Glu Reports Third Quarter 2009 Financial Results

Glu Mobile Inc. (NASDAQ:GLUU), a leading global publisher of mobile games, today announced financial results for its third quarter ended September 30, 2009.

For the quarter ended September 30, 2009, Glu reported revenues of $19.6 million compared to $23.9 million in the third quarter of 2008. GAAP loss from operations and net loss were $(2.8) million and $(4.0) million, respectively, compared to GAAP loss from operations and net loss of $(54.2) million and $(56.9) million, respectively, in the third quarter of 2008.  GAAP loss per basic share was $(0.13) for the quarter ended September 30, 2009, compared with a GAAP loss per basic share of $(1.93) in the same period last year.  GAAP net loss for the third quarter of 2009 included $513,000 of royalty impairments and $919,000 in restructuring charges.

For the quarter ended September 30, 2009, non-GAAP income from operations, which excludes stock-based compensation expense, amortization of intangibles arising from business combinations, transitional expenses, goodwill impairments, restructuring charges and MIG earnout expenses, was $300,000, compared to a loss of $(1.0) million in the same period last year.  Non-GAAP net loss, which includes foreign currency exchange gains and losses primarily related to the revaluation of assets and liabilities, was $(889,000) for the quarter ended September 30, 2009, compared to a non-GAAP net loss of $(1.7) million in the same period last year.  Non-GAAP basic loss per share was $(0.03) for the quarter ended September 30, 2009, compared to a non-GAAP basic loss per share of $(0.06) in the same period last year. 

The company achieved positive cash flow from operations for the second consecutive quarter, generating $2.7 million in cash from operations during the third quarter of 2009.

“We were pleased with the company’s ability to exceed expectations for the third consecutive quarter and remain optimistic that our recently launched titles for the iPhone will improve our paid app ranking,” said Greg Ballard, chief executive officer of Glu.  “We are also excited about the upcoming launch of our social network game initiative and anticipate our investment to gain traction as we develop and launch new titles in this growing sector of the gaming market.”  

Ballard concluded, “With the increasing importance of quality content for the mobile and social networking platforms, Glu remains well positioned due to the quality of its game developers, worldwide reach and stabilized capital structure.”

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.”

The company ended the quarter with a cash and cash equivalents balance of $9.9 million, and had $4.1 million outstanding on its line of credit.  The company has successfully fulfilled its fiscal 2009 obligations with respect to the promissory notes issued to the former shareholders of MIG.

“Our ability to achieve positive cash flow from operations for the second consecutive quarter highlights the company’s commitment to generate positive cash flow as we continue to invest in new platforms,” said Eric R. Ludwig, Glu’s chief financial officer. “With the strong cash generation during the third quarter, Glu expects to attain its full year cash flow objective and remains in position to continue investing in new markets.”

Business Outlook

The following forward-looking statements reflect expectations as of November 3, 2009. Results may be materially different and are affected by many factors, such as: consumer demand for mobile entertainment and specifically Glu’s mobile products; consumer demand for gaming on social networks and specifically Glu’s social network gaming products; consumer demand for mobile handsets, including the next-generation platforms; carriers' and distributors' marketing to consumers, including premium deck placement; continued uncertainty in the global economic environment; carriers' and other distributors’ maintaining their networks and provisioning systems to enable consumer purchases; development delays on Glu's products; competition in the industry; 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, 2009:

• GAAP revenue is expected to be between $19.5 million and $20.0 million
• GAAP net loss is expected to be between $(1.8) million and $(2.2) million, or a net loss of between $(0.06) and $(0.07) per basic share
• Non-GAAP operating income is expected to be between $600,000 and $1.0 million.  Non-GAAP net income is expected to be between $300,000 and $600,000, or a net income of $0.01 to $0.02 per diluted share, which excludes $1.5 million for amortization of intangibles, approximately $650,000 of anticipated stock-based compensation expense and approximately $300,000 of restructuring charges
• Our income tax expense in the fourth quarter of 2009 is expected to be approximately $92,000
• Weighted average common shares outstanding for the fourth quarter of 2009 are expected to be approximately 30.4 million basic and 31.2 million diluted

Full Year Expectations - Year Ending December 31, 2009:

