SAN FRANCISCO--(BUSINESS WIRE)--Glu Mobile Inc. (NASDAQ:GLUU), a leading global developer and publisher of free-to-play mobile games, today announced financial results for its third quarter ended September 30, 2017. In addition, the company provided its outlook for its financial performance in the fourth quarter and the full year 2017.
Nick Earl, Chief Executive Officer, stated, “As I reach my one-year anniversary as CEO of Glu, I am delighted to recognize our team’s exceptional execution of our growth strategy. Our strong operating performance in the quarter and year to date reflects our creative culture and better than expected results from our portfolio of growth and evergreen titles. Design Home continues to be a strong growth driver and demonstrates Glu’s ability to combine our scaled operations and user acquisition strategy with quality IP."
“While our new strategy is working well and generating improved financial results, there is still work to be done,” added Earl. “Our pipeline is active and we remain focused on executing on our live operations strategy of increasing social interaction and user engagement. We believe we are on track to reach our primary financial goal of achieving sustained profitability on an adjusted EBITDA basis beginning in the first quarter of 2018.”
Third Quarter 2017 Financial Highlights:
| Three Months Ended | |||||
| September 30, | |||||
| $ in thousands, except per share data | 2017 | 2016 | |||
| Revenue | $81,148 | $51,381 | |||
| Bookings | $85,681 | $51,279 | |||
| Gross margin | 61% | (9%) | |||
| Net loss | ($11,671) | ($43,727) | |||
| Net loss per share – basic and diluted | ($0.09) | ($0.33) | |||
| Weighted-average common shares outstanding – basic and diluted | 135,726 | 133,110 | |||
| Cash and cash equivalents | $62,939 | $147,515 | |||
|
Cash used in operations |
($925) | ($9,792) | |||
| Cash paid for royalty advances that are included in cash used in operations |
($3,922) |
($10,841) |
|||
Eric R. Ludwig, Chief Operating Officer and Chief Financial Officer, said “We are pleased to report better than expected financial results, an accomplishment we have achieved in every quarter of 2017. The strong top line performance was driven by Design Home and outperformance by several of our evergreen titles. We continue to take a diligent and analytical approach to our user acquisition investments as we look to capitalize on and maximize the long-term value of our top games. Our full year guidance reflects the strong third quarter and our optimism and confidence in our current portfolio."
Recent Developments and Strategic Initiatives:
- Design Home Audience Reaches One Million Daily Active Users: During the quarter, Design Home reached one million daily active users. Originally launched worldwide in November 2016, Design Home has achieved remarkable success, having generated more than 8.7 million downloads and $30.2 million in bookings in the third quarter of 2017. Additionally, Design Home reached rankings of #34 Top Free and #15 Top Grossing game in the U.S. App Store for iPhone. Additionally, Design Home reached #48 Top Free and #29 Top Grossing game in the U.S. Google Play Store.
- Glu Releases First Look at Interactive Social App, The Swift Life™: Glu released into beta territories The Swift Life, a new digital entertainment project in partnership with multiple Grammy Award-winning artist, Taylor Swift. Glu expects to launch The Swift Life worldwide later this year. The Swift Life provides a creative, inclusive and community-driven place for users to better connect with each other and Taylor.
Financial Outlook as of November 1, 2017:
Glu is providing its financial outlook for the fourth quarter of 2017 and updating guidance for the full year 2017 as follows:
Fourth Quarter 2017 Guidance:
| In millions | Low | High | |||
| Bookings | $75.0 | $77.0 | |||
| Platform commissions, excluding any impact of deferred platform commissions | $19.4 | $19.9 | |||
| Royalties, excluding any impact of deferred royalties | $4.7 | $4.9 | |||
| Hosting and other costs | $2.1 | $2.2 | |||
| Adjusted operating expenses | $54.2 | $54.4 | |||
| Depreciation | $0.9 | $0.9 | |||
| Income tax | $0.3 | $0.3 | |||
| Stock-based compensation | $5.1 | $5.1 | |||
| Transitional costs | $0.0 | $0.0 | |||
| Restructuring costs | $0.0 | $0.0 | |||
| Amortization of intangible assets | $1.5 | $1.5 | |||
| Weighted-average common shares outstanding – basic and diluted | 136,596 | 136,596 | |||
Full Year 2017 Guidance:
| In millions | Low | High | |||
| Bookings | $312.2 | $314.2 | |||
| Platform commissions, excluding any impact of deferred platform commissions | $80.6 | $81.0 | |||
| Royalties, excluding any impact of deferred platform royalties | $22.8 | $23.0 | |||
| Hosting and other costs | $7.4 | $7.5 | |||
| Adjusted operating expenses | $214.5 | $214.8 | |||
| Depreciation | $3.4 | $3.4 | |||
| Income tax | ($1.0) | ($1.0) | |||
| Stock-based compensation | $15.7 | $15.7 | |||
| Transitional costs | $4.0 | $4.0 | |||
| Restructuring costs | $6.0 | $6.0 | |||
| Amortization of intangible assets | $10.3 | $10.3 | |||
| Weighted-average common shares outstanding – basic and diluted | 135,431 | 135,431 | |||
| Cash and short-term investments | At least $60.0 | ||||
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 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). Please dial (866) 582-8907 (domestic), or (760) 298-5046 (international), with conference ID # 1477338 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 on the investor relations portion of the company's website at www.glu.com/investors. An audio replay will be available between 4:30 p.m. Pacific Time, November 1, 2017, and 8:59 p.m. Pacific Time, November 8, 2017, by calling (855) 859-2056, or (404) 537-3406, with conference ID # 1477338.
