Overview

This overview provides a high-level discussion of our operating results and 
some of the trends that affect our business. We believe that an understanding 
of these trends is important to understanding our financial results for the 
three months ended March 31, 2020, as well as our future prospects. This 
summary is not intended to be exhaustive, nor is it intended to be a substitute 
for the detailed discussion and analysis provided elsewhere in this report, 
including our unaudited condensed consolidated financial statements and 
accompanying notes.

Impact of the COVID-19 Pandemic

The extent of the impact of the novel strain of coronavirus, SARS-CoV-2 
(“COVID-19”), on our operational and financial performance will depend on 
certain developments, including the duration and spread of the outbreak, the 
impact on our employees, and the effect on the global economy, all of which are 
uncertain and cannot be predicted. Although we were able to successfully launch 
two new games, MLB Tap Sports Baseball 2020 and Disney Sorcerer’s Arena, in 
March 2020 and have been publishing updates and running live operations for our 
games while our global workforce has been working from home, we believe that if 
our employees are required to work from home for many months, it could 
ultimately negatively impact game development. We have also recently seen a 
reduction in CPIs (costs per install) and an increase in the daily active users 
in many of our games, but believe that this effect may be temporary and that 
the trend of increasing CPIs and declining daily and monthly active users may 
persist over the longer term. In addition, we may experience adverse impacts 
from changes in how we and companies worldwide conduct business due to the 
COVID-19 pandemic, including restrictions on travel and in-person meetings. As 
of the filing date of this Form 10-Q, the extent to which COVID-19 may impact 
our financial condition, results of operations or guidance is uncertain. The 
effects of the COVID-19 pandemic will not be fully reflected in our results of 
operations and overall financial performance until future periods. See “Risk 
Factors” included elsewhere in this report for further discussion of the 
possible impact of the COVID-19 pandemic on our business.

Financial Results and Trends

Revenue for the three months ended March 31, 2020 was $107.3 million, an 11.9% 
increase compared to the three months ended March 31, 2019, in which we 
reported revenue of $95.9 million. The increase was primarily related to an 
increase in revenue from Design Home, Covet Fashion and the Tap Sports Baseball 
franchise, the worldwide launches of Diner DASH Adventures and WWE Universe in 
the second quarter of 2019, and the worldwide launch of Disney Sorcerer’s Arena 
in the first quarter of 2020. These increases were partially offset by 
declining revenue on a year-over-year basis from catalog titles such as Kim 
Kardashian: Hollywood, Cooking Dash, Restaurant Dash with Gordon Ramsay, Deer 
Hunter 2018 (originally launched as Deer Hunter 2016), Diner Dash and Racing 
Rivals.

We have concentrated our product development efforts towards developing games 
for smartphone and tablet devices. We generate the majority of our revenue from 
Apple’s iOS platform, which accounted for 62.8% and 60.6% of our total revenue 
for the three months ended March 31, 2020 and 2019, respectively. We generated 
the majority of this iOS-related revenue through the Apple App Store, which 
represented 57.6% and 52.9% of our total revenue for the three months ended 
March 31, 2020 and 2019, respectively, with the significant majority of such 
revenue derived from in-app purchases. We generated the balance of our 
iOS-related revenue from offers and advertisements in games distributed on the 
Apple App Store. In addition, we generated approximately 37.2% and 39.3% of our 
total revenue for the three months ended March 31, 2020 and 2019, respectively, 
from the Android platform. We generated the majority of our Android-related 
revenue through the Google Play Store, which represented 31.9% and 34.1% of our 
total revenue for the three months ended March 31, 2020 and 2019, respectively, 
with the significant majority of such revenue derived from in-app purchases. We 
generated the balance of our Android-related revenue from other platforms that 
distribute apps that run the Android operating system (e.g., the Amazon App 
Store) and through offers and advertisements in games distributed through the 
Google Play Store and other Android platforms.

We currently publish titles primarily in four genres: lifestyle, casual, 
mid-core, and sports and outdoors. We believe these are genres in which we have 
already established a leadership position, are otherwise aligned with our 
strengths or are conducive to the establishment of a strong growth game. Across 
genres, we view our titles as either growth games or catalog games. Growth 
games are titles that we continue to update with additional content and 
features and which we expect to grow revenue year over year. We continue to 
update some of our catalog titles with additional content and features, whereas 
on others we expend little to no investment in terms of updates and 
enhancements.