• GAAP revenue is expected to be approximately $79.8 to $80.3 million
• GAAP net loss is expected to be between $(13.1) million and $(13.4) million, or a loss of $(0.44) to $(0.45) per basic share
• Non-GAAP operating income is expected to be between $2.8 million and $3.2 million.  Non-GAAP net loss is expected to be between a net loss of $(600,000) and $(900,000) or a net loss of $(0.02) to $(0.03) per basic share, which excludes $7.3 million for amortization of intangibles, approximately $3.7 million of anticipated stock-based compensation and the non-equity component of the MIG earnout, approximately $1.7 million of restructuring charges and $300,000 related to un-hedged foreign exchange gains expected primarily on the revaluation of assets and liabilities  
• Our income tax expense for the full year is expected to be approximately $2.6 million
• Weighted average common shares outstanding for the year ending December 31, 2009 are expected to be approximately 29.9 million basic and 30.1 million diluted

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 (877) 224-2002, or if outside the U.S., (281) 312-0957, with conference ID # 37862580, 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 at http://www.glu.com/corp/Pages/investors.aspx under the Investor Calendar and Webcasts menu. An audio replay will be available between 2:30 p.m. Pacific Time, November 3, 2009, and 8:59 p.m. Pacific Time, November 10, 2009, by calling (800) 642-1687, or (706) 645-9291, with conference ID # 37862580.

Use of Non-GAAP Financial Measures

To supplement Glu's unaudited condensed consolidated financial statements 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 operating income/(loss), non-GAAP net income/(loss) and non-GAAP basic and diluted net income/(loss) per share. These non-GAAP financial measures exclude the following items from Glu's unaudited consolidated statements of operations:

• Acquired in-process research and development
• Amortization of intangible assets
• Stock-based compensation expense
• Gain/impairment of auction-rate securities
• Restructuring charges
• MIG earnout expenses
• Transitional expenses
• Impairment of goodwill
• Foreign currency exchange gains and losses primarily related to the revaluation of assets and liabilities

Glu may consider whether other 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" ("Fourth Quarter Expectations – Quarter Ending December 31, 2009" and "Full Year Expectations - Year Ending December 31, 2009"); our expectations that our recently launched titles for iPhone will improve our paid app ranking; our expectations that our investment in our social network game initiative will gain traction as we develop and launch new titles in this growing sector of the gaming market; our belief that we will remain well positioned in the mobile and social networking platforms due to the quality of our game developers, worldwide reach and stabilized capital structure; our plan to generate positive cash flow as we continue to invest in new platforms and our expectation that we can attain our full year cash flow objective and remain in position to continue investing in new markets. 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"; the risk that the mobile gaming and social network gaming markets are not growing at the rate that we anticipate or that we will be unable to capitalize on any such growth; the risk that our expense control initiatives will be insufficient to enable us to achieve positive cash flow from operations for the full fiscal year; the risk that we may have insufficient working capital to effectively execute our business strategy, including exploiting next-generation platforms and social networking platforms while continuing to address our traditional carrier-based business, and that, even if we do execute our business strategy, we may not derive the revenues that we expect; the risk that we may fall out of compliance with the financial and other covenants in our credit facility; the risk that we may lose a key intellectual property license or key carrier distribution agreement; the risk that growth of next-generation handsets and advanced networks does not grow as significantly as we anticipate; the risk that our development expenses for games for next-generation handsets and social networking platforms are greater than we anticipate; the risk that our recently and newly launched games are less popular than anticipated; the risk that changes in wireless carrier plans with their customers may adversely impact sales of our games; the risk that sales of our original intellectual property titles will not continue to favorably impact product mix; 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 and social network gaming markets are smaller than anticipated; the risk that Greg Ballard may elect to leave our company before we retain a suitable successor or that we are otherwise unable to effect a smooth transition of the CEO position; and other risks detailed under the caption "Risk Factors" in our Form 10-Q filed with the Securities and Exchange Commission on August 10, 2009 and our other SEC filings. You can locate these reports through our website at http://www.glu.com/corp/Pages.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 (NASDAQ:GLUU) is a leading global publisher of mobile games. Its portfolio of top-rated games includes original titles Glyder, Bonsai Blast, Super K.O. Boxing!, Stranded and Brain Genius, and titles based on major brands from partners including Activision, Atari, Harrah's, Hasbro, Konami, Microsoft, PlayFirst, PopCap Games, SEGA, Sony and Warner Bros. Founded in 2001, Glu is based in San Mateo, Calif. and has offices in Australia, Brazil, Canada, Chile, China, England, France, Germany, Italy, Mexico, Poland, Russia and Spain. Consumers can find high-quality, fresh entertainment created exclusively for their mobile phones wherever they see the 'g' character logo or at www.glu.com.

GLU MOBILE, GLU, BONSAI BLAST, SUPER K.O. BOXING!, STRANDED, BRAIN GENIUS and the 'g' character logo are trademarks of Glu Mobile Inc.