Glu Reports First Quarter 2019 Financial Results

Glu Mobile Inc. (NASDAQ: GLUU), a leading global developer and publisher
of free-to-play mobile games, today announced financial results for its
first quarter ended March 31, 2019. The company also provided an outlook
for its financial performance in the second quarter and increased its
financial guidance for the full year 2019.

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Nick Earl, Chief Executive Officer, stated, “Glu had a strong start to
the year with solid bookings growth and EBITDA profitability led by our
three Growth Games. We are also excited to bring three creative and
entertaining games to the market in the near term. WWE Universe,
Diner DASH Adventures and Disney Sorcerer’s Arena are on
track to launch in the May to August time frame. Looking ahead, we
continue to bolster our pipeline with three original IP launches slated
for 2020. The increase in our bookings guidance for 2019 reflects our
confidence in our business.”

Eric R. Ludwig, Chief Operating Officer and Chief Financial Officer,
said, “This is an exciting time for Glu and the mobile gaming industry
at large. Over the next four months we are planning to launch the first
three titles under our new development process. Our financial
performance from our live Growth Games continues to be solid and our
bookings will continue to benefit as we stack our new games on top of
our Core Business throughout the year. We are pleased about our
performance in Q1, what’s to come in 2019 and believe that we remain on
track to reach our financial goals.”

Financial Outlook as of May 6, 2019:

Glu is providing its financial outlook for the second quarter of 2019
and updating guidance for the full year 2019 as follows:

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 and corresponding cost of revenue. The amount of
Glu’s deferred revenue and cost of revenue for any given period is
difficult to predict due to differing estimated useful lives of paying
users across games, variability of monthly revenue, platform commissions
and royalties by game and unpredictability of revenue from new game
releases. Future changes in deferred revenue and deferred cost of
revenue are uncertain and could be material to Glu’s results computed in
accordance with GAAP. Accordingly, Glu is unable to provide a
reconciliation of the non-GAAP financial measure guidance to the
corresponding GAAP measure without unreasonable effort.

Quarterly Conference Call Information:

Glu will discuss its quarterly results via teleconference today at 2:00
p.m. Pacific Time (5:00 p.m. Eastern Time). Please dial (866) 582-8907
(domestic), or (760) 298-5046 (international), with conference ID #
2099286 to access the conference call at least five minutes prior to the
2:00 p.m. Pacific Time start time. A live webcast and replay of the call
will also be available on the investor relations portion of the
company’s website at www.glu.com/investors.
An audio replay will be available between 5:00 p.m. Pacific Time, May 6,
2019, and 8:59 p.m. Pacific Time, May 13, 2019, by calling (855)
859-2056, or (404) 537-3406, with conference ID # 2099286.

Disclosure Using Social Media Channels

Glu currently announces material information to its investors using SEC
filings, press releases, public conference calls and webcasts. Glu uses
these channels as well as social media channels to announce information
about the company, games, employees and other issues. Given SEC guidance
regarding the use of social media channels to announce material
information to investors, Glu is notifying investors, the media, its
players and others interested in the company that in the future, it
might choose to communicate material information via social media
channels or, it is possible that information it discloses through social
media channels may be deemed to be material. Therefore, Glu encourages
investors, the media, players and others interested in Glu to review the
information posted on the company forum (https://communities.glu.com/home)
and the company Facebook site (https://www.facebook.com/glumobile)
and the company twitter account (https://twitter.com/glumobile). Investors,
the media, players or other interested parties can subscribe to the
company blog and twitter feed at the addresses listed above. Any updates
to the list of social media channels Glu will use to announce material
information will be posted on the Investor Relations page of the
company’s website at www.glu.com/investors.

Use of Non-GAAP Financial Measures

To supplement Glu’s unaudited condensed consolidated financial data
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 bookings, platform commissions, excluding any
impact of deferred platform commissions, royalties, excluding any impact
of deferred royalties, 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;
• Non-cash warrant expense;
• Impairment and amortization of intangible assets;
• Stock-based compensation expense;
• Restructuring charges;
• Transitional costs; and
• Litigation 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.

Glu may consider whether significant 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 “Financial Outlook as of May 6, 2019” (“Second Quarter
2019 Guidance” and “Full Year 2019 Guidance”), and the statements that
we expect our three new titles launching this year to be globally
released in the May to August time frame; we continue to bolster our
pipeline with three original IP launches slated for 2020; our financial
performance from our live Growth Games continues to be solid and our
bookings will continue to benefit as we stack our new games on top of
our Core Business throughout the year; and that we believe that we
remain on track to reach our financial goals. 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 risk that 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, tablets and next-generation platforms, the risk that we
will be unable build successful Growth Games that provide predictable
bookings and year over year growth; the risk that we will not be able to
maintain our good relationships with Apple and Google; the risk that our
development expenses for games for smartphones, tablets and
next-generation platforms are greater than we anticipate; the risk that
our recently and newly launched games are less popular than anticipated
or decline in popularity and monetization rate more quickly than we
anticipate; 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 free-to-play gaming, is
smaller than anticipated; the risk that we may lose a key intellectual
property license; the risk that we are unable to recruit and retain
qualified personnel for developing and maintaining the games in our
product pipeline resulting in reduced monetization of a game, product
launch delays or games being eliminated from our pipeline altogether;
and other risks detailed under the caption “Risk Factors” in our Form
10-K filed with the Securities and Exchange Commission on February 28,
2019 and our other SEC filings. You can locate these reports through our
website at http://www.glu.com/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 Mobile (NASDAQ: GLUU) is a leading creator of mobile games. Founded
in 2001, Glu is headquartered in San Francisco with additional locations
in San Mateo, Toronto and Hyderabad. With a history spanning over a
decade, Glu’s culture is rooted in taking smart risks and fostering
creativity to deliver world-class interactive experiences for our
players. Glu’s diverse portfolio features top-grossing and award-winning
original and licensed IP titles including, Cooking DASH, Covet
Fashion, Deer Hunter, Design Home, MLB Tap Sports
Baseball and Kim Kardashian: Hollywood available worldwide on
various platforms including the App Store and Google Play. For more
information, visit www.glu.com
or follow Glu on Twitter,
Facebook
and Instagram.