We established our leadership position in the lifestyle genre through our 
acquisition of Crowdstar Inc. (“Crowdstar”) in November 2016 and its successful 
Covet Fashion title, and extended our leadership with our global release of 
Design Home in November 2016. We introduced key updates for Design Home in 2019 
and the first three months of 2020, including elite events for elder players, 
improved series challenges, language localization in German, French and 
Spanish, and meta game functionality, and are planning further key updates for 
this title, including the introduction of e-commerce functionality. The casual 
genre includes our Kim Kardashian: Hollywood title; we recently extended the 
term of our license agreement with Ms. Kardashian West for an additional 3.5 
years through the end of 2023. The casual genre also includes our Cooking Dash 
and Diner DASH franchises, and our leadership position in this genre was 
bolstered by our worldwide launch of Diner DASH Adventures in June 2019. The 
mid-core genre includes our Disney Sorcerer’s Arena title that launched 
worldwide in March of 2020. Our leadership in the sports and outdoors category 
remains strong with our Tap Sports Baseball and Deer Hunter franchises. In 
March 2020, we furthered our leadership in this genre with the launch of MLB 
Tap Sports Baseball 2020 in more than 100 countries (prior versions of the Tap 
Sports Baseball franchise were only available in the United States, Canada, 
United Kingdom, Germany and Australia). MLB Tap Sports Baseball 2020 includes 
licensed content from Major League Baseball, or MLB, together with current and 
former MLB players pursuant to our continuing agreements with the Major League 
Baseball Players Association, and Major League Baseball Players Alumni 
Association, contains new features and content, including authentic major 
league stadiums, a skill-based home run mode and a new cover athlete. We expect 
to add to our portfolio of sports and outdoor titles through the worldwide 
release of the next iteration of our Deer Hunter franchise in the second half 
of 2020.

We believe that our games consistently have high production values, are 
visually appealing and have engaging core gameplay. These characteristics have 
typically helped to drive installs and awareness of our games and resulted in 
highly positive consumer reviews. The majority of our games have been featured 
on the Apple and Google storefronts when they were commercially released, which 
we believe is the result of us being a good partner of Apple and Google.

We work closely with our celebrity and brand licensors to engage their social 
media audiences and build games that will resonate with their unique fan bases. 
For example, our Kim Kardashian: Hollywood title utilizes transmedia 
storytelling, leveraging Ms. Kardashian West’s built-in social media fan base 
to drive installs and awareness of the game, and then attempting to surprise 
and delight those fans with real-world events and other game content based on 
her life. Our goal is for the game content to become entwined with Ms. 
Kardashian West’s persona and social media presence, and to otherwise enhance 
interaction with her fans. We also leverage the strength of well-known brands 
and licensors to provide users with more realistic experiences, such as the 
case with MLB Tap Sports Baseball 2020 which features all MLB clubs and 
uniforms, current and former MLB players and real MLB stadiums, or with our 
Disney Sorcerer’s Arena title, which includes characters from the Disney and 
Pixar universes. We also work to build and nurture social communities in and 
around the games themselves, creating a new vehicle for strong, personal 
engagement with the brand or celebrity’s fan base.

For us to continue driving installs and awareness of our games and to improve 
monetization and retention of our players, we must ensure that each of our 
games has compelling gameplay and a deep meta game that motivates users to 
continue to play our games for months or even years. In addition, we must 
regularly update our games with compelling new content, deliver 
socio-competitive features like tournaments, contests, player-versus-player 
gameplay and live events, and build and nurture communities around our 
franchises both in-game and holistically via community features such as 
dedicated social channels. We have also made significant investments in our 
proprietary analytics and revenue technology infrastructure. With our enhanced 
analytics capabilities, we intend to devote resources towards segmenting and 
learning more about the players of each of our franchises and further 
monetizing our highest spending and most engaged players. We aim to connect our 
analytics and revenue technology infrastructure to multiple elements of our 
business – from marketing to merchandising – in order to improve player 
retention and monetization.

