Glu Mobile Q413 Earnings Call February 5, Glu Mobile Inc. Proprietary

Transcription

1 Glu Mobile Q413 Earnings Call February 5, 2014

2 Safe-Harbor Statement This presentation contains "forward-looking" statements including those regarding: our quarterly and full year guidance for 2014; that we have an expanding global presence, particularly in APAC; estimated growth and expected trends in smartphone users and global mobile traffic; momentum in global tablet growth; our belief that the shooter genre is well positioned for long-term growth in mobile FTP from current levels; the expected launch date of Frontline Commando 2; that APAC is the fastest growing mobile market globally and represents an increasing percentage of Glu s revenues; our belief that there is a significant opportunity for increased mobile ad spending, particularly in the U.S.; our expectation of the quad screen future; expected trends in wearable computing; that we are poised for growth; and that Glu has a strong secular growth opportunity. 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 and tablets, the risk that we do not maintain our good relationships with Apple and Google; the risk that our development expenses for games for smartphones are greater than we anticipate; 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-Q filed with the Securities and Exchange Commission on November 8, 2013 and our other SEC filings. You can locate these reports through our website at These "forward-looking" statements are based on estimates and information available to us on February 5, 2014 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. 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 non-gaap revenues, non-gaap smartphone revenues, non-gaap freemium revenues, non-gaap cost of revenues, non-gaap gross profit, non-gaap gross margin, non-gaap operating expenses, non-gaap operating margin, non-gaap net income/(loss), non-gaap net income/(loss) per share and Adjusted EBITDA. These non-gaap financial measures exclude the following items from Glu's unaudited consolidated statements of operations: Change in deferred revenues and deferred cost of revenues; Amortization of intangible assets; Non-cash warrant expense; Stock-based compensation expense; Restructuring charges; Change in fair value of Blammo earnout; Transitional costs; Impairment of goodwill; Release of tax liabilities; and Foreign currency exchange gains and losses primarily related to the revaluation of assets and liabilities. In addition, Glu has included in this presentation Adjusted EBITDA figures which are used to evaluate Glu s operating performance and is defined as non-gaap operating income/(loss) excluding depreciation. 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 attached to Glu s earnings press release for the quarter ended December 31, 2013, which is available on our website at Page 3

4 Page 4

5 Upwards Step Change Q financial performance strongest in Glu s history: Largest topline - $42.8m in non-gaap revenues Most profitable - $6.0m in Adjusted EBITDA 2014 guidance strongest in Glu s history: Expected $142m-$150m in non-gaap revenue or 25-32% growth Y/Y Expected full year Adjusted EBITDA profits of $4-$6m Page 5

6 Step Change in Performance Non-GAAP Revenue ($M) Adjusted EBITDA ($M) Much has come together for Glu after 15 months of hard work: Monetize more deeply Optimize more predictably Market more efficiently Better processes Better talent (0.9) (1.6) 24.1 (0.7) (2.1) (1.8) 24.7 (1.4) 23.2 (2.9) 22.6 (4.1) (2.0) (4.0) Rowing in unison - Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 (6.0) Smartphone Featurephone Adjusted EBITDA ($M) (Secondary Axis) Non-GAAP revenues have been restated or revised, as appropriate, to reflect gross accounting for digital storefronts for 2010, 2011, 2012 and Q113 and prospectively, as outlined in the Company s 8/6/2013 Form 8-K and press release Page 6

7 A Global Leader Only pure-play mobile gaming company listed in North America (NASDAQ: GLUU) Deeply aligned with mobile ecosystem (ios & Android) Expanding global presence, particularly APAC Well capitalized 500+ employees Page 7

8 The Management Team CEO Niccolo De Masi CFO Eric Ludwig Pres. of Studios Matt Ricchetti Pres. of Pub. Chris Akhavan Page 8

9 Tightly Aligned w/ Ecosystem Distribution Channel Technology Integration New Devices at Launch Quality Pipeline 90%+ Featuring Track Record Page 9