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 (http://ggnbb.glu.com/forum.php) 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;
- Impairment and amortization of intangible assets;
- Non-cash warrant 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. Adjusted EBITDA equals non-GAAP operating income/(loss) excluding depreciation.
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 November 1, 2017” (“Fourth Quarter 2017 Guidance” and “Full Year 2017 Guidance”) and statements including words such as “anticipate,” “believe,” “estimate,” “expect” “may,” “will,” “plan,” “intend,” “could,” “continue,” “remain” and similar expressions or variations, as well as statements in the future tense, are forward-looking statements. 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 Glu will be unable to attract and retain creative leaders with a successful track record; 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 titles that provide predictable bookings and year over year growth; the risk that we do not realize a sufficient return on our strategic investment in user acquisition for Design Home; 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-Q filed with the Securities and Exchange Commission on August 7, 2017 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 global developer and publisher of free-to-play mobile games. Glu is focused on creating compelling original IP games such as CONTRACT KILLER, COOKING DASH, COVET FASHION, DEER HUNTER, DESIGN HOME, QUIZUP, and RACING RIVALS, and branded IP games including RESTAURANT DASH WITH GORDON RAMSAY, KENDALL & KYLIE, MLB TAP SPORTS BASEBALL 2017 and KIM KARDASHIAN: HOLLYWOOD on the App Store, Google Play and Amazon Appstore. Founded in 2001, Glu is headquartered in San Francisco with U.S. offices in Burlingame and San Mateo, and international locations in Canada, India, Japan, and Russia. Consumers can find high-quality entertainment wherever they see the ‘g’ character logo or at www.glu.com.
For live updates, please follow Glu via Twitter at www.twitter.com/glumobile and on Instagram at www.instagram.com/glumobile, or become a Glu fan at www.facebook.com/glumobile.
CONTRACT KILLER, COOKING DASH, COVET FASHION, DEER HUNTER, QUIZUP, RACING RIVALS, TAP SPORTS, GLU, GLU MOBILE, and the 'g' character logo are trademarks of Glu Mobile Inc.
| Glu Mobile Inc. | |||||||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||||
| Revenue | $ | 81,148 | $ | 51,381 | $ | 206,615 | $ | 154,272 | |||||||||
| Cost of revenue: | |||||||||||||||||
| Platform commissions, royalties and other | 28,898 | 18,918 | 74,519 | 57,771 | |||||||||||||
| Impairment of prepaid royalties and minimum guarantees | 464 | 29,836 | 1,256 | 29,984 | |||||||||||||
| Impairment and amortization of intangible assets | 2,363 | 7,320 | 8,796 | 11,981 | |||||||||||||
| Total cost of revenue | 31,725 | 56,074 | 84,571 | 99,736 | |||||||||||||
| Gross profit/(loss) | 49,423 | (4,693 | ) | 122,044 | 54,536 | ||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | 22,004 | 20,080 | 71,025 | 61,113 | |||||||||||||
| Sales and marketing | 29,776 | 10,104 | 78,015 | 33,663 | |||||||||||||
| General and administrative | 8,698 | 7,011 | 25,873 | 22,091 | |||||||||||||
| Restructuring charge | 1,402 | 57 | 6,040 | 2,279 | |||||||||||||
| Total operating expenses | 61,880 | 37,252 | 180,953 | 119,146 | |||||||||||||
| Loss from operations | (12,457 | ) | (41,945 | ) | (58,909 | ) | (64,610 | ) | |||||||||
| Interest and other expense, net: | |||||||||||||||||
| Interest income | 5 | 12 | 25 | 58 | |||||||||||||
| Other income/(expense) | (276 | ) | (1,665 | ) | (365 | ) | (5,695 | ) | |||||||||
| Interest and other income/(expense), net | (271 | ) | (1,653 | ) | (340 | ) | (5,637 | ) | |||||||||