We also plan to continue monitoring the successful aspects of our games to 
drive downloads and enhance monetization and retention as part of our product 
strategy, whether by optimizing advertising revenue within each title, securing 
additional compelling licensing arrangements, building enhanced and more 
complex core gameplay, adding deep meta game features and through enhancing our 
live operations. Optimizing advertising revenue within our games requires us to 
continue taking advantage of positive trends in the mobile advertising space, 
particularly as brands continue to migrate budgets from web to mobile. 
Continuing to drive installs and awareness of our games through licensing 
efforts requires that we continue to partner with brands, celebrities and 
social influencers that resonate with potential players of our games. 
Partnering with desirable licensing partners and renewing our existing licenses 
with our most successful partners requires that we continue to develop 
successful games based on licensed content and are able to compete with other 
mobile gaming companies on financial and other terms in signing such partners. 
We also plan to continue introducing third-party licensed brands, properties 
and personalities into our games as additional licensed content, for cameo 
appearances or for limited time events in order to drive awareness and 
monetization.

Across the globe, our industry is evidencing that hit titles generally remain 
higher in the top grossing charts for longer. We believe this is due to the 
continued specialization and investment of teams and companies in their hit 
titles, and the live, social nature of certain games. Our strategy and the 
measures we have implemented to support our business position us to take 
advantage of these trends, as evidenced by the continued strength and 
year-over-year growth of Design Home, Covet Fashion and the Tap Sports Baseball 
franchise. We plan to continue to regularly update and otherwise support our 
growth games in order to ensure that those games monetize and retain users for 
even longer periods of time. In addition, we plan to continue to invest in our 
creative leaders and the creative environments in which they and their teams 
work to increase our likelihood of creating significant hit growth games.

Our net loss in the three months ended March 31, 2020 was $8.3 million versus 
net income of $663,000 in the three months ended March 31, 2019. This change 
was primarily due to an increase in sales and marketing expenses of $14.6 
million, an increase in cost of revenue of $3.3 million, and an increase in 
research and development expenses of $3.0 million, partially offset by an 
increase in revenue of $11.4 million and a change from tax expense to a tax 
benefit of $1.3 million. See “—Results of Operations—Comparison of the Three 
Months Ended March 31, 2020 and 2019” below for further details.

Our ability to achieve, sustain and increase profitability depends not only on 
our ability to grow our revenue, but also on our ability to manage our 
operating expenses. We increased our sales and marketing expenditures during 
the first three months of 2020 compared to the first three months of 2019. This 
increase largely related to higher marketing spend for most of our successful 
titles as well as for user acquisition expenditures related to the global 
launch of Disney Sorcerer’s Arena. Our increased sales and marketing expenses 
may impair our ability to achieve and sustain profitability if this spending 
does not result in increased revenues. Additionally, the largest component of 
our recurring expenses is personnel costs, which consist of salaries, benefits 
and incentive compensation, including bonuses and stock-based compensation. In 
the remainder of 2020, we expect that our operating costs will increase as we 
invest in user acquisition for our games and continue to hire creative and 
project management talent in all of our offices worldwide.

Cash and cash equivalents at March 31, 2020 totaled $114.7 million, a decrease 
of $12.3 million from the $127.1 million balance at December 31, 2019. This 
decrease was primarily related to $16.9 million of cash used in operating 
activities, $4.8 million of cash used in investing activities, partially offset 
by $9.5 million of cash provided by financing activities.

Key Operating Metrics

We manage our business by tracking various non-financial operating metrics that 
give us insight into user behavior in our games. The three metrics that we use 
most frequently are Daily Active Users (DAU), Monthly Active Users (MAU), and 
Average Revenue Per Daily Active User (ARPDAU). Our methodology for calculating 
DAU, MAU, and ARPDAU may differ from the methodology used by other companies to 
calculate similar metrics.

DAU is the number of individuals who played a particular smartphone game on a 
particular day. An individual who plays two different games on the same day is 
counted as two active users for that day when we aggregate DAU across games. In 
addition, an individual who plays the same game on two different devices during 
the same day (e.g., an iPhone and an iPad) is also counted as two active users 
for each such day when we average or aggregate DAU over time. Average DAU for a 
particular period is the average of the DAUs for each day during that period. 
We use DAU as a measure of player engagement with the titles that our players 
have downloaded.

