Glu Mobile Inc. Q Earnings Call

Transcription

1 Glu Mobile Inc. Q Earnings Call May 3, 2017 Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 1

2 Safe Harbor Statement This presentation contains "forward-looking" statements including: that our strong Q demonstrates early progress under our new product strategy; our expectation that Taylor Swift and future game launches can be growth games; that our daily operations focus is designed to support improved long-tail bookings flow; we believe that a creative-led approach to hit development and the active management of evergreens will drive more predictable bookings and improved bottom-line results; our expected title release slate for 2017 and that we may release Car Town Racing and Zombie Shooter in 2017 pending Beta results; that increased pipeline activity is leading to 3-4 expected launches in 2018; and our Q and full year 2017 guidance. 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: 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 and tablets; the risk that Glu will be unable to attract and retain creative leaders with a successful track record; the risk that we will be unable build successful growth titles that provide predictable bookings and year over year growth; the risk that we do not maintain our good relationships with Apple and Google; the risk that Glu does not realize the anticipated strategic benefits from its celebrity partnerships and strategic investments; the risk that our development expenses are greater than we anticipate or that we experience product delays; the risk that our recently and newly launched games are less popular than anticipated; 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 social, free-to-play gaming, is smaller than anticipated; risks related to the restatement of certain of our historical financial statements and other risks detailed under the caption "Risk Factors" in our Form 10-K filed with the Securities and Exchange Commission on March 10, 2017 and our other SEC filings. You can locate these reports through our website at These "forward-looking" statements, including our Q and full year 2017 guidance, are based on estimates and information available to us on May 3, 2017 and 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. Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 2

3 Use of Non-GAAP Financial Measures Glu uses in this presentation 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 Bookings, Adjusted platform commissions, Adjusted royalties, Adjusted research and development expense, Adjusted sales and marketing expense, Adjusted general and administrative expense and Adjusted operating expenses. These non-gaap financial measures exclude the following items from Glu's unaudited consolidated statements of operations: Change in deferred platform commissions Change in deferred royalties; Impairment and amortization of intangible assets; Non-cash warrant benefit/(expense); Stock-based compensation expense; Restructuring charges; and Transitional costs. 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 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. For a reconciliation of these non-gaap financial measures to their most directly comparable GAAP financial measures, please refer to the tables at the end of this presentation. Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 3

4 Q Business Update Nick Earl President & CEO Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 4

5 Q1 Operational and Financial Highlights Strong quarter demonstrates early progress under new product strategy Bookings exceed midpoint guidance expectations by 28% Crowdstar acquisition drives bookings growth Evergreen titles outperform forecast (in Millions) $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 Bookings $69.0 $54.0 $50.9 $51.3 $57.8 Q116 Q216 Q316 Q416 Q117 Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 5

6 Product Portfolio Catalog Games Growth Games Legacy Evergreen 60+ Legacy Games including: Our expectation is that Taylor Swift and future game launches can be growth games Incremental revenue and margin Improved long-tail revenue Repeatable, stackable revenue Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 6

7 Q1 Drivers Crowdstar Evergreens Crowdstar acquisition driving bookings growth for Glu Titles have responded well to UA strategies Design Home reached as high as #28 game on the U.S. App Store for iphone Solid performance; results ahead of forecast Daily operations focus designed to support improved long-tail bookings flow A number of evergreen titles delivered flat to growing performance in Q1 compared to Q4 Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 7

8 Glu Growth Strategy We believe that a creative-led approach to hit development and the active management of evergreens will drive more predictable bookings and improved bottom-line results Creative leadership with proven track records Growth games: Top grossing games that stack bookings over time Evergreen games: Investing to extend bookings tail Disciplined greenlighting process New design construct focused on rapid prototyping and emphasis on: Social interaction Deeper meta games Monetization Live events Mike Olsen Prototyping Jerome Collin Tap Sports Baseball & Prototyping Mark Van Ryswyk Covet Fashion, Design Home & Prototyping Becky Ann Hughes Dash Franchise & Prototyping Dave Waisglass Kim Kardashian: Hollywood, Kendall & Kylie & Taylor Swift Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 8