| Loss before income taxes | (12,728 | ) | (43,598 | ) | (59,249 |
) |
(70,247 | ) | |||||||||
| Income tax benefit/(provision) | 1,057 | (129 | ) | 1,246 | 21 | ||||||||||||
| Net loss | $ | (11,671 | ) | $ | (43,727 | ) | $ | (58,003 | ) | $ | (70,226 | ) | |||||
| Net loss per common share - basic and diluted | $ | (0.09 | ) | $ | (0.33 | ) | $ | (0.43 | ) | $ | (0.54 | ) | |||||
| Weighted average common shares outstanding - basic and diluted | 135,726 | 133,110 | 135,047 | 131,160 | |||||||||||||
| Stock-based compensation expense included in: | |||||||||||||||||
| Research and development | $ | 1,521 | $ | 1,135 | $ | 4,520 | $ | 3,165 | |||||||||
| Sales and marketing | 283 | 263 | 823 | 747 | |||||||||||||
| General and administrative | 1,771 | 1,692 | 5,296 | 5,684 | |||||||||||||
| Total stock-based compensation expense | $ | 3,575 | $ | 3,090 | $ | 10,639 | $ | 9,596 | |||||||||
| Glu Mobile Inc. | |||||||||
| Consolidated Balance Sheets | |||||||||
| (in thousands) | |||||||||
| (unaudited) | |||||||||
| September 30, | December 31, | ||||||||
| 2017 | 2016 | ||||||||
| ASSETS | |||||||||
| Cash and cash equivalents | $ | 62,939 | $ | 102,102 | |||||
| Accounts receivable, net | 34,192 | 21,477 | |||||||
| Prepaid royalties | 9,049 | 12,465 | |||||||
| Restricted Cash | 602 | - | |||||||
| Prepaid expenses and other current assets | 30,982 | 18,986 | |||||||
| Total current assets | 137,764 | 155,030 | |||||||
| Property and equipment, net | 6,425 | 5,640 | |||||||
| Restricted cash | - | 1,312 | |||||||
| Long-term prepaid royalties | 34,113 | 31,288 | |||||||
| Other long-term assets | 3,032 | 3,506 | |||||||
| Intangible assets, net | 19,799 | 25,896 | |||||||
| Goodwill | 117,447 | 116,832 | |||||||
| Total assets | $ | 318,580 | $ | 339,504 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Accounts payable | $ | 21,305 | $ | 16,298 | |||||
| Accrued liabilities | 1,557 | 1,788 | |||||||
| Accrued compensation | 15,537 | 12,495 | |||||||
| Accrued royalties | 12,710 | 8,623 | |||||||
| Accrued restructuring | 1,138 | 271 | |||||||
| Deferred revenue | 74,394 | 44,865 | |||||||
| Total current liabilities | 126,641 | 84,340 | |||||||
| Long-term accrued royalties | 6,425 | 20,836 | |||||||
| Other long-term liabilities | 669 | 1,514 | |||||||
| Total liabilities | 133,735 | 106,690 | |||||||
| Common stock | 13 | 13 | |||||||
| Additional paid-in capital | 581,385 | 571,243 | |||||||
| Accumulated other comprehensive income | (10 | ) | 246 | ||||||
| Accumulated deficit | (396,543 | ) | (338,688 | ) | |||||
| Stockholders' equity | 184,845 | 232,814 | |||||||
| Total liabilities and stockholders' equity | $ | 318,580 | $ | 339,504 | |||||
| Glu Mobile Inc. | ||||||||||||||||||||||||
| Supplemental Financial Information | ||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
| June 30, | September 30, | December 31, | March 31, | June 30, | September 30, | |||||||||||||||||||
| 2016 | 2016 | 2016 | 2017 | 2017 | 2017 | |||||||||||||||||||
| GAAP gross profit/(loss) | $ | 27,388 | $ | (4,693 | ) | $ | 25,907 | $ | 31,874 | $ | 40,747 | $ | 49,423 | |||||||||||
| Impairment and amortization of intangible assets | 2,336 | 7,320 | 2,811 | 3,262 | 3,171 | 2,363 | ||||||||||||||||||
| Non-cash warrant benefit/(expense) | (32 | ) | (6 | ) | (26 | ) | 62 | - | - | |||||||||||||||
| Change in deferred revenue | 2,575 | (102 | ) | 11,464 | 12,248 | 13,863 | 4,533 | |||||||||||||||||
| Change in deferred platform commissions | (588 | ) | 96 | (3,126 | ) | (3,479 | ) | (3,583 | ) | (1,107 | ) | |||||||||||||
| Change in deferred royalties | 240 | (294 | ) | (200 | ) | 145 | (1,032 | ) | 153 | |||||||||||||||