MAU is the number of individuals who played a particular smartphone game in the 
month for which we are calculating the metric. An individual who plays two 
different games in the same month is counted as two active users for that month 
when we aggregate MAU across games. In addition, an individual who plays the 
same game on two different devices during the same month (e.g., an iPhone and 
an iPad) is also counted as two active users for each such month when we 
average or aggregate MAU over time. Average MAU for a particular period is the 
average of the MAUs for each month during that period. We use the ratio between 
DAU and MAU as a measure of player retention.

ARPDAU is total free-to-play smartphone revenue – consisting of 
micro-transactions, advertisements and offers – for the measurement period 
divided by the number of days in the measurement period divided by the DAU for 
the measurement period. ARPDAU reflects game monetization. Under our revenue 
recognition policy, we recognize this revenue over the estimated average 
playing period of a user, but our methodology for calculating our DAU does not 
align with our revenue recognition policy for micro-transactions and offers, 
under which we defer revenue. For example, if a title is introduced in the last 
month of a quarter, we defer a substantial portion of the micro-transaction and 
offer revenue to future months, but the entire DAU for the newly released title 
is included in the month of launch.

We calculate DAU, MAU and ARPDAU for only our primary distribution platforms, 
Apple’s App Store, the Google Play Store and Amazon’s Appstore, as well as from 
Facebook for certain titles; we are not able to calculate these metrics across 
all of our distribution channels. In addition, the platforms that we include 
for purposes of this calculation have changed over time, and we expect that 
they will continue to change as our business evolves, but we do not expect that 
we will adjust prior metrics to take any such additions or deletions of 
distribution platforms into account. We believe that calculating these metrics 
for only our primary distribution platforms at a given period is generally 
representative of the metrics for all of our distribution platforms. Moreover, 
we rely on the data analytics software that we incorporate into our games to 
calculate and report the DAU, MAU and ARPDAU of our games, and we make certain 
adjustments to the analytics data to address inconsistencies between the 
information as reported and our DAU and MAU calculation methodology.

We have estimated the DAU and MAU for certain older titles because the 
analytics tools incorporated into those titles are incompatible with newer 
device operating systems (e.g., iOS 13), preventing us from collecting complete 
data. For these titles, we estimate DAU and MAU by extrapolating from each 
affected title’s historical data using a fixed decay rate in light of the 
behavior of similar titles for which we had complete data.

As of January 1, 2019, we began calculating DAU and MAU using the average of 
each month during the period rather than our historical practice of calculating 
these metrics based on the last month of the period. For example, DAU for the 
three months ended March 31, 2020 is calculated as an average of aggregate 
daily DAU for the months of January 2020, February 2020 and March 2020 
calculated for all active smartphone free-to-play titles during those months 
across the distribution platforms for which we calculate the metric. We adopted 
this new methodology because we believe that it provides a more accurate 
representation of overall DAU and MAU for the applicable period and more 
closely aligns with the methodology used by other companies in the gaming 
industry to calculate similar metrics.

The decrease in aggregate DAU and MAU for the three months ended March 31, 2020 
as compared to the same period of the prior year was primarily related to fewer 
downloads across our portfolio of catalog games partially offset by an increase 
in aggregate DAU and MAU attributable to our new title launches in 2019, 
primarily Diner DASH Adventures, an earlier launch date of our MLB Tap Sports 
Baseball franchise in the first quarter of 2020, compared with the prior year, 
as well as higher downloads of our growth games.

Our aggregate ARPDAU increased for the three months ended March 31, 2020 as 
compared to the same period of the prior year, as we improved monetization on 
certain titles, particularly through increased content updates and use of 
social features in those games. Future increases in our aggregate DAU, MAU and 
ARPDAU will depend on our ability to retain current players, attract new paying 
players, launch new games and expand into new markets and distribution 
platforms.

We rely on a very small portion of our total users for nearly all of our 
revenue derived from in-app purchases. Since the launch of our first 
free-to-play titles in the fourth quarter of 2010, the percentage of unique 
paying users for our largest revenue-generating free-to-play games has 
typically been less than 5%, when measured as the number of unique paying users 
on a given day divided by the number of unique users on that day, though this 
percentage fluctuates, and it may be higher than 5% for certain of our games 
during specific, relatively short time periods, such as immediately following 
worldwide launch or the week following content updates, marketing campaigns or 
certain other events.

