20.9) million, or between $(0.11) and $(0.16) per weighted-average basic share outstanding, which excludes approximately $14.0 million of anticipated stock-based compensation expense, approximately $2.6 million of restructuring charges, $10.1 million for amortization of intangibles and any change in fair value of strategic investments.
  • Weighted-average common shares outstanding are expected to be approximately 131.8 million basic and 132.8 million diluted.
  • We expect to have cash and short-term investments at December 31, 2016 of at least $135.0 million with no debt. (Original Source)

Shares of Glu Mobile are down nearly 14% to $2.30 in after-hours trading. GLUU has a 1-year high of $7.03 and a 1-year low of $1.98. The stock’s 50-day moving average is $2.90 and its 200-day moving average is $3.03.

On the ratings front, GLUU has been the subject of a number of recent research reports. In a report issued on April 26, Roth Capital analyst Darren Aftahi reiterated a Buy rating on GLUU, with a price target of $4.15, which implies an upside of 51.5% from current levels. Separately, on April 4, Canaccord Genuity’s Michael Graham reiterated a Hold rating on the stock and has a price target of $4.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Darren Aftahi and Michael Graham have a total average return of -3.5% and 7.7% respectively. Aftahi has a success rate of 50.5% and is ranked #3318 out of 3838 analysts, while Graham has a success rate of 54.5% and is ranked #240.

Overall, 2 research analysts have assigned a Hold rating and 4 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $3.98 which is 45.3% above where the stock opened today.

Glu Mobile, Inc. designs, markets and sells mobile games. It develops, publishes and markets a portfolio of games designed to appeal to a broad cross section of the users of smartphones and tablet devices who download and make purchases within its games through direct-to-consumer digital storefronts, such as the Apple App Store, Google Play Store, Amazon Appstore and others. The company occupies leadership positions in four gaming genres: action, celebrity, sports, and simulation.