Glu Mobile Inc. (NASDAQ:GLUU), leading global developer and publisher of free-to-play games for smartphone and tablet devices, today announced financial results for its second quarter ended June 30, 2016.

“Our ability to exceed expectations in the quarter was driven by the strong Tap Sports Baseball 2016 launch as well as the ongoing success of Cooking Dash 2016, Kim Kardashian:Hollywood and Racing Rivals,” stated Niccolo de Masi, Chairman and Chief Executive Officer of Glu.

De Masi continues, “We believe there is significant latent revenue potential in our genre-leading live games. By learning from Tencent and deepening monetization of our biggest spenders and most engaged players, we anticipate it being possible to not only arrest catalogue declines, but reverse them. Our goal is to achieve profitability from our catalogue Bookings alone by the end of 2017.

“Over the past 6.5 years Glu has shipped over 85 games. Having built a diversified portfolio of genre-leaders, we now intend to double down on turning them into evergreen revenue generators. Henceforth we shall prioritize adding new modes, systems and community-enhancing features to our existing games to evolve them into evergreen games. We believe this new focus will allow us to grow Bookings significantly in the first half of 2017 and beyond.

De Masi concluded, “We look forward to launching Nicki Minaj: The Empire before year end and releasing 4-6 new innovative evergreen games in 2017.”

Second Quarter 2016 Financial Highlights:

  • Revenue: Total revenue was $48.4 million in the second quarter of 2016 compared to $56.2 million in the second quarter of 2015.
  • Bookings: Total Bookings were $50.9 million in the second quarter of 2016, compared to$57.5 million in the second quarter of 2015. Bookings do not reflect the deferral of certain game revenue that Glu recognizes over the estimated useful lives of paying users of Glu’s games and excludes changes in deferred revenue and litigation settlement proceeds. Glu’s presentation of Bookings is consistent with Glu’s previous disclosure of non-GAAP revenue.
  • Gross Margin: Gross margin was 57% in the second quarter of 2016 compared to 58% in the second quarter of 2015. Adjusted gross margin was 63% in the second quarter of 2016, consistent with the second quarter of 2015. Adjusted gross margin, which is consistent with Glu’s previous disclosure of 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.
  • Operating Loss: Operating loss was $(13.5) million in the second quarter of 2016 compared to a loss of $(6.1) million in the second quarter of 2015.
  • Adjusted Operating Income/(Loss): Adjusted operating loss was $(3.9) million in the second quarter of 2016 compared to income of $1.0 million during the second quarter of 2015. Adjusted operating income/(loss), which is consistent with Glu’s prior disclosure of 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.
  • Net Loss and EPS: Net loss was $(17.9) million for the second quarter of 2016 compared to a net loss of $(5.5) million for the second quarter of 2015. EPS loss was $(0.14) for the second quarter of 2016, based on 131.2 million weighted-average basic and diluted shares outstanding, compared to an EPS loss of $(0.05) for the second quarter of 2015, based on 116.2 million weighted-average basic and diluted shares outstanding.
  • Adjusted Net Income/(Loss) and EPS: Adjusted net loss was $(3.9) million for the second quarter of 2016 compared to net income of $1.8 million for the second quarter of 2015. Adjusted EPS loss, which is consistent with Glu’s prior disclosure of non-GAAP net income/(loss), was $(0.03) for the second quarter of 2016 based on 131.2 million weighted-average basic and diluted shares outstanding, compared to Adjusted diluted EPS of $0.01 for the second quarter of 2015 based on 122.5 million weighted-average diluted shares outstanding.
  • Adjusted EBITDA: Adjusted EBITDA was a $(3.2) million loss for the second quarter of 2016 compared to a $1.7 million profit during the second quarter of 2015. Adjusted EBITDA is defined as Adjusted operating income/(loss) excluding depreciation.
  • Cash and Cash Flows: As of June 30, 2016, Glu had cash and cash equivalents of$158.0 million and no debt. Cash flows provided by operations were $2.0 million for the second quarter of 2016 compared to $(1.2) million used for the second 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 July, we announced the availability of Rival Fire, the westernized version of Tencent’s popular shooter game, We Fire.
  • In June, we announced the availability of Gordon Ramsay Dash.
  • In May, we announced the availability of Britney Spears: American Dream.