10 Market Page 10

11 Global Users (MM) % of Internet Traffic Global Smartphone vs. Mobile Phone Users 2013E Global Mobile Traffic as % of Total Internet Traffic, 12/08 5/13 (with Trendline Projection to 5/15E) B+ Mobile Phone Users B Smartphone Users Smartphone Mobile Phone Source: Internet Trends D11 Conference, 5/29/2013, Mary Meeker, KPCB Morgan Stanley Research estimates. Source: StatCounter Global Stats, 5/13. Internet Trends D11 Conference, 5/29/2013, Mary Meeker, KPCB. Note that PC-based Internet data bolstered by streaming. Page 11

12 Global Units Shipments (000) Tablet Momentum First 12 Quarters Cumulative Unit Shipments, iphone vs. ipad Quarters After Launch Source: Internet Trends D11 Conference, 5/29/2013, Mary Meeker, KPCB; Katy Huberty, Ehud Gelblum, Morgan Stanley Research. Gartner. Apple, as of CQ1:13 (12 quarters post ipad launch). Launch Dates: iphone (6/29/07), ipad (4/3/10) Page 12

13 The Big Get Bigger $50m+ estimated lifetime revenue games commonplace: A number of $100m+ estimated lifetime revenue titles: Three $500m+ estimated lifetime revenue mega-hits: We believe that Glu is the clear category leader in action: Page 13

14 Category Leadership Puzzle RTS/RPG Casino CBG Res Mgt Sports Casual Racing Action Page 14

15 Action Leadership More than 40%* of console revenues from action/shooters: 4 th year in a row now we have shipped what we believe is the biggest & best free-to-play mobile action game of the year: We believe that the action genre is well positioned for long-term growth in mobile free-to-play from current levels *Data compiled by the Entertainment Software Association using NPD Group figures for 2012 Page 15

16 Momentum Page 16

17 Global OIP Franchises Franchise Releases Current or Next Installment CK3 Approx. Cum. Installs* 102M 62M 29M 111M *Glu internal estimates through December 31, 2013 Page 17

18 Page 18

19 Strong Q1 Line-Up Launched Jan 9 Coincides with theatrical release in February; FLC engine Launched Jan 16 SvZ2 engine Launched Jan 23 PVP; online-only Expected to launch in Mar 14 Franchise sequel; PVP and PVE Page 19

20 APAC Fastest growing mobile market globally Increasing percentage of Glu revenue Glu is arguably the strongest foreign player in China, and is expanding presence in key markets of Japan and Korea Phased global launch between Dec 17 and Jan 10 Top 10 grossing in Korea on ios Top 25 grossing in China on ios Page 20

21 Long Term Growth Opportunities Page 21

22 % of Total Media Consumption Time Or Advertising Spending Mobile Ad Spend Lags Mobile Usage % of Time Spent in Media vs. % of Advertising Spending, USA 2012 Time Spent Ad Spend 50% 40% 42% 43% Internet Ad = $37B* Mobile Ad = $4B* 30% 20% 23% 26% 22% ~ $20B+ Opportunity in USA 10% 0% 14% 12% 10% 3% 6% Print Radio TV Internet Mobile Note: *Internet advertising reached $37B in USA in 2012 per IAB, Mobile advertising reached $4B per emarketer. Print includes newspaper and magazine. $20B opportunity calculated assuming Internet and Mobile ad spend share equal their respective time spent share. Source: Internet Trends D11 Conference, 5/29/2013, Mary Meeker, KPCB; Time spend and ad spend share data based on emarketer (adjusted to exclude outdoors / classified media spend), 12/12 Page 22

23 Quad Screen Future Page 23

24 Wearables Mainframe Computing 1960s Mini Computing 1970s Technology Cycles Have Tended to Last Ten Years Personal Computing 1980s xxx Desktop Internet Computing 1990s Mobile Internet Computing Wearable / Everywhere Computing Source: Internet Trends D11 Conference, 5/29/2013, Mary Meeker, KPCB; Page 24

