Tag Archives: gluu

#Bitzio: Awaiting the NFL app

16 Nov

One of our trading ideas, US app developer Bitzio, reported its Q3 2012 on Wednesday. Given the fact that the company is still in a start-up phase we do not emphasize the actual quarterly result too much. Focus should rather be, in our opinion, on the ongoing project in co-operation with the NFL Players association. The app is expected to be launched in December, hopefully in-time for the important Christmas business.

As we have previously reported, during the third quarter, Bitzio divested non-core assets and operations to focus on developing and monetizing fan-based apps in the sports and entertainment markets. The company generated nominal revenues from it legacy software and mobile applications in the third quarter, totaling USD 154,000 compared to marginal revenues in the same year-ago quarter. Operating expenses in the third quarter of 2012 were USD1.4 m, a significant improvement from USD8.1 m in the same year-ago quarter. The year-over-year improvement was primarily due to a significant decrease in stock-based compensation, as well as a USD2.3 m goodwill impairment charge recognized in Q3 2011. Net loss from continuing operations in the third quarter of 2012 totaled USD 1.1 m or USD(0.02) per share, as compared to a net loss of USD 8.1 m or USD(0.22) per share in the same year-ago quarter.

“During the third quarter of 2012, we greatly improved our operational platform and set course on our new business model designed to tap the tremendous opportunities for mobile apps in the sports and entertainment markets,” said Peter Henricsson, president and CEO of Bitzio. “In fact, we achieved several milestones in the quarter, including divesting non-core assets, strengthening our balance sheet and executive team, and forming major strategic partnerships.”

“Our new license agreement with The NFL Players demonstrated our ability to secure the media rights of large, existing fan bases, as well as establish a co-marketing and revenue-sharing partnership that requires no up-front fees. We have been working closely with The NFL Players to develop the first app, which is now set to launch next month. Given their marketing support, we are confident the trivia app will be well received and widely downloaded by the millions of NFL fans across the country.” (visit the app’s Facebook page: http://www.facebook.com/pigskins?filter=3)

“Our partnership with The NFL Players also serves an ideal showcase of Bitzio”s capabilities, and represents a springboard toward greater opportunities across a number of verticals, including other sports communities, entertainment properties and major consumer brands. We are now well positioned to capitalize on the tremendous opportunities in delivering apps to the fan-based communities of some of world”s largest sports clubs and entertainment brands. We plan to leverage our deep industry relationships and marketing partnerships to secure new licensing agreements during the coming months, and roll out a number of new and highly-engaging mobile apps.”

We continue to see Bitzio as a high risk – high reward on the globally growing app market, driven by rapid smartphone and tablet expansion. The current market cap of <11m does, in our opinion, not give any credit to the ongoing project with the NFL. If executed successfully, we believe this high profile app could be able to generate multi-million dollars in revenues. Also, we consider it highly likely that there will be many more apps under this co-operation and potentially other brands as well. Financing has been secured for the coming quarters and expected cash flow from the NFL app as of December/January should limit the risk for a new share issue near-term (taking aside potential acquisitions).

See our detailed interview with CEO Henricsson from September here: http://nordicinvestor.net/2012/09/23/bitzio-ceo-interview/

Nordic Investor

#G5 Entertainment: share price underperformance versus #Glu Mobile sticks out

4 Sep

The G5 Entertainment share has performed very poorly recently, for no obvious reason. Business continues to go well, as the recent Q2 2012 report and our regular download ranking checks confirm. Nevertheless, the G5 share is down some 15% over the last 3 months and some 11% over the last week. At the same time, the only true mobile gaming peer Glu Mobile share is up some 20% over the last 3 months and 11% over the last month. Looking at the ratio of relative share price performance between G5 and Glu, the pair has been trading on average at around 3.7 over the last 12 months (see graph below). The current ratio is around2.8.