“The outperformance of Tap Sports Baseball 2016 resulted in a better-than-expected second quarter,” stated Eric R. Ludwig, Chief Operating Officer and Chief Financial Officer. “We believe that our focus on elongating the tail of our evergreen titles will help us achieve our goal of having our fixed operating costs being covered by our catalog Bookings by the end of 2017.”

Business Outlook as of August 2, 2016:

The following forward-looking statements reflect expectations as of August 2, 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 to create evergreen games 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.

Third Quarter Expectations – Quarter Ending September 30, 2016:

  • Bookings are expected to be between $50.0 million and $52.0 million.
  • Adjusted gross margin is expected to be approximately 62.1%.
  • Adjusted operating expenses are expected to be between $35.7 million and $36.4 million.
  • Adjusted EBITDA, defined as Adjusted operating income/(loss) excluding depreciation of approximately $0.6 million, is expected to range from a loss of $(3.5) million to $(4.0) million.
  • Income tax is expected to be an expense of approximately $0.2 million.
  • Adjusted net loss is expected to be between $(4.3) million and $(4.8) million, or between$(0.03) and $(0.04) per weighted-average basic and diluted share outstanding, which excludes approximately $2.8 million of anticipated stock-based compensation expense, $2.7 million for amortization of intangibles and any potential impairments of prepaid royalties and guarantees or any change in fair value of strategic investments.
  • Weighted-average common shares outstanding are expected to be approximately 132.9 million basic and diluted.

2016 Expectations – Full Year Ending December 31, 2016:

  • Bookings are expected to be between $195.0 million and $202.0 million.
  • Adjusted gross margin is expected to be approximately 61.9%.
  • Adjusted EBITDA is expected to range from a loss of $(16.5) million to $(19.0) million.
  • Adjusted net loss is expected to be between a loss of $(19.3) million and $(21.8) million, or between $(0.15) and $(0.17) per weighted-average basic and diluted share outstanding, which excludes approximately $12.7 million of anticipated stock-based compensation expense, approximately $2.2 million of restructuring charges, $10.1 million for amortization of intangibles and any potential impairments of prepaid royalties and guarantees or any change in fair value of strategic investments.
  • Weighted-average common shares outstanding are expected to be approximately 131.8 million basic and diluted.
  • We expect to have cash and short-term investments at December 31, 2016 of at least$125.0 million with no debt.

Glu does not provide guidance on a GAAP basis primarily due to the fact that Glu is unable to predict, with reasonable accuracy, future changes in its deferred revenue. The amount of Glu’s deferred revenue for any given period is difficult to predict due to differing estimated useful lives of paying users across games, variability of monthly revenue by game and unpredictability of revenue from new game releases. Future changes in deferred revenue are uncertain and could be material to Glu’s results computed in accordance with GAAP. (Original Source)

Shares of Glu Mobile are down 1.31% to $2.26 in after-hours trading. GLUU has a 1-year high of $5.88 and a 1-year low of $1.98. The stock’s 50-day moving average is $2.38 and its 200-day moving average is $2.68.

On the ratings front, GLUU has been the subject of a number of recent research reports. In a report issued on July 29, Wedbush analyst Michael Pachter reiterated a Hold rating on GLUU, with a price target of $2.45, which represents a slight upside potential from current levels. Separately, on July 25, Roth Capital’s Darren Aftahi reiterated a Hold rating on the stock and has a price target of $2.50.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Michael Pachter and Darren Aftahi have a total average return of -1.1% and 1.8% respectively. Pachter has a success rate of 49.5% and is ranked #3276 out of 4083 analysts, while Aftahi has a success rate of 45.0% and is ranked #1527.

Glu Mobile, Inc. designs, markets and sells mobile games. It develops and publishes a portfolio of action, adventure, casual and traditional games, which are designed for the users of smartphones and tablet devices who purchase those games through direct-to-consumer digital storefronts as well as users of feature phones served by wireless carriers and other distributors. It creates games and related applications based on its own brands including Big Time Gangsta, Blood & Glory, Contract Killer, Contract Killer: Zombies, Deer Hunter, Eternity Warriors, Frontline Commando, Gun Bros, Heroes of Destiny, Motocross Meltdown, Samurai vs. Zombies Defense and Stardom, as well as third-party licensed brands.