25 Financial Summary Page 25

26 Revenue ($M) Annual Non-GAAP Revenues Proven ability to successfully transition as ecosystem evolves Poised for growth (5.0) Smartphone Featurephone Non-GAAP revenues have been restated or revised, as appropriate, to reflect gross accounting for digital storefronts for 2010, 2011 and 2012 as outlined in the Company s Amended Annual Report on Form 10-K/A for the year ended December 31, 2012 filed with the SEC on August 9, Page 26

27 Non-GAAP Revenue ($M) Non-GAAP Revenues and EBITDA Adjusted EBITDA ($M) (0.9) (1.6) 24.1 (0.7) (2.1) (1.8) 24.7 (1.4) 23.2 (2.9) 22.6 (4.1) (2.0) (4.0) - Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Smartphone Featurephone Adjusted EBITDA ($M) (Secondary Axis) (6.0) Non-GAAP revenues have been restated or revised, as appropriate, to reflect gross accounting for digital storefronts for 2010, 2011, 2012 and Q113 and prospectively, as outlined in the Company s 8/6/2013 Form 8-K and press release Page 27

28 Non-GAAP Smartphone Revenues Mix ($M) 45 Non-GAAP Revenue by Platform 42.1 ($M) 45 Non-GAAP Revenue by Category % % 7% % % % % % % % 31% 62% All Other Android ios % 7% 10% 8% 14% 10% 14% 11% 8% 5% 5% 7% 7% 6% 8% 5% 77% Premium Offers & Incented Ads Non-Incented Ads % 77% 14% 34% 73% 50% 66% 67% 64% 60% 61% 64% 63% 64% % 2% 36% 12% 5% 30% 1% 50% 64% 67% 74% 70% 67% 76% 79% 83% 81% In-App Purchases Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Non-GAAP revenues have been restated or revised, as appropriate, to reflect gross accounting for digital storefronts for 2010, 2011, 2012 and Q113 and prospectively, as outlined in the Company s 8/6/2013 Form 8-K and press release Page 28

29 Non-GAAP Smartphone Revenues by Title $42.1M Non-GAAP Smartphone Revenues in Q413 Contract Killer 2 $1.8M Contract Killer Zombies 2 $0.2M Dragon Slayer $0.1M Q411, 1,536, 4% Q412, 2,210, 5% Other, 4,034, 10% Q113, 5,309, 13% Frontline Commando: D-Day Stardom: Hollywood Heroes of Destiny Samurai vs Zombies 2 Gun Bros 2 $2.9M $1.0M $0.6M $0.4M $0.3M Frontline Commando Contract Killer: Zombies Blood & Glory Stardom: The A-List $0.9M $0.3M $0.2M $0.2M Q313, 28,326, 68% Deer Hunter 2014 Zombies Ate My Friends Gang Lords $27.4M $0.6M $0.2M Page 29

30 $ Millions GAAP Revenues Trend by Region ROW/LATAM APAC/China EMEA North America - Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 GAAP revenues have been restated or revised, as appropriate, to reflect gross accounting for digital storefronts for 2010, 2011, 2012 and Q113 and prospectively, as outlined in the Company s 8/6/2013 Form 8-K and press release Page 30

31 GAAP Revenues Trend by Region (% contribution) 100% 90% 80% 13% 12% 15% 14% 13% 12% 15% 14% 18% 19% 21% 27% 28% 32% 30% 21% 70% 60% 27% 28% 24% 28% 31% 28% 26% 26% 21% 20% 20% 22% 22% 22% 22% 21% ROW/LATAM 50% APAC/China 40% EMEA North America 30% 20% 53% 51% 49% 46% 49% 56% 54% 53% 60% 59% 56% 49% 47% 43% 44% 56% 10% 0% Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 GAAP revenues have been restated or revised, as appropriate, to reflect gross accounting for digital storefronts for 2010, 2011, 2012 and Q113 and prospectively, as outlined in the Company s 8/6/2013 Form 8-K and press release Page 31

