in Mobile Gaming

#Glu Mobile: Decent Q1 2013 numbers but outlook weakish




 US mobile gaming company Glu Mobile reported its Q1 2013 results yesterday. Adjusted EPS reached USD -0.03 in the quarter versus EPS of USD-0.01 in the year-earlier quarter. (Q4 2012 EPS was USD -0.05).  Revenues of USD 19m were down 12% y-o-y and 9% compared with Q4 2012. 

Wall Street consensus estimates were for USD -0.07 on EPS and revenues of USD18m, i.e. Glu Mobile managed to come in better than expected by analysts. Nevertheless, share were down in after-hours trading, as progress is proceeding too slow and the outlook both for Q2 and FY 2013 was rather on the weakish side (including further game release delays).

Quoting Management: “We were pleased with the monetization milestones delivered during the quarter in a number of both new and existing titles,” stated Niccolo de Masi, Chief Executive Officer of Glu. “We anticipate further monetization and retention traction as we continue to evolve our studio and begin to launch true games-as-a-service.”

Eric R. Ludwig, Glu’s Chief Financial Officer says: “While our second quarter guidance reflects a light title launch schedule, we remain in position to benefit during the second half of the year from new title launches, increasing monetization trends and progress from Glu Publishing. We remain confident in our ability to end 2013 with approximately $14 million in cash and without the need to raise additional capital or incur debt.”

On the positive side, Glu Mobile announced yesterday that it has expanded its real-money mobile gambling portfolio to include a new Contract Killer mobile slots game and has begun development on Glu-IP-branded mobile casino suites. All products will be created in conjunction with Probability, a leading technology provider to the mobile entertainment gambling industry in the UK. Contract Killer Slots is immediately available to Probability customers in the UK and Glu-IP-branded mobile casino suites are expected to be available by Q3 2013.  Also, Glu Mobile seems to make progress with its recently launched third-party publishing division and announced yesterday that it has signed one long-term agreement and two additional binding LOIs, with game developers that include two of the leading mobile MMO’s of China. GLUU anticipates launching these in western markets during the second half of Q3. Its pipeline of third-party publishing partnerships is said to grow the company expects to launch approximately six such titles by year end. The business unit is now staffed up with an experienced team of product managements, projects management and our resources. Glu Mobile’s R&D rebalancing as well as growth in third-party publishing will result in circa two-thirds first party and one-third third party by volume. In 2014, Glu Mobile anticipates this mix shifting towards an approximate 50-50 split between first and third-party titles.

 Conclusion: Glu Mobile has some interesting projects going on, of which the third-party publishing initiative seems to be the most promising to us. Real money gambling could potentially be a big success as well, but at this stage it is simply too early to assess that. The “traditional” Glu Mobile business continues to develop gradually, but as usual, things take longer time than expected. Given the big cost base, Glu Mobile needs to constantly have absolute top rankings in the US top grossing charts, which has not happened for quite some time. We strongly recommend investors who want to get exposure to the fast growing app market, to look at Sweden listed G5 Entertainment. G5 is profitable (EBIT margin of >30%), grows fast, sits on a net cash position and will soon be relisted to Nasdaq OMX (from a smaller Swedish stock exchange).  It’s trading at a huge discount to international gaming peers as well.

 Nordic Investor


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