COOKING DASH, COVET FASHION, DEER HUNTER, DESIGN HOME, DINER DASH, TAP
SPORTS, GLU, GLU MOBILE, and the ‘g’ character logo are trademarks of
Glu Mobile Inc.

In addition to the reasons stated above, which are generally applicable
to each of the items Glu excludes from its non-GAAP financial measures,
Glu believes it is appropriate to exclude certain items for the
following reasons:

Change in Deferred Platform Commissions and Deferred Royalties.
At the date we sell certain premium games and micro-transactions, Glu
has an obligation to provide additional services and incremental
unspecified digital content in the future without an additional fee. In
these cases, we recognize any associated cost of revenue, including
platform commissions and royalties, on a straight-line basis over the
estimated life of the paying user. Internally, Glu’s management excludes
the impact of the changes in deferred platform commissions and deferred
royalties related to its premium and free-to-play games in its non-GAAP
financial measures when evaluating the company’s operating performance,
when planning, forecasting and analyzing future periods, and when
assessing the performance of its management team. Glu believes that
excluding the impact of the changes in deferred platform commissions and
deferred royalties from its operating results is important to facilitate
comparisons to prior periods and to understand Glu’s operations.

Non-cash Warrant expense. Glu recorded non-cash charges related
to the warrants to purchase shares of common stock issued to certain
brand holders as part of third party licensing, development and
publishing arrangements. These charges were recorded in cost of revenue.
When evaluating the performance of its consolidated results, Glu does
not consider non-cash warrant charges as it places a greater emphasis on
overall stockholder dilution rather than the accounting charges
associated with any warrants. As the non-cash warrant expense impacts
comparability from period to period Glu believes that investors benefit
from a supplemental non-GAAP financial measure that excludes these
charges.

Impairment and amortization of Intangible Assets. When analyzing
the operating performance of an acquired entity or intangible asset,
Glu’s management focuses on the total return provided by the investment
(i.e., operating profit generated from the acquired entity as compared
to the purchase price paid) without taking into consideration any
allocations made for accounting purposes. Because the purchase price for
an acquisition necessarily reflects the accounting value assigned to
intangible assets (including acquired in-process technology and
goodwill), when analyzing the operating performance of an acquisition in
subsequent periods, Glu’s management excludes the GAAP impact of
acquired intangible assets to its financial results. Glu believes that
such an approach is useful in understanding the long-term return
provided by an acquisition and that investors benefit from a
supplemental non-GAAP financial measure that excludes the accounting
expense associated with acquired intangible assets.

Stock-Based Compensation Expense. Glu applies the fair value
provisions of Accounting Standard Codification Topic 718,
Compensation-Stock Compensation (“ASC 718”). ASC 718 requires the
recognition of compensation expense, using a fair-value based method,
for costs related to all share-based payments. Glu’s management team
excludes stock-based compensation expense from its short and long-term
operating plans. In contrast, Glu’s management team is held accountable
for cash-based compensation and such amounts are included in its
operating plans. Further, when considering the impact of equity award
grants, Glu places a greater emphasis on overall stockholder dilution
rather than the accounting charges associated with such grants. Glu
believes it is useful to provide a non-GAAP financial measure that
excludes stock-based compensation in order to better understand the
long-term performance of its business.

Restructuring Charges. Glu undertook restructuring activities in
the first, second and third quarters of 2017 and recorded cash
restructuring charges due to the termination of certain employees in
Asia and certain U.S. offices. Glu recorded the severance costs as an
operating expense when it communicated the benefit arrangement to the
employee and no significant future services, other than a minimum
retention period, were required of the employee to earn the termination
benefits. Additionally, Glu recorded restructuring charges upon exiting
portions of certain facilities in Asia and the U.S. in 2017 and the
first quarter of 2018. Glu believes that these restructuring charges do
not reflect its ongoing operations and that investors benefit from a
supplemental non-GAAP financial measure that excludes these charges.

Transitional Costs. GAAP requires expenses to be recognized for
various types of events associated with a business acquisition such as
legal, accounting and other deal related expenses. Glu incurred various
costs related to the divestiture of its Moscow studio and termination of
certain game related contracts. Glu recorded these transitional costs as
operating expenses when they were incurred. Glu believes that these
transitional costs affect comparability from period to period and that
investors benefit from a supplemental non-GAAP financial measure that
excludes these expenses.

Litigation costs. Glu incurred legal costs related to the
complaint filed by the former Chief Executive Officer of Crowdstar in
the Superior Court of the State of California for the County of Santa
Clara against Glu, Time Warner Inc., Intel Capital Corporation,
Middlefield Ventures Inc., Rachel Lam, Jose Blanc and additional
yet-to-be-named defendants. Glu believes that these legal costs have no
direct correlation to the operation of its ongoing core business and
affect comparability from period to period and, as a result, that
investors benefit from a supplemental non-GAAP financial measure that
excludes these expenses.

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