32 User Metrics New installs of 79.6M in Q413, up Q/Q due to Deer Hunter 2014 Q413 DAU and MAU at all-time highs due to Deer Hunter 2014 DAU Daily Active Users (Average DAU) (In 000s) MAU Monthly Active Users (MAU) (In 000s) DAU/MAU % 7,000 6,415 60,000 56,297 20% 6,000 5,000 4,000 3,000 2,873 3,218 3,412 3,835 3,535 3,894 2,895 4,273 50,000 40,000 30,000 45,229 37,676 40,056 31,363 29,814 34,795 29,034 29,359 22,090 15% 10% 2,000 1, ,639 2,103 20,000 10,000 16,517 11,882 5% - Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 - Q111Q211Q311Q411Q112Q212Q312Q412Q113Q213Q313Q413 0% MAU DAU/MAU % Note: MAU/DAU calculation methodology was changed in Q411 to more accurately reflect the user metrics which had the effect of increasing our Q411 MAU/DAU by less than 5% from what it would have been under our previous methodology. This change affects the comparability of Q411 and subsequent MAU/DAU data to prior quarters. Page 32

33 Q413 Non-GAAP Results ($ in millions) Q413 Q313 Q/Q Q412 Y/Y Featurephone Revenue (42%) 2.4 (69%) Smartphone Revenue % % Total Revenue $ 42.8 $ % $ % Gross Margin % % Gross Margin % 73% 66% 705 bp 71% 235 bp Operating Expense (32%) 21.2 (22%) Operating Income/(Loss) 5.3 (4.8) 212% (2.5) 312% Adjusted EBITDA $ 6.0 $ (4.1) 246% $ (1.8) 429% Page 33

34 Strong Balance Sheet ($ in millions) Q413 Q313 Q412 Cash and cash equivalents Accounts receivable, net Prepaid expenses, royalties and other current assets Other assets Intangible assets & goodwill Total Assets $ 87.6 $ 77.0 $ 75.0 Accounts payable and accrued liabilities Accrued expenses, royalties and other liabilities Deferred revenue Common stock/paid in capital Accumulated deficit & other comprehensive income (252.1) (248.5) (232.1) Total Liabilities and Stockholders Equity $ 87.6 $ 77.0 $ 75.0 Page 34

35 Q114 and FY2014 Guidance Page 35

36 Q114 Non-GAAP Guidance ($ in millions, except EPS) (Gross) Q413 Act Q114 Guidance Low Q114 Guidance High Total Revenue $42.8 $38.0 $40.0 Gross Margin (%) 73.0% 68.6% 68.6% Operating Expense Operating Income/(Loss) Depreciation Addback Adjusted EBITDA $6.0 $1.5 $2.5 Net Income/(Loss) Basic Shares Diluted Shares Earnings Per Diluted Share $0.07 $0.01 $0.02 Cash Balance $28.5 $30.0 Page 36

37 2014 Full Year Non-GAAP Guidance ($ in millions, except EPS) (Gross) 2013 Act 2014 Guidance Low High Total Revenue $113.4 $142.0 $150.0 Gross Margin (%) 69.9% 68.0% 68.0% Operating Expense Operating Income/(Loss) (5.2) Depreciation Addback Adjusted EBITDA $(2.5) $4.0 $6.0 Net Income/(Loss) (5.5) Basic Shares (millions) Diluted Shares (millions) Earnings/(Loss) Per Diluted/(Basic) Share $(0.08) $0.00 $0.02 Cash Balance $28.5 $35.0 Page 37

38 2014 Quarterly Non-GAAP Guidance Guidance ($ in millions) Q114 Q214 Q314 Q Total Revenue (Low) $38.0 $30.0 $36.0 $38.0 $142.0 Total Revenue (High) Adjusted EBITDA (Low) $1.5 $4.0 Adjusted EBITDA (High) $2.5 $6.0 Expected non-gaap revenue growth of 25-32% for 2014 from the full year 2013 actual results The quarter to quarter variability reflects our current estimated timing of new title releases Any changes to our title release schedule may impact these quarterly Non-GAAP revenue and Adjusted EBITDA estimates Page 38