Our revenue increased $11.4 million, or 11.9%, from $95.9 million for the three 
months ended March 31, 2019 to $107.3 million for the three months ended March 
31, 2020, which was primarily comprised of a $12.4 million increase in our 
revenue from micro-transactions (in-app purchases), partially offset by a 
decrease of $1.0 million in our revenue from advertisements and offers. The 
increase in revenue from micro-transactions was primarily related to our growth 
games, namely Design Home, Covet Fashion, and the Tap Sports Baseball 
franchise, as well as the worldwide launch of new titles Diner DASH Adventures 
and WWE Universe in the second quarter of 2019 and Disney Sorcerer’s Arena in 
the first quarter of 2020. Revenue from our growth games increased by $8.8 
million during the three months ended March 31, 2020 compared to the three 
months ended March 31, 2019. Revenue from the new titles launched in 2019 and 
2020 was $9.3 million during the three months ended March 31, 2020. These 
increases were partially offset by a $6.7 million aggregate decline in revenue 
from catalog titles such as Kim Kardashian: Hollywood, Cooking Dash, Restaurant 
Dash with Gordon Ramsay, Diner Dash, Racing Rivals, and Deer Hunter 2018. The 
decrease in revenue from advertisements and offers was primarily due to the 
removal of pay-per-engagement offer wall advertisement units from Apple in 
2019.

During the three months ended March 31, 2020, Design Home, the Tap Sports 
Baseball franchise, and Covet Fashion, were our top three revenue-generating 
games and comprised 43.0%, 18.8% and 15.8%, respectively, of our revenue for 
the period. During the three months ended March 31, 2019, Design Home, the Tap 
Sports Baseball franchise, and Covet Fashion, were our top three 
revenue-generating games and represented 44.9%, 17.2% and 15.6% of our revenue 
for the period, respectively. No other game generated more than 10% of revenue 
during the quarters ended March 31, 2020 and 2019.

International revenue (generated from distributors and advertising service 
providers whose principal operations are located outside the United States or, 
in the case of the digital storefronts, the revenue generated from end-user 
purchases made outside of the United States) increased by $249,000 from $23.0 
million in the three months ended March 31, 2019 to $23.3 million in the three 
months ended March 31, 2020.

Cost of Revenue

Our cost of revenue increased $3.3 million, or 9.7%, from $34.5 million in the 
three months ended March 31, 2019 to $37.9 million in the three months ended 
March 31, 2020. This was primarily due to an increase of $3.6 million in 
platform commission fees resulting from a higher volume of revenue transactions 
through the digital storefronts and a $349,000 increase in hosting costs. This 
increase was partially offset by a $418,000 decrease in impairment of prepaid 
royalties and minimum guarantees, and a $364,000 decrease in amortization of 
intangible assets.

The royalties we paid to licensors increased by $195,000, or 3.2%, from $6.1 
million in the three months ended March 31, 2019 to $6.3 million in the three 
months ended March 31, 2020. The increase was due to a growth in revenue from 
royalty burdened titles. However, the rate of increase of our royalty payments 
was lower than the 11.9% increase in our revenue, which increased from $95.9 
million in the three months ended March 31, 2019 to $107.3 million in the three 
months ended March 31, 2020. This was due to a larger percentage of our revenue 
being attributable to titles that are not royalty burdened, such as Design 
Home, Covet Fashion and Diner DASH Adventures.

Research and Development Expenses

Our research and development expenses increased $3.0 million, or 11.2%, from 
$26.5 million in the three months ended March 31, 2019 to $29.5 million in the 
three months ended March 31, 2020. This was primarily attributable to a net 
increase in payroll related costs of $2.5 million mainly due to the increase in 
headcount, payroll taxes and certain employee benefit costs and a $398,000 
increase in allocated charges for equipment, facilities and depreciation. As a 
percentage of revenue, research and development expenses decreased slightly 
from 27.7% in the three months ended March 31, 2019 to 27.5% in the three 
months ended March 31, 2020. We expect our research and development 
expenditures to increase slightly in absolute dollars in the remainder of 2020, 
primarily due to expected increases in headcount.

