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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

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FORM 10-Q

(Mark One)

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For the Quarterly Period Ended June 30, 2020

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875 Howard Street, Suite 100

San Francisco, California 94103

(Address of Principal Executive Offices, including Zip Code)

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(415) 800-6100

(Registrant’s Telephone number, including Area Code)

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No   ☐

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Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).     Yes  ☒    No   ☐

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Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

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Shares of Glu Mobile Inc. common stock outstanding as of August 4, 2020: 170,853,481

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GLU MOBILE INC.

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FORM 10-Q

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Quarterly Period Ended June 30, 2020

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The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements

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The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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GLU MOBILE INC.

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Concentration of Credit Risk

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Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and accounts receivable.

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The Company derives its accounts receivable from revenue earned from customers located worldwide. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers. The Company bases its allowance for doubtful accounts on management’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company writes off accounts receivable balances against the allowance when it determines that the amount will not be recovered.

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The following table summarizes the revenue from customers in excess of 10% of the Company’s revenue:

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At June 30, 2020, Apple Inc. (“Apple”) and Google Inc. (“Google”) accounted for 66.1% and 20.4%, respectively, of total accounts receivable. At December 31, 2019, Apple, Google, and Tapjoy Inc. (“Tapjoy”) accounted for 47.2%, 28.5%, and 17.8%, respectively, of total accounts receivable. No other customer or Digital Storefront represented more than 10% of the Company’s total accounts receivable as of these dates.

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Recent Accounting Pronouncements

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Recently Adopted Accounting Pronouncements

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In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost and replaces the existing incurred loss impairment model with an expected loss methodology, which will result in earlier recognition of credit losses. The ASU requires a cumulative-effect adjustment to retained earnings transition approach and is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

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In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This new accounting standard update simplifies the measurement of goodwill by eliminating the Step 2 impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The new guidance requires an entity to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, limited to the amount of goodwill. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.  The new guidance becomes effective for goodwill impairment tests in fiscal years beginning after December 15, 2019. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

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In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This guidance adds, modifies and removes several disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with Topic 820, Fair Value Measurement. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

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In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

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Recently Issued Accounting Pronouncements Not Yet Adopted

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In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

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Note 2 — Net Income/(Loss) Per Share

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The Company computes basic net income/(loss) per share by dividing its net income/(loss) for the period by the weighted average number of common shares outstanding during the period.

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Diluted net loss per share for the three and six months ended June 30, 2020 has been computed by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for common share equivalents as their effect would have been antidilutive. Diluted net income per share for the three and six months ended June 30, 2019 is computed by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period, including potentially dilutive common stock instruments.

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The following equity awards outstanding at the end of each period presented have been excluded from the computation of diluted net income/(loss) per share of common stock for the periods presented because including them would have had an anti-dilutive effect: 

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Note 3 — Revenue from Contracts with Customers

Disaggregation of Revenue

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The following table summarizes revenue from contracts with customers for the three and six months ended June 30, 2020 and June 30, 2019:
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The Company operates in a single reportable segment. In the table above, revenue is disaggregated by type of revenue stream, indicating whether it is recognized over-time or at a point-in-time.

Contract Balances

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The following table provides information about receivables and contract liabilities from contracts with customers:

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The Company receives payments from customers based on billing terms established in the Company’s contracts. Contract assets relate to the Company’s right to consideration for its completed performance under the contract before the customer pays consideration or before payment is due. At June 30, 2020 and December 31, 2019, there were no contract assets recorded in the Company’s condensed consolidated balance sheets. Accounts receivable are recorded when the right to consideration becomes unconditional.

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Deferred revenue relates to payments received in advance of performance under the contract.  Deferred revenue is recognized as revenue as the Company performs under the contract. The Company had $97,629 in deferred revenue as of December 31, 2019, of which $24,604 and $96,371 was recognized as revenue in the three and six months ended June 30, 2020, respectively. The Company had $85,736 in deferred revenue as of December 31, 2018, of which $21,914 and $84,612 was recognized as revenue in the three and six months ended June 30, 2019, respectively.

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Note 4 — Fair Value Measurements

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Fair Value Measurements

The Company accounts for fair value in accordance with Accounting Standard Codification 820, Fair Value Measurements and Disclosures (“ASC 820”). Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a three-tier hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

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Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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The Company’s financial assets as of June 30, 2020 are presented below at fair value and were classified within the fair value hierarchy as follows:

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