9 Product Roadmap MLB Tap Sports Baseball 2017 Taylor Swift Growth and Evergreen Games Launched March 28, 2017 Launching in 2017 Continued Updates in 2017 Potential future launches pending Beta results Car Town Racing Zombie Shooter Increased Pipeline Activity Leading to 3-4 Launches Expected in 2018 Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 9

10 Q Financial Update and Guidance Eric Ludwig COO & CFO Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 10

11 Q1 Financial Highlights GAAP Revenue up 4% to $56.8 Million Bookings up 28% Y/Y to $69.0 million Booking outperformance led to improved bottom line results Cash Balance of $73.2 Million Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 11

12 Q117 Bookings: $69.0M from a Broad Portfolio Deer Hunter 2017, $5.3M, 8% Tap Sports Baseball 2016, $3.6M, 5% Covet Fashion, $11.5M, 17% Deer Hunter Classic, $1.3M, 2% Gordon Ramsay DASH, $7.9M, 11% Other, $6.2M, 9% Racing Rivals, $2.9M, 4% Cooking Dash, $7.1M, 10% QuizUp, $0.8M, 1% Kim Kardashian Hollywood, $6.9M, 10% Kendall and Kylie, $1.0M, 1% Design Home, $14.9M, 22% Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 12

13 Consolidated Income Statement (In millions) Revenue $56.8 $ % Bookings $69.0 $ % Cost of Goods Sold Q117 Actual Q116 Actual Y/Y % Change Adjusted Platform Commissions $17.8 $ % Adjusted Royalties $5.3 $5.6 (4.3%) Hosting and Other Costs $1.8 $ Adjusted Operating Expenses $45.7 $ % Depreciation Add Back $0.8 $ % Basic and Diluted Shares Outstanding % Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 13

14 Condensed Balance Sheet (In millions) Q117 Q416 Q116 Cash and cash equivalents $ 73.2 $ $ Accounts receivable, net Prepaid expenses, royalties and other current assets Other assets Intangible assets & goodwill Total Assets $ $ $ Accounts payable and accrued liabilities Accrued expenses, royalties and other liabilities Deferred revenue Common stock/paid in capital Accumulated deficit & other comprehensive income (361.1) (338.4) (260.1) Total Liabilities and Stockholders' Equity $ $ $ Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 14

15 Condensed Cash Flow (In millions) Q116 Q216 Q316 Q416 Q117 Cash and cash equivalents at beginning of period $ $ $ $ $ Other cash generated from/(used in) operations (2.0) (14.9) Cash paid for royalty advances (9.8) (1.1) (10.8) (4.1) (14.2) Net cash generated from/(used in) operating activities (11.8) 2.0 (9.8) (0.2) (29.0) Net cash used in investing activities (10.1) (2.5) (1.2) (37.8) (0.3) Net cash provided by (used in) financing activities 0.6 (0.6) 0.6 (7.3) 0.4 Effect of exchange rate changes on cash and cash equivalents 0.1 (0.2) (0.2) (0.1) (0.1) Net decrease in cash and cash equivalents $ (21.3) $ (1.2) $ (10.5) $ (45.4) $ (29.0) Cash and cash equivalents at end of period $ $ $ $ $ 73.2 Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 15

16 Q2 and FY 2017 Non-GAAP Guidance (In millions) Q217 Guidance FY2017 Guidance Low High Low High Bookings $71.0 $73.0 $280.0 $290.0 Cost of Goods Sold Adjusted Platform Commissions $17.9 $18.3 $70.7 $73.2 Adjusted Royalties $5.6 $5.8 $22.5 $23.3 Hosting and Other Costs $1.7 $1.7 $7.2 $7.5 Adjusted Operating Expenses $58.7 $59.1 $203.4 $207.8 Depreciation Add Back $0.9 $0.9 $3.8 $3.8 Basic and Diluted Shares Outstanding Cash and ST Investments Balance At least $60.0 Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 16

