Glu Mobile just announced its Q3 2012 numbers. While revenues where a notch below market expecations, Glu managed to reported a smaller loss than analyst had feared. However, the outlook for Q4 appears surprisingly weak and Glu’s share is currently tanking in after-hours-trading.
Q3 2012 numbers:
Total GAAP revenue was $21.3 million in the third quarter of 2012 compared to $16.9 million in the third quarter of 2011. Total non-GAAP revenue was $21.2 million in the third quarter of 2012 compared to $17.8 million in the third quarter of 2011. Non-GAAP revenue excludes changes in deferred revenue and amortization of in-process development contracts.
Non-GAAP net loss was $(1.6) million for the third quarter of 2012 compared to a loss of $(1.3) million for the third quarter of 2011. Non-GAAP EPS was a loss of $(0.03) for the third quarter of 2012 based on 64.6 million weighted-average basic shares outstanding, compared to a loss of $(0.02) for the third quarter of 2011 based on 60.5 million weighted-average basic shares outstanding. GAAP EPS was a loss of $(0.06) for the third quarter of 2012, based on 64.6 million weighted-average basic shares outstanding, compared to a loss of $(0.10) for the third quarter of 2011, based on 60.5 million weighted-average basic shares outstanding.
Consensus expectations were for revenue $21.4 million and for EPS is -$0.11.
“We are satisfied with our 73% year-over-year growth in non-GAAP smartphone revenue. User reviews remained strong, with growth in daily active users from July to September,” stated Niccolo de Masi, Chief Executive Officer of Glu. “Q3 was underpinned by the strength of newly launched Eternity Warriors 2 across iOS and Android and the continued success of catalog titles Frontline Commando and Deer Hunter Reloaded. As expected, both consumer adoption of new hardware, and advertising demand, slowed over the summer in anticipation of new device launches. These industry headwinds, along with weaker-than-anticipated monetization from most new launches during the quarter, resulted in a sequential decline in smartphone revenue from Q2 2012.”
De Masi continued, “We are confident in Glu’s long-term ability to drive higher monetization and lifetime value through the inclusion of robust multiplayer and community functionality. The acquisition of GameSpy and appointment of our first President of Studios accelerate our ability to enhance average revenue per day per daily active user. We anticipate Adjusted EBITDA improvement in Q1 2013 from Q4 2012 guidance levels.”
“Our results continue to be driven by the growth of freemium revenue and original IP,” stated Eric R. Ludwig, Glu’s Chief Financial Officer. “Our fourth quarter is being impacted by the combination of underperforming titles launched in Q3, Apple’s prohibition of incentivized advertising for external HTML 5 sites along with the reduction in the number of titles launched during the quarter as we further optimize their monetization. With more than $24 million in cash and no debt on our balance sheet, as well as an ongoing focus on controlling costs, Glu remains well positioned to execute its long-term monetization strategy.”
Fourth Quarter Expectations – Quarter Ending December 31, 2012:
- Non-GAAP revenue is expected to be between $19.5 million and $20.5 million and non-GAAP smartphone revenue is expected to be between $17.5 million and $18.5 million.
- Non-GAAP gross margin is expected to be approximately 90%.
- Non-GAAP operating expenses are expected to be approximately $22.2 million.
- Adjusted EBITDA, defined as non-GAAP operating loss excluding depreciation of approximately $650,000, is expected to range from $(4.0) million to $(3.1) million.
- Income tax expense is expected to be $(0.5) million.
- Non-GAAP net loss is expected to be between $(5.1) million and $(4.2) million, or a net loss of $(0.08) to $(0.06) per weighted-average basic share.
- Weighted average common shares outstanding for the fourth quarter of 2012 are expected to be approximately 65.9 million basic and 69.9 million diluted.
- We expect to use cash in operations and have a cash balance at December 31, 2012 of approximately $21.5 million with no debt.
2012 Expectations – Full Year Ending December 31, 2012:
- Non-GAAP revenue is expected to be between $86.4 million and $87.4 million and non-GAAP smartphone revenue is expected to be between $73.6 million and $74.6 million.
- Non-GAAP operating loss is expected to range from $(6.8) million to $(5.9) million.
- Adjusted EBITDA is expected to range from $(4.4) million to $(3.5) million.
We are very surprised by the weak outlook for Q4, implying sequentially falling revenue despite the fact that the Christmas business usually drives income at the end of the year. Also, our recent ranking checks for Glu Mobile showed a very promising trend.