39 Key Statistics Market Statistics (as of January 31, 2014) (in millions except per share and volume data) Stock Price $ Week High $ Week Low $2.00 Basic Shares Outstanding 78.7 Avg. Daily Volume (last 90 days) 2,782,665 Market Capitalization $311.0 Debt $0 Cash $28.5 Enterprise Value $282.5 Average Daily Volume is calculated using the last 90 calendar days Cash balance as of 12/31/2013 Page 39

40 Key Operating Metrics (Gross Basis) Actual Actual Actual Actual Actual Actual Actual Actual (All Revenue Figures are Non-GAAP) Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Freemium Smartphone Revenues (in thousands) $21,029 $24,689 $21,090 $21,987 $20,680 $20,447 $20,045 $ 40,906 Premium Smartphone Revenues (in thousands) 1,695 1,344 1,888 2,060 2,152 1,370 1,302 1,204 Smartphone Revenues (in thousands) 22,724 26,033 22,978 24,046 22,831 21,817 21,346 42,111 Featurephone Revenues (in thousands) 4,158 3,727 2,903 2,353 1,885 1,377 1, Total Revenues (in thousands) $ 26,882 $ 29,760 $ 25,881 $ 26,399 $ 24,716 $ 23,194 $ 22,608 $ 42,845 Freemium Smartphone Revenues Growth Q/Q 21% 17% (15%) 4% (6%) (1%) (2%) 104% Freemium Smartphone Revenues % of Total Smartphone Revenues 93% 95% 92% 91% 91% 94% 94% 97% Smartphone Revenues Growth Y/Y 189% 124% 75% 27% 0% (16%) (7%) 75% Smartphone Revenues % of Total 85% 87% 89% 91% 92% 94% 94% 98% Original IP % of Total Non-GAAP Revenues** 80% 87% 85% 86% 86% 93% 92% 98% Original IP % of Smartphone Non-GAAP Revenues 91% 96% 93% 92% 91% 97% 96% 99% Daily Active Users (DAU)* (in millions) Monthly Active Users (MAU)* (in millions) Installs (in millions) Cumulative Installs (in millions) In-App Purchase Billable Transactions (in thousands) 2,489 2,499 1,866 1,859 1,605 1,535 1,618 3,095 Average Revenues per Billable Transaction $6.74 $7.25 $8.15 $9.68 $10.98 $11.74 $10.70 $10.48 Non-GAAP Operating Expenses (in thousands) $19,119 $21,500 $21,630 $21,184 $19,283 $19,530 $19,693 $25,944 Adjusted EBITDA (in thousands) $539 $1,158 ($2,141) ($1,830) ($1,436) ($2,926) ($4,141) $6,028 Headcount*** (at quarter-end) *DAU & MAU reflects the DAU & MAU figures for the last month of the quarter **In prior publication Original IP % of total non-gaap Revenues was reported as 68% in Q411, 75% in Q112 and 83% in Q212. Above figures represent a more detailed methodology in calculating Original IP % of total non-gaap Revenues. ***FTE only, excludes contractors, temporary employees and consultants Page 40

41 Investment Overview Strong secular global growth opportunity New team & expertise delivering tangible results Games as a Service strategy bolsters fundamentals Page 41