Sales and Marketing Expenses

Our sales and marketing expenses increased $14.6 million, or 52.1%, from $28.1 
million in the three months ended March 31, 2019 to $42.7 million in the three 
months ended March 31, 2020. This was primarily attributable to a $12.7 million 
increase in user acquisition and other marketing expenditures primarily related 
to a significant investment in user acquisition for Disney Sorcerer’s Arena and 
Diner DASH Adventures following these titles’ global launches in March 2020 and 
June 2019, respectively, as well as increased marketing expenditures for Design 
Home and the Tap Sports Baseball franchise, partially offset by lower user 
acquisition expenditures on our catalog titles, a $1.0 million increase in 
payroll related costs mainly due to the increase in headcount and certain 
employee benefit costs, a $496,000 increase in professional and consulting 
costs, and a $410,000 increase in allocated charges for equipment, facilities 
and depreciation. As a percentage of revenue, sales and marketing expenses 
increased from 29.3% in the three months ended March 31, 2019 to 39.8% in the 
three months ended March 31, 2020. We expect our sales and marketing expenses 
to increase significantly in the second quarter of 2020 as we seek to 
capitalize on the current favorable CPI environment to increase the daily 
active users of our recently launched titles, Disney Sorcerer’s Arena and MLB 
Tap Sports Baseball 2020, as well as our key existing titles, Design Home, 
Covet Fashion, Kim Kardashian: Hollywood and Diner DASH Adventures. We expect 
that our sales and marketing expenses will decrease sequentially in the third 
and fourth quarters of 2020.

General and Administrative Expenses

Our general and administrative expenses slightly increased by less than 
$100,000, or 0.5%, from $6.6 million in the three months ended March 31, 2019 
to $6.7 million in the three months ended March 31, 2020. The small 
year-over-year increase was primarily attributable to a $454,000 increase in 
payroll related costs mainly due to the increase in headcount and certain 
employee benefit costs and a $338,000 increase in software and equipment 
related expenses, partially offset by a $490,000 decrease in stock based 
compensation expense mainly related to the decrease in vesting probability of 
certain performance-based equity awards and a $298,000 net decrease in 
allocated charges for equipment, facilities, and depreciation. As a percentage 
of revenue, general and administrative expenses decreased from 6.9% in the 
three months ended March 31, 2019 to 6.2% in the three months ended March 31, 
2020. We expect our general and administrative expenses to increase in absolute 
dollars in the remainder of 2020, primarily due to increases in headcount and 
certain facilities related expenses.

Interest and Other Income/(Expense), Net

Interest and other income, net, changed from net income of $764,000 in the 
three months ended March 31, 2019 to net expense of $65,000 in the three months 
ended March 31, 2020. This was primarily attributable to lower investment and 
interest income earned on money market funds and higher foreign currency losses 
related to the revaluation of certain account balances during the three months 
ended March 31, 2020.

Income Tax Benefit/(Expense)

Our income tax provision changed from an income tax expense of $178,000 in the 
three months ended March 31, 2019 to an income tax benefit $1.3 million in the 
three months ended March 31, 2020. This change was primarily due to changes in 
pretax income in the United States and certain foreign entities, and changes in 
tax rates. The provision for income taxes differs from the amount computed by 
applying the statutory U.S. federal rate principally due to the effect of our 
non-U.S. operations, non-deductible stock-based compensation expense, and 
change in foreign withholding taxes.

Liquidity and Capital Resources

Since our inception, we have generally incurred recurring losses and negative 
annual cash flows from operating activities. We had an accumulated deficit of 
$439.9 million as of March 31, 2020.

Operating Activities

In the three months ended March 31, 2020, net cash used in operating activities 
was $16.9 million, which was primarily due to an increase of $13.5 million in 
accounts receivable mainly due to the timing of payments from our customers, an 
$8.3 million net loss, a $6.3 million increase in prepaid royalties, a $2.9 
million decrease in accrued royalties, a $1.8 million decrease in accrued 
compensation mainly related to bonus payments in the first quarter of 2020 
related to 2019 performance, and a $901,000 decrease in operating lease 
liabilities due to rental payments on leases. These decreases were partially 
offset by a $7.5 million increase in accounts payable and other accrued 
liabilities mainly due to the timing of payments to our vendors and non-cash 
adjustments including $6.4 million of stock based compensation expense, $1.3 
million of depreciation expense, $996,000 of non-cash lease expense, and 
$888,000 of amortization of intangible assets during the three months ended 
March 31, 2020.