Trading at around USD 5.05 and looking at analyst estimate of an 2013 EPS of USD 0.17, Glu Mobile is currently valued at 30x expected 2013 earnings. This compares to G5′s current valuation of below 10x expected 2012 earnings. In our opinion, this difference in performance and valuation seems unsustainable and it will be only a matter of time until this gap will be closed in favour of G5 Entertainment. As so many times in the past, the local micro-cap investor base in Sweden is behaving in strange ways and we think this is a golden opportunity to profit from this misjudgment.

G5 Entertainment relative share price performance versus Glu Mobile:

Nordic Investor

#Glu Mobile: Rumours about takeover by #Microsoft

27 Jun

Mobile game developer Glu Mobile‘s share price has been soaring in recent trading sessions despite the generally muted market. Several sources are citing rumours that Glu Mobile has received a takeover bid of $7 per share from Microsof. The same rumor has already surfaced on June 14.

A spokesperson for Microsoft declined comment on the renewed chatter. A Glu Mobile spokesperson was not available.

At USD 7 per share, Glu Mobile would trade at a PE-ratio of 44x expected 2013 earnings. As a reminder, our top-pick G5 Entertainment currently trades at a PE-ratio of 12x expected 2012! earnings. Unlike Glu Mobile, G5 is already profitable and is growing faster and has a net cash position. Applying a PE-ratio of 44x on G5′s expected 2012 EPS of SEK 3,2 implies a share price of SEK 140 (the share is currently trading below SEK 39). That does not take into consideration that G5 is expected to grow by some 80-100% also in 2013 and 2014, which makes EPS in the region of SEK 5.5 – 6 realistic for 2013. 44 times 5.5 equals 242.

Another data point that highlights the huge share price potential we see in G5 Entertainment.

Nordic Investor

#Glu Mobile: Strong Q1 2012 report

2 May

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/

Mobile gaming: The trend is your friend

28 Oct

The trend is your friend – in this case if you are an app developer focused on mobile gaming that is.

I have been looking at the search volume on Google for several key words related to apps and mobile gaming such as “Games Ipad”, “Games Iphone”, “Games Android”, “App store” and “Android markets”. As you can see in the chart below (source Google Trends), search volumes for all these key words are trending up, i.e. there are more people “googling” for these key words today compared with the average over the last 12-months. I think it is also interesting to highlight that the X-mas period has been by far the busiest period over the last 12 months, so the best time of the year lies still ahead of us.  This should bode well for download activity for the mobile gaming companies such as Glu Mobile and G5 Entertainment in the weeks and months ahead.

Nordic Investor

 

G5 share continues to underperform Glu Mobile

14 Jul

G5 Entertainment’s share continues to underperform relative to Glu Mobile. I have plotted the ratio since July 2010 and on average it has been at 2.6x. As you can see in the chart above, it is at 1.9x right now, i.e. almost 30% below the average. The ratio peaked at 5.2x in January this year and has been around 3x for a long time…

Glu Mobile rallies on EA’s PopCap deal

13 Jul

Glu Mobile rallies more than 10% in today’s trading on the news of EA’s acquisition of PopCap. That clearly has the market on the hunt for other companies that make games for mobile phones, tablets and the Web. And that seems to be giving a big lift this morning to shares of Glu Mobile, a San Francisco-based company that provides games for the  iOS, Android, Palm and Windows Phone 7 platforms.

Glu posted 2010 revenue of $64.3 million, down from $79.3 million in 2009, and $89.8 million in 2008, which is not a good trend, and it has been losing money. Wall Street sees the business stabilizing, forecasting revenue of $63 million this year and $69.9 million next year. PopCap by contrast had revenue of $100 million last year, and expects an increase of at least 40% this year, so Glu’s business is clearly not nearly as healthy.  G5 Entertainment (http://www.g5e.com/), which is listed in Sweden, is growing its business by more than 100% according to recent management guidance for FY 2011 , profitability is high and there is no debt!

http://www.nordicinvestor.de

Now it’s official: EA snaps up PopCap

13 Jul

Late Tuesday evening it became official: Electronic Arts agreed to acquire PopCap Games, a Seattle-based maker of casual games like Plants vs. Zombies and Bejeweled.   The deal is valued at upwards of $1.3 billion, including $750 million up-front ($650m in cash) and up to $550 million in multi-year earn-outs based on financial milestones.  The PopCap transaction is expected to close in August. EA is investing more in digital content as customers are buying fewer games on discs to play on consoles. Video game companies are now offering users options to play free or low-priced games on mobile devices, PCs and Facebook. EA’s Chief Financial Officer Eric Brown said the deal would help EA better compete with Zynga. Zynga filed with regulators on July 1 for an initial public offering of up to $1 billion.