42 GAAP to Non-GAAP Reconciliations Page 42

43 Q413 GAAP to Non-GAAP Reconciliation Condensed Consolidated Statements of Operations GAAP to Non-GAAP Reconciliation (in thousands, except per share data) (unaudited) GAAP Results Change in Deferred Revenues Change in deferred platform commissions and royalty expense Three Months Ended December 31, 2013 Amortization of intangible assets Stock-based compensation Change in fair value of Blammo earnout Foreign currency exchange loss Non-GAAP Results Revenues $ 34,841 $ 8,005 $ - $ - $ - $ - $ - $ 42,846 Cost of revenues: Platform commissions, royalties and other 9,803-1, ,556 Amortization of intangible assets 1, (1,004) Total cost of revenues 10,807-1,753 (1,004) ,556 Gross profit 24,034 8,005 (1,753) 1, ,290 Operating expenses: Research and development 12, (849) ,925 Sales and marketing 10, (103) ,512 General and administrative 4, (632) (56) - 3,507 Amortization of intangible assets (117) Total operating expenses 27, (117) (1,584) (56) - 25,944 Income/(loss) from operations (3,667) 8,005 (1,753) 1,121 1, ,346 Interest and other income/(expense), net: (130) Income/(loss) before income taxes (3,797) 8,005 (1,753) 1,121 1, ,346 Income tax benefit Net income/(loss) $ (3,719) $ 8,005 $ (1,753) $ 1,121 $ 1,584 $ 56 $ 130 $ 5,424 Earnings per share Net loss per share - basic and diluted $ (0.05) Basic $ 0.07 Diluted $ 0.07 Number of shares used in computation Number of shares used in computation - basic and diluted 78,071 Basic 78,071 Diluted 81,433 Page 43

44 Q412 GAAP to Non-GAAP Reconciliation Condensed Consolidated Statements of Operations GAAP to Non-GAAP Reconciliation (in thousands, except per share data) (unaudited) GAAP Results Change in Deferred Revenues Change in deferred platform commissions and royalty expense Amortization of intangible assets Three Months Ended December 31, 2012 Stock-based compensation Transitional costs Change in fair value of Blammo earnout Restructuring charge Foreign currency exchange gain Non-GAAP Results (Restated) (Restated) (Restated) (Restated) Revenues $ 26,311 $ 88 $ - $ - $ - $ - $ - $ - $ - $ 26,399 Cost of revenues: Platform commissions, royalties and other 7, ,741 Amortization of intangible assets 1, (1,073) Total cost of revenues 8, (1,073) ,741 Gross profit 17, (359) 1, ,658 Operating expenses: Research and development 13, (1,223) (70) ,273 Sales and marketing 6, (43) (24) ,205 General and administrative 3, (560) - (90) - - 2,706 Amortization of intangible assets (495) Restructuring charge (838) - - Total operating expenses 24, (495) (1,826) (94) (90) (838) - 21,184 Loss from operations (6,671) 88 (359) 1,568 1, (2,526) Interest and other income/(expense), net: (263) 1 Loss before income taxes (6,407) 88 (359) 1,568 1, (263) (2,525) Income tax provision (660) (660) Net loss $ (7,067) $ 88 $ (359) $ 1,568 $ 1,826 $ 94 $ 90 $ 838 $ (263) $ (3,185) Net loss per share - basic and diluted $ (0.11) $ (0.05) Number of shares used in computation - basic and diluted 65,678 65,678 Page 44

45 2013 GAAP to Non-GAAP Reconciliation Condensed Consolidated Statements of Operations GAAP to Non-GAAP Reconciliation (in thousands, except per share data) (unaudited) GAAP Results Change in Deferred Revenues Change in deferred platform commissions and royalty expense Amortization of intangible assets Twelve Months Ended December 31, 2013 Amortization of intangible assets Stock-based compensation Restructuring charge Change in fair value of Blammo earnout Foreign currency exchange gain Release of tax liabilities Non-GAAP Results Revenues $ 105,613 $ 7,751 $ - $ - $ - $ - $ - $ - $ - $ - $ 113,364 Cost of revenues: Platform commissions, royalties and other 32,371-1,717 - (427) ,661 Impairment of prepaid royalties and guarantees Amortization of intangible assets 4, (4,238) Total cost of revenues 37,044-1,717 (4,238) (427) ,096 Gross profit 68,569 7,751 (1,717) 4, ,268 Operating expenses: Research and development 47, (1,948) ,085 Sales and marketing 26, (303) ,824 General and administrative 15, (2,034) - (7) ,542 Amortization of intangible assets 1, (1,336) Restructuring charge 1, (1,448) Total operating expenses 91, (1,336) - (4,285) (1,448) (7) ,451 Loss from operations (22,958) 7,751 (1,717) 5, ,285 1, (5,183) Interest and other income/(expense), net: Loss before income taxes (22,948) 7,751 (1,717) 5, ,285 1, (5,150) Income tax benefit/(provision) 2, (3,148) (305) Net loss $ (20,105) $ 7,751 $ (1,717) $ 5,574 $ 427 $ 4,285 $ 1,448 $ 7 $ 23 $ (3,148) $ (5,455) Net loss per share - basic and diluted $ (0.28) $ (0.08) Number of shares used in computation - basic and diluted 71,453 71,453 Page 45

