Glu Mobile Inc. (GLUU)

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Glu Mobile, Inc. (GLUU)

Q4 2018 Earnings Conference Call

February 04, 2019 5:00 PM ET

Company Participants

Harman Singh - Vice President of Finance & Investor Relations

Nick Earl - President & Chief Executive Officer

Eric Ludwig - Chief Operating Officer & Chief Financial Officer

Conference Call Participants

Jeff Cohen - Stephens Incorporated

Doug Creutz - Cowen & Company

Drew Crum - Stifel

Mike Hickey - The Benchmark Company

Darren Aftahi - Roth Capital Partners

Mike Olson - Piper Jaffray



Good day ladies and gentlemen and welcome to the Q4 2018 Glu Mobile Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today's conference is being recorded.

I would now like to turn the call over to Harman Singh, VP of Finance and Investor Relations. Sir, please begin.

Harman Singh

Thank you, operator. Good afternoon everyone and thank you for joining us on Glu Mobile's fourth quarter 2018 earnings conference call. On the call today are Nick Earl, President and Chief Executive Officer; and Eric Ludwig, COO and Chief Financial Officer.

During this call, we will be making forward-looking statements regarding future events and the future financial performance of the company. Any forward-looking statements that we make today are based on assumptions that the company believes to be reasonable as of this date. We undertake no obligation to update these statements as a result of future events.

We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statements, in the press release, and during this conference call. Risk factors are described more fully in our documents filed with the SEC, specifically, the most recent reports on Forms 10-K and 10-Q.

During this call, we will present both GAAP and non-GAAP financial measures. The non-GAAP financial measures are not intended to be considered in isolation from, a substitute for, or superior to our GAAP results and we encourage investors to consider all measures before making an investment decision.

For complete information regarding our non-GAAP financial information, the most directly comparable GAAP measures, and quantitative reconciliation of those figures, please refer to the supplemental presentation accompanying today's earnings call that can be accessed via our Investor website, www.glu.com/investors.

As a reminder, consistent with our financial presentation and for all of the information aside from bookings or otherwise stated below, we will discuss results on a GAAP basis and refer you to changes in deferred revenue, the deferred cost of revenue, and non-GAAP operating expenses totals in our financial tables. This data will provide a GAAP to non-GAAP reconciliation of the quarter's financial results based on the same methodology we've used in prior quarters.

We're also providing a supplementary Excel file on our IR website to more easily aid in this reconciliation. Both the PowerPoint and Excel file are now accessible on the website. We encourage you to follow along with the slides during this earnings conference call.

And with that, I'd like to turn the call over to Nick.

Nick Earl

Thanks Harman. Hello and thank you for joining us for Glu's fourth quarter and full year 2018 earnings conference call. I'll review highlights from our strong fourth quarter and year and then provide an update on our current titles, new game development plans, and long-term outlook. Following that, Eric will discuss our financial results in more detail and provide first quarter guidance and an update to the 2019 outlook we provided last quarter.

I'm pleased to say that 2018 was a great year for Glu and its shareholders. We achieved record bookings with the year-over-year growth of 20%, as well as delivered increasing adjusted EBITDA profitability on a year-over-year basis, and a significant free cash flow.

We also expanded our adjusted EBITDA margin to double-digits reflecting the leverage in our business. Our strong financial results were due to the successful execution of our live ops strategy through enhanced gaming experience, improved merchandising and strategic ad placement. We have a profitable and expanding core business and we are excited about the upside potential of the new launches planned for this year and next.

Glu finished the year on a high note with a strong fourth quarter performance as bookings increased 18% year-over-year to $98.2 million. Bookings were higher-than-expected and included another quarter of sequential growth from Design Home and Covet Fashion, along with a strong performance from Tap Sports Baseball and a seasonally soft quarter.

Adjusted EBITDA profitability also increased for the fourth consecutive quarter and we generated free cash flow of $17.3 million. These financial results reflect our longer-term strategy of creating Growth games that deliver repeatable bookings and strong profitability. The annual bookings for Design Home, Covet Fashion and Tap Sports Baseball collectively grew by 53% year-over-year and contributed 74% of total annual bookings.

In the fourth quarter, Design Home bookings grew 46% year-over-year to $43.9 million delivering another quarter of outperformance. For the full year, Design Home generated a $57.7 million in bookings compared with $97.7 million in 2017. We continue to add updates and events that drove a meaningful increase in average bookings per DAU. We also have a several additional updates that are planned which we believe will drive further growth.

We're pleased with the early results from that meta game update and closed beta testing and expect meta features to be integrated into the game and live by the end of Q2. We have initiated our cauterization efforts and are partnering with Caconey [ph], a Japanese game developer and publisher to launch Ramaz [ph], an international version of Design Home for the Japanese and South Korean markets. Additionally, we will be launching an e-commerce feature through a vertical partner more to come on this, but we expect it to launch by the year-end.

Read the rest of this transcript on seekingalpha.com