| GAAP operating expense | $ | 40,868 | $ | 37,252 | $ | 43,287 | $ | 54,528 | $ | 64,545 | $ | 61,880 | ||||||||||||
| Stock-based compensation | (2,961 | ) | (3,090 | ) | (3,667 | ) | (3,541 | ) | (3,523 | ) | (3,575 | ) | ||||||||||||
| Transitional costs | - | - | (802 | ) | (1,582 | ) | (1,924 | ) | (506 | ) | ||||||||||||||
| Restructuring charge | (2,116 | ) | (57 | ) | - | (3,712 | ) | (926 | ) | (1,402 | ) | |||||||||||||
| GAAP research and development expense | $ | 20,721 | $ | 20,080 | $ | 20,766 | $ | 25,032 | $ | 23,989 | $ | 22,004 | ||||||||||||
| Transitional costs | - | - | (83 | ) | (1,115 | ) | (1,821 | ) | (90 | ) | ||||||||||||||
| Stock-based compensation | (837 | ) | (1,135 | ) | (1,401 | ) | (1,441 | ) | (1,558 | ) | (1,521 | ) | ||||||||||||
| GAAP sales and marketing expense | $ | 10,935 | $ | 10,104 | $ | 14,387 | $ | 17,287 | $ | 30,952 | $ | 29,776 | ||||||||||||
| Transitional costs | - | - | (39 | ) | (53 | ) | 53 | - | ||||||||||||||||
| Stock-based compensation | (191 | ) | (263 | ) | (344 | ) | (362 | ) | (178 | ) | (283 | ) | ||||||||||||
| GAAP general & administrative expense | $ | 7,096 | $ | 7,011 | $ | 8,134 | $ | 8,497 | $ | 8,678 | $ | 8,698 | ||||||||||||
| Transitional costs | - | - | (680 | ) | (414 | ) | (156 | ) | (417 | ) | ||||||||||||||
| Stock-based compensation | (1,933 | ) | (1,692 | ) | (1,922 | ) | (1,738 | ) | (1,787 | ) | (1,771 | ) | ||||||||||||
| Other supplemental financial information | ||||||||||||||||||||||||
| Depreciation | $ | 720 | $ | 768 | $ | 804 | $ | 790 | $ | 830 | $ | 827 | ||||||||||||
| Foreign currency exchange (gain)/loss | (182 | ) | 1,035 | 294 | 129 | (48 | ) | (78 | ) | |||||||||||||||
| Loss/(income) from change in fair value of strategic investments | 4,660 | 630 | (255 | ) | - | - | - | |||||||||||||||||
| Income tax provision/(benefit) | 16 | 129 | (280 | ) | (12 | ) | (177 | ) | (1,057 | ) | ||||||||||||||
| Interest (income)/expense | (25 | ) | (12 | ) | 74 | (7 | ) | (13 | ) | (5 | ) | |||||||||||||
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.
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.
Non-cash Warrant Expense. Glu recorded a non-cash expense/ (benefit) related to the vesting of warrants to purchase shares of common stock issued to brand holders as part of third party licensing, development and publishing arrangements. These charges/(benefits) were computed using the Black-Scholes valuation model and were recorded in cost of revenue. When evaluating the performance of its consolidated results, Glu does not consider non-cash warrant expense/(benefit) as it places a greater emphasis on overall stockholder dilution rather than the accounting charges associated with the vesting of any warrants. As the non-cash warrant expense/(benefit) impacts comparability from period to period Glu believes that investors benefit from a supplemental non-GAAP financial measure that excludes these charges.
Stock-Based Compensation Expense. Glu applies the fair value provisions of ASC 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 the first, second and third quarters of 2016 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 the first, second and third quarters of 2017 and the second and third quarters of 2016. 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 has incurred various costs related to the acquisition and integration of Crowdstar and Dairy Free into Glu’s operations. Glu recorded these acquisition and transitional costs as operating expenses when they were incurred. Glu believes that these acquisition and transitional costs affect comparability from period to period and that investors benefit from a supplemental non-GAAP financial measure that excludes these expenses.