 PopCap, which is based in Seattle, has been profitable for 10 years since its founding. It makes easy-to-play games for platforms such as Facebook, RenRen, Google Android, Apple iPhone and iPad. In 2010, PopCap generated $100 million in revenue,  implying an EV/Sales multiple of 13x on last year’s revenues (assuming PopCap is debt free). 

Despite the lofty valuation, I found several comments that the deal will prove inexpensive for EA. “Once Zynga comes out, this acquisition is going to look like the bargain of the century,” says for example Larry Haverty, associate portfolio manager of the Gabelli Global Multimedia Trust, which owns EA shares. “Outside of Zynga, EA is going to be the only way for investors to play the casual gaming phenomenon,” Haverty added. Zynga’s IPO plans along with the acquisition of PopCap has investors searching the landscape for other hot up-and-coming video game publishers, including CrowdStar, Wooga and Badoo, said Sterne Agee analyst Arvind Bhatia. An obvious choice in this space is G5 Entertainment, listed in Sweden. Using the same valuation criteria as for PopCap (i.e. EV/Sales on last year’s revenues), G5 Entertainment is trading at a 50% discount and actually the real valuation discount is even higher as G5 is growing by more than 100% this year. Looking at the PER on 2011 EPS, the share is trading at 11.6x. Earlier this week, G5 announced that it will open an office in California, which will certainly help to put it on the map even in the US. Do I hear “takeover target”? You bet!

www.nordicinvestor.de

 

 

Further background information:

PopCap has been around since 2000, but didn’t raise outside funding until a $22.5 million investment in 2008 led by Meritech Capital Partners. CNNMoney published an edited transcript of an interview of fortune.com with Rob Ward, the Meritech partner who led the deal and sits on the PopCap board of directors. I took the liberty to post some of the highlights:

Q: Was PopCap games headed toward an IPO?

Rob Ward: The answer is yes, it absolutely was well under way. Right after we invested, they hired Bob Chamberlain as their first real CFO, and he had been CFO of Watchguard and F5 Networks and a number of big, public Seattle-area companies. Then they added Rick Fox as audit committee chair and Steve Raymond, former CEO of Tech Data, as compensation chairman. So they had made those changes to the board, and also changed auditors to get their books in order. The plan was to file for an IPO in the second half of this year, and go out in Q4 if the SEC was willing or in Q1 of next year if they were less helpful. Then they did a market check like you always do, and found themselves in a situation where they got a compelling enough offer from the right partner.

Q: PopCap CEO Dave Roberts expressed concern that the tech valuation bubble could put Popcap in the untenable position of justifying an inflated valuation in the public markets. Legitimate worry?

RW: It’s a very fair question and one we talked about a lot at PopCap board meetings and other portfolio company board meetings. How I’d frame it is: I don’t think it’s the best thing in the world to have your IPO value get ahead of the true intrinsic value of your company. IPOs are supposed to be financing events, not the end game. The problem with having your stock go from $15 to $100 in T+1 trading days is that you’ve got to bring in new employees with option pricing way out of line from where it should be. And it’s different than what existing employees have, which can create strange issues internally. The challenge is particularly tough with digital media and consumer-branded companies, because that strong retail component often drives the post-pricing pop. Ironically a lot of companies decide to have smaller deal sizes to avoid scarcity, get a good pop and trade up. I think that if you’re a recognizable consumer brand, you need to have a larger IPO to mitigate that effect. So it was absolutely a concern, but it wasn’t the overriding reason why the sale to EA is happening.

Q: So why is it happening?