46 2012 GAAP to Non-GAAP Reconciliation Condensed Consolidated Statements of Operations GAAP to Non-GAAP Reconciliation (in thousands, except per share data) (unaudited) GAAP Results Change in Deferred Revenues Change in deferred platform commissions and royalty expense Amortization of intangible assets Stock-based compensation Twelve Months Ended December 31, 2012 Transitional costs Impairment of goodwill Restructuring charge Change in fair value of Blammo earnout Foreign currency exchange loss Release of tax liabilities Non-GAAP Results (Restated) (Restated) (Restated) (Restated) Revenues $ 108,183 $ 739 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 108,922 Cost of revenues: Platform commissions, royalties and other 29, ,130 Amortization of intangible assets 3, (3,783) Total cost of revenues 33, (3,783) ,130 Gross profit 74, (500) 3, ,792 Operating expenses: Research and development 54, (3,491) (184) ,600 Sales and marketing 20, (386) (39) ,468 General and administrative 14, (1,945) (266) - - (167) ,366 Amortization of intangible assets 1, (1,980) Restructuring charge 1, (1,371) Impairment of goodwill 3, (3,613) Total operating expenses 96, (1,980) (5,822) (489) (3,613) (1,371) (167) ,434 Loss from operations (22,106) 739 (500) 5,763 5, ,613 1, (4,642) Interest and other income/(expense), net: (347) Loss before income taxes (22,453) 739 (500) 5,763 5, ,613 1, (4,624) Income tax benefit/(provision) 1, (2,427) (433) Net loss $ (20,459) $ 739 $ (500) $ 5,763 $ 5,822 $ 489 $ 3,613 $ 1,371 $ 167 $ 365 $ (2,427) $ (5,057) Net loss per share - basic and diluted $ (0.32) $ (0.08) Number of shares used in computation - basic and diluted 64,318 64,318 Page 46

47 GAAP to Non-GAAP Reconciliation Non-GAAP Adjusted EBITDA (in thousands) (unaudited) For the Three Months Ended March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, (Restated) (Restated) (Restated) (Restated) (Restated) GAAP net loss $ (6,841) $ (2,988) $ (3,563) $ (7,067) $ (5,497) $ (2,921) $ (7,968) $ (3,719) Change in deferred revenues (218) (1,251) 886 8,005 Change in deferred platform commissions and royalty expense (263) (359) (138) 419 (245) (1,753) Non-cash warrant expense Amortization of intangible assets 1,248 1,427 1,520 1,568 1,569 1,573 1,311 1,121 Depreciation Stock-based compensation 3,836 3,038 (2,878) 1,826 1, ,584 Change in fair value of Blammo earnout (954) (47) (31) 56 Transitional costs Impairment of goodwill - - 3, Restructuring charge Foreign currency exchange loss/(gain) 373 (205) 460 (263) (129) (137) Interest and other income (7) (5) (5) (1) (3) (26) (4) - Income tax provision/(benefit) 440 (2,019) (1,075) (2,870) (30) (78) Total Non-GAAP Adjusted EBITDA $ 539 $ 1,158 $ (2,141) $ (1,830) $ (1,436) $ (2,926) $ (4,142) $ 6,028 Page 47