17 Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 17

18 Non-GAAP Reconciliations & Other Operating Metrics Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 18

19 GAAP to Adjusted Results Reconciliation Glu Mobile Inc. GAAP to Adjusted Results Reconciliation (in thousands) (unaudited) For the Three Months Ended March 31, June 30, September 30, December 31, March 31, GAAP gross profit/(loss) $ 31,841 $ 27,388 $ (4,693) $ 25,907 $ 31,874 Impairment and amortization of intangible assets in cost of revenue 2,324 2,336 7,320 2,811 3,262 Non-cash warrant benefit/(expense) 9 (32) (6) (26) 62 Change in deferred revenue (530) 2,575 (102) 11,464 12,248 Change in deferred platform commissions (278) (588) 96 (3,126) (3,479) Change in deferred royalties (398) 240 (294) (200) 145 GAAP platform commissions $ 13,374 $ 11,974 $ 12,681 $ 11,381 $ 14,307 Change in deferred platform commissions (96) 3,126 3,479 Adjusted platform commissions $ 13,652 $ 12,562 $ 12,585 $ 14,507 $ 17,786 GAAP royalties (including impairment of royalties and minimum guarantees) $ 5,184 $ 5,163 $ 34,796 $ 4,844 $ 5,489 Change in deferred royalties 398 (240) (145) Adjusted royalties $ 5,582 $ 4,923 $ 35,090 $ 5,044 $ 5,344 GAAP operating expense $ 41,026 $ 40,868 $ 37,252 $ 43,287 $ 54,528 Stock-based compensation (3,545) (2,961) (3,090) (3,667) (3,541) Transitional costs (802) (1,582) Restructuring charge (106) (2,116) (57) - (3,712) Adjusted operating expense $ 37,375 $ 35,791 $ 34,105 $ 38,818 $ 45,693 GAAP research and development expense $ 20,312 $ 20,721 $ 20,080 $ 20,766 $ 25,032 Transitional costs (83) (1,115) Stock-based compensation (1,194) (837) (1,135) (1,401) (1,441) Adjusted research and development expense $ 19,118 $ 19,884 $ 18,945 $ 19,282 $ 22,476 GAAP sales and marketing expense $ 12,624 $ 10,935 $ 10,104 $ 14,387 $ 17,287 Transitional costs (39) (53) Stock-based compensation (292) (191) (263) (344) (362) Adjusted sales and marketing expense $ 12,332 $ 10,744 $ 9,841 $ 14,004 $ 16,872 GAAP general & administrative expense $ 7,984 $ 7,096 $ 7,011 $ 8,134 $ 8,497 Transitional costs (680) (414) Stock-based compensation (2,059) (1,933) (1,692) (1,922) (1,738) Adjusted general and administrative expense $ 5,925 $ 5,163 $ 5,319 $ 5,532 $ 6,345 Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 19

20 GAAP to Adjusted Results Reconciliation Glu Mobile Inc. (in thousands) (unaudited) For the Three Months Ended December 31, March 31, June 30, September 30, December 31, March 31, GAAP net loss $ (2,958) $ (8,550) $ (17,949) $ (43,727) $ (17,214) $ (22,764) Non-cash warrant expense/(benefit) (116) 9 (32) (6) (26) 62 Impairment and amortization of intangible assets in cost of revenue 2,336 2,324 2,336 7,320 2,811 3,262 Depreciation Stock-based compensation 3,469 3,545 2,961 3,090 3,667 3,541 Transitional costs ,582 Restructuring charge 1, , ,712 Foreign currency exchange (gain)/loss 149 (148) (182) 1, Change in fair value of strategic investments - (300) 4, (255) - Interest and other expense (15) (21) (25) (12) 74 (7) Income tax provision/(benefit) (234) (166) (280) (12) Change in deferred revenue (3,135) (530) 2,575 (102) 11,464 12,248 Change in deferred platform commissions and royalty expense 1,497 (676) (348) (198) (3,326) (3,334) Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 20

