in Mobile Gaming

#Glu Mobile: Strong Q1 2012 report

Glu Mobile, a leading global developer and publisher of freemium games for smartphone and tablet devices just announced financial results for its first quarter ended March 31, 2012. The Glu Mobile share is trading up some 8% in after-hour trading as the company increases its FY 2012 guidance.

The first quarter was a strong start to the year for Glu,” stated Niccolo de Masi, Chief Executive Officer of Glu. “We are very pleased with our sixth consecutive quarter of freemium smartphone revenue growth. This quarter’s continued momentum from both existing and new title launches drove total GAAP smartphone revenues up 192% year over year. We believe that our investments to expand studio capacity, as well as our recent acquisition of the Deer Hunter ® brand assets, position Glu for significant growth in the second half of 2012.”

First Quarter 2012 Financial Highlights:

Revenue: Total GAAP revenue was $21.5 million in the first quarter of 2012 compared to $16.4 million in the first quarter of 2011. Total non-GAAP revenue was $21.6 million in the first quarter of 2012 compared to $17.2 million in the first quarter of 2011. Non-GAAP revenue excludes changes in deferred revenue.

GAAP Loss and EPS: GAAP net loss was $(6.8) million in the first quarter of 2012 compared to a GAAP net loss of $(3.2) million in the first quarter of 2011. GAAP EPS was a loss of $(0.11) in the first quarter of 2012, based on 63.2 million weighted-average basic shares outstanding, compared to a loss of $(0.06) in the first quarter of 2011, based on 52.0 million weighted-average basic shares outstanding.

Non-GAAP Net Loss and EPS: Non-GAAP net loss was $(0.5) million in the first quarter of 2012 compared to $(0.9) million in the first quarter of 2011. Non-GAAP EPS loss was $(0.01) in the first quarter of 2012 based on 63.2 million weighted-average basic shares outstanding, compared to a loss of $(0.02) in the first quarter of 2011 based on 52.0 million weighted-average basic shares outstanding.

Cash Flows Used in Operations: Cash flows used in operations were $(4.1) million in the first quarter of 2012 compared to cash flows used in operations of $(2.1) million in the first quarter of 2011.

We had a very strong first quarter with non-GAAP smartphone revenues growing primarily due to the strength of our Q4 launches and successful launches of Samurai vs. Zombies Defense and Small Street,” stated Eric R. Ludwig, Glu’s Chief Financial Officer. “The combination of our strong balance sheet and the out-performance of our first quarter allowed Glu to acquire the Deer Hunter brand assets from Atari with cash. We are confident that we will reach sustainable Adjusted EBITDA profitability by the fourth quarter of 2012 without needing to raise capital and without taking on debt. In addition, we anticipate being cash flow break-even from operations in the fourth quarter of 2012 and expect to end the year with over $18.0 million of cash.”

Management Business Outlook as of May 2, 2012:

2012 Expectations – Full Year Ending December 31, 2012:

  • Non-GAAP revenue is expected to be between $86.7 million and $91.7 million and non-GAAP smartphone revenue is expected to be between $76.5 million and $81.5 million.
  • We expect to achieve break-even non-GAAP operating income and break-even cash flows from operations in the fourth quarter of 2012.
  • We expect to achieve positive Adjusted EBITDA in the fourth quarter of 2012.
  • Glu’s cash balance at December 31 is expected to be over $18.0 million.
  • We expect to launch 23 titles in fiscal 2012.

Flipping through the company’s presentation material for its Q1 2012 webcast, it is obvious that Glu Mobile is extremely bullish on the potential for smartphone and tablets. And rightly so as its growth of 192% GAAP and 158% non-GAAP quarterly smartphone revenue growth year over year shows. Glu Mobile is steadily developing into a pure mobile play, comparable to G5 Entertainment (which is already today almost 100% smartphone and tablet exposure). In Q1 2012, 81% of Glu Mobile’s non-GAAP revenue was related to smartphones, up from 75% in Q4 2011. Some 67% of that part is related to iOS and 28% to Android.

A quick ranking check shows that Q2 has continued on a very positive note for Glu Mobile. For iOS, its top grossing rankings have actually gradually improved during April while they have been stable on a high level for Android. Nordic Investor is screening the most important market around the world and aggregates the rankings as you can see in the charts below:

iOS:

Android:

Conclusion: Strong report from GLUU and a further proof that the app market is exploding. This is definitely a sector one wants to be exposed to and there are not many listed alternatives. In fact, the only “pure” plays are G5 Entertainment and Glu Mobile (not yet there but on a good way). G5 Entertainment is already profitable and trades at far lower multiples as Glu Mobile but given the high growth and high level of M&A in the sector we are bullish on Glu as well. G5 Entertainment remains our top-pick.

Nordic Investor

PS: Interested in investing in a Mobile Gaming / Technology strategy? http://nordicinvestor.net/2012/04/24/survey-nordic-investor-mobile-gamingtechnology-strategy/

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