In the three months ended March 31, 2019, net cash used in operating activities 
was $2.4 million, which was primarily due to a decrease in accrued compensation 
of $10.3 million mainly related to bonus payments paid in the first quarter of 
2019 related to 2018 performance, an increase of $7.4 million in accounts 
receivable mainly due to the timing of payments from our customers and a 
decrease of $3.3 million in deferred revenues. These decreases were partially 
offset by an increase of $7.3 million in accounts payable and other accrued 
liabilities mainly due to the timing of payments to our vendors, a $1.1 million 
decrease in deferred platform commission fees and non-cash adjustments 
including $6.8 million of stock based compensation expense, $1.3 million of 
amortization of intangible assets and $1.1 million of depreciation expense.

Investing Activities

In the three months ended March 31, 2020, we used $4.8 million of cash in 
investing activities related to leasehold improvements and equipment purchases.

In the three months ended March 31, 2019, we used $1.2 million of cash in 
investing activities primarily related to leasehold improvements and equipment 
purchases of $1.1 million.

Financing Activities

In the three months ended March 31, 2020, net cash generated from financing 
activities was $9.5 million which was primarily due to $11.2 million in 
proceeds received from option exercises and purchases under our employee stock 
purchase plan partially offset by $1.7 million of taxes paid related to net 
share settlement of equity awards.

In the three months ended March 31, 2019, net cash used in financing activities 
was $1.0 million which was primarily due to $4.0 million of taxes paid related 
to net share settlement of RSUs partially offset by $3.0 million in proceeds 
received from option exercises and purchases under our employee stock purchase 
plan.

Sufficiency of Current Cash and Cash Equivalents

Our cash and cash equivalents were $114.7 million as of March 31, 2020. Cash 
and cash equivalents held outside of the United States in various foreign 
subsidiaries were $3.0 million as of March 31, 2020, most of which were held by 
our Canadian and Indian subsidiaries. Under current tax laws and regulations, 
if cash and cash equivalents held outside the United States are distributed to 
the United States in the form of dividends or otherwise, we may be subject to 
additional U.S. income taxes and foreign withholding taxes. We have not 
provided deferred taxes on unremitted earnings attributable to foreign 
subsidiaries because these earnings are intended to be reinvested indefinitely. 
However, if any such balances were to be repatriated, additional U.S. federal 
income tax payments could result. Computation of the potential deferred tax 
liabilities associated with unremitted earnings deemed to be indefinitely 
reinvested is not practicable.

We expect to fund our operations, grow our business and satisfy our contractual 
obligations during the next 12 months primarily through our cash and cash 
equivalents, including cash generated from operations. We believe our cash and 
cash equivalents will be sufficient to meet our anticipated cash needs for at 
least the next 12 months from the date of this report; however, our cash 
requirements for the next 12 months may be greater than we anticipate due to, 
among other reasons, revenue that is lower than we currently anticipate, 
greater than expected operating expenses, particularly with respect to our 
research and development and sales and marketing initiatives, use of cash to 
pay minimum guaranteed royalties, use of cash to pay operating lease 
obligations, use of cash to fund our foreign operations, and the impact of 
foreign currency rate changes, unanticipated limitations or timing restrictions 
on our ability to access funds that are held in our non-U.S. subsidiaries or 
any investments or acquisitions that we may decide to pursue. We expect to 
continue to use cash to fund operating lease obligations and minimum guaranteed 
royalty payments during the remainder of 2020 as milestone payments become due 
on games we publish and/or develop that incorporate third party licensed 
property, and may also use cash to fund investments and/or the purchase price 
of any acquisitions. If the games we develop based on such licensing 
arrangements fail to perform in accordance with our expectations, we may not 
fully recoup these minimum guaranteed royalty payments.

If our cash sources are insufficient to satisfy our cash requirements, we may 
seek to raise additional capital. However, we may be unable to do so on terms 
that are favorable to us or at all.