21 Key Operating Metrics Actual Actual Actual Actual Actual Q116 Q216 Q316 Q416 Q117 Total Bookings (in millions) $54.0 $50.9 $51.3 $57.8 $69.0 Total Bookings Growth Q/Q (7%) (6%) 1% 13% 19% Total Bookings Growth Y/Y (14%) (11%) (20%) (0%) 28% Original IP % of Total Bookings 43% 37% 33% 50% 65% Adjusted Operating Expenses (in millions) $37.4 $35.8 $34.1 $38.8 $45.7 Marketing Expense (in millions) Marketing as % of Total Bookings 19% 17% 15% 20% 20% Headcount** (at quarter-end) Daily Active Users (DAU)* (in millions) Monthly Active Users (MAU)* (in millions) Installs (in millions) Cumulative Installs (in millions) 1, , , , ,608.2 In-App Purchase Billable Transactions (in millions)*** Average Bookings per Billable Transaction*** $9.15 $9.61 $9.08 $8.30 $7.81 *DAU & MAU reflects the DAU & MAU figures for the last month of the quarter **FTE only, excludes contractors, temporary employees and consultants ***Q416 in-app purchase billable transactions and average booking per billable transaction include the impact of Crowdstar activity after its acquisition on November 2, 2016 Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 21

22 Appendix Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 22

23 DAU and MAU Trends (in Millions) 6.0 DAU (in Millions) MAU Q116 Q216 Q316 Q416 Q Q116 Q216 Q316 Q416 Q117 Aggregate DAU and MAU for each period presented represents the aggregate metric for the last month of the period. An individual who plays two different games in the same month is counted as two active users for that month when we aggregate DAU and MAU across games. In addition, an individual who plays the same game on two different devices during the same month (e.g., an iphone and an ipad) is also counted as two active users for each such month when we average or aggregate DAU and MAU over time. Our methodology for calculating DAU and MAU may differ from the methodology used by other companies to calculate similar metrics. Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 23

24 ABPDAU and ABPMAU Trends $0.20 $0.18 $0.16 $0.14 $0.12 $0.12 $0.14 ABPDAU $0.16 $0.14 $0.18 $0.80 $0.70 $0.60 $0.50 $0.42 $0.47 ABPMAU $0.58 $0.54 $0.70 $0.10 $0.40 $0.08 $0.30 $0.06 $0.04 $0.20 $0.02 $0.10 $0.00 Q116 Q216 Q316 Q416 Q117 $0.00 Q116 Q216 Q316 Q416 Q117 Average Bookings per DAU ( ABPDAU ) is computed as our total Bookings in a given period, divided by the number of days in that period, divided by, the DAU during the period. Average Bookings per MAU ( ABPMAU ) is computed as our total Bookings in a given period, divided by the number of months in that period, divided by, the MAU during the period. Aggregate DAU and MAU for each period presented represents the aggregate metric for the last month of the period. Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 24

25 Bookings by Geography (in Millions) $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 $69.0 Q $ $ $50.9 $ % % % Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q116 Q216 Q316 Q416 Q117 NA APAC ROW NA APAC ROW Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 25

26 Bookings Mix (in Millions) $80.0 $70.0 $60.0 $50.0 $40.0 $54.0 1% 35% Bookings by Platform $50.9 $51.3 2% 2% 34% 37% $57.8 1% 36% $69.0 1% 39% (in Millions) $80.0 $70.0 $60.0 $50.0 $40.0 $ % Bookings by Category $50.9 $ % 18% $ % $ % $30.0 $20.0 $ % 64% 61% 63% 60% $30.0 $20.0 $ % 82% 82% 84% 86% $0.0 Q116 Q216 Q316 Q416 Q117 ios Android All Other $0.0 Q116 Q216 Q316 Q416 Q117 In-App Purchases Ads Glu Mobile Inc. Q Earnings Call Glu Mobile Inc. Proprietary Page 26