Contractual Obligations

The amount of tenant improvement allowance expected to be received in the 
second quarter of 2020 for one of our office leases is netted off from the 
future obligations amount. We have entered into license and publishing 
agreements with various celebrities and other owners of brands, properties and 
other content to develop and publish games and other software applications for 
mobile devices. These agreements typically require us to make non-refundable, 
but recoupable payments of minimum guaranteed royalties or license fees as 
upfront payments or over the term of the agreement.

Off-Balance Sheet Arrangements

At March 31, 2020, we did not have any significant off-balance sheet 
arrangements requiring disclosure under Item 303(a)(4)(ii) of Regulation S-K, 
other than those listed in our contractual obligations table above.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information in this section should be read in connection with the 
information on financial market risk related to changes in interest rates and 
non-U.S. currency exchange rates in Part II, Item 7A, “Quantitative and 
Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K 
for the year ended December 31, 2019. Our market risk profile has not changed 
significantly during the three months ended March 31, 2020.

Interest Rate and Credit Risk

Our exposure to interest rate risk relates primarily to our investment 
portfolio and the potential losses arising from changes in interest rates.

We are potentially exposed to the impact of changes in interest rates as they 
affect interest earned on our investment portfolio. As of March 31, 2020, 
substantially all of our cash and cash equivalents of $114.7 million was held 
in operating bank and money market accounts earning nominal interest. 
Accordingly, we do not believe that a 10% change in interest rates would have a 
significant impact on our interest income/(expense), net, operating results or 
liquidity related to these amounts.

The primary objectives of our investment activities are, in order of 
importance, to preserve principal, provide liquidity and maximize income 
without significantly increasing risk. We do not currently use or plan to use 
derivative financial instruments in our investment portfolio.

As of March 31, 2020, and December 31, 2019, our cash and cash equivalents were 
maintained by financial institutions in the United States, Canada, Hong Kong 
and India and our current deposits are likely in excess of insurance limits.

Our accounts receivable primarily relate to revenue earned from digital 
storefront operators and advertising platforms. We perform ongoing credit 
evaluations of our customers’ and the digital storefronts’ financial condition 
but generally require no collateral from them.

At March 31, 2020, Apple, Google, and Tapjoy accounted for 63.1%, 21.6% and 
11.1% of total accounts receivable, respectively. At December 31, 2019, Apple, 
Google, and Tapjoy accounted for 47.2%, 28.5% and 17.8% of total accounts 
receivable, respectively. No other customer or digital storefront represented 
more than 10% of the Company’s total accounts receivable as of these dates.

Foreign Currency Exchange Risk

We transact business in more than 100 countries in more than 30 different 
currencies, and in 2019 and the first three months of 2020, some of these 
currencies fluctuated significantly. Our revenue is usually denominated in the 
functional currency of the distributor while the operating expenses of our 
operations outside of the United States are maintained in their local currency, 
with the significant operating currencies consisting of the Indian Rupee and 
the Canadian Dollar. Although recording operating expenses in the local 
currency of our foreign operations mitigates some of the exposure of foreign 
currency fluctuations, variances among the currencies of our customers and our 
foreign operations relative to the United States Dollar, or USD, could have and 
have had a material impact on our results of operations.

Our foreign currency exchange gains and losses have been generated primarily 
from fluctuations in the Indian Rupee versus the USD and the Canadian Dollar 
versus the USD. At month-end, non-functional currency-denominated accounts 
receivable and intercompany balances are marked to market and unrealized gains 
and losses are included in interest and other income/(expense), net. 
Translation adjustments arising from the use of differing exchange rates are 
included in accumulated other comprehensive loss in stockholders’ equity. We 
have in the past experienced, and in the future expect to experience, foreign 
currency exchange gains and losses on our accounts receivable and intercompany 
receivables and payables. Foreign currency exchange gains and losses could have 
a material adverse effect on our business, operating results and financial 
condition.

To date, we have not engaged in exchange rate hedging activities, and we do not 
expect to do so in the foreseeable future.

Inflation

We do not believe that inflation has had a material effect on our business, 
financial condition or results of operations. If our costs were to become 
subject to significant inflationary pressures, we might not be able to offset 
these higher costs fully through price increases. Our inability or failure to 
do so could harm our business, operating results and financial condition.