RW: PopCap went out to a small handful of folks that it made sense to do a market check with, and everyone on that list either formally or informally came back at them with an offer to buy the company. It’s not really shocking, because this is one of the last great franchise companies in the casual gaming space, with some of the best brands like Bejeweled. Until now, the company had always said no to takeover offers. Sometimes it wasn’t the right cultural fit or they didn’t think the buyer had enough appreciation for great game developers or it just wasn’t the right time for PopCap. But this was a very compelling offer. Not just from a financial standpoint, but also the way that they’ll be allowed to operate inside of EA. At the end of the day, this is a great chance to build a preeminent digital gaming company across all these different distribution platforms and geographies. PopCap is about great brands and great games, which makes them a fit with EA.

Q: Well it’s clearly a strong move into digital by EA, following the Playfish purchase.

RW: I think it’s a masterstroke by [EA CEO] John Riccitiello. How many times do you see a 1.0 company turn into a 2.0 winner? It can happen, look at Apple, but it usually ends up more like Yahoo. This puts EA at the front and center of digital gaming.

Q: This deal involves a lot of earn-outs. When biotech VCs get an earn-out, they usually expect to see around 20% of it. How do you forecast a gaming earn-out? 

RW: I wish I could be that formulaic. For us it’s much more deal-by-deal. One of the things that gave us a lot of comfort here was how EA dealt with other acquisitions recently, including Playfish. That deal had similar components and not only has turned into a very nice financial returns for Playfish investors, but a lot of those senior execs are still running important parts of EA’s business. So we’re banking on seeing lots of that money.

G5 Entertainment: Growth, growth, growth

11 Jul

 

G5 Entertainment announces this morning that the company has opened a marketing office in San Francisco, California, USA. The office, located at Suite 136, 1750 Montgomery Street, is going to oversee marketing of company’s games in Americas. North America continues to be the single largest market for G5 games, accounting for some 35% of the group’s iOS revenue in Q1’2011.

 

Larissa McCleary became G5′s first hire in California in the position of Director of Marketing, joining G5 after spending 5 years marketing PC casual games in San Francisco-based companies iWin and Playfirst.

 

Vlad Suglobov, CEO and board member of G5 Entertainment AB, comments: “As the management previously communicated, this year G5 is going to release 80 games. With so many games released this year, and many more next year, our marketing efforts need more structured approach, especially in USA, where we have so many customers. With Larissa’s experience, we are going to do an even better job at reaching and retaining our audience. San Francisco was  the natural choice as the place for our marketing office because of its access to the best talent and proximity to the headquarters of Apple and Google. Our goal with the San Francisco office is to establish a small but effective marketing team, which is going to focus on growing company’s sales in the region. G5 will continue to perform its product development out of the group’s offices in Ukraine and Russia.”  More information about G5 Entertainment can be found at: www.g5e.se/corporate

Scaling up the business is key. G5 Entertainment is still a small company but with enormous growth potential. Getting the word out is just as important as developing new games. With a low-cost development set up in Eastern Europe, G5 Entertainment is very efficient which is reflected in its impressive margins today. Leveraging on this solid development base by hiring dedicated regional sales  and marketing directors seems a reasonable way to grow! I am really looking forward to the company’s first statements on 2012. Lately, the CEO has hinted in his statements on continued strong growth potential. Traction’s investment and now the increased sales efforts in North America should bode well for stellar growth even in 2012.

http://www.nordicinvestor.de/

M&A activity in app market remains high as Zynga goes Canada

11 Jul

“Zynga is crossing the border!” the company wrote in a blog post last Friday.

Social gaming giant Zynga has announced plans to establish a Canadian headquarters after scooping up Toronto-based mobile developer Five Mobile. The San Francisco-based company behind the popular Facebook games FarmVille and Mafia Wars announced the deal to acquire Five Mobile in a blog post on Friday.

“Today we are excited to announce a new addition to the Zynga family, the Toronto-based Five Mobile team. In addition to the team, Zynga is also acquiring certain assets and Intellectual Property developed by Five Mobile. Five Mobile, now Zynga Toronto, creates compelling, robust and scalable mobile applications.  The team has worked closely with some of the largest media and technology companies in North America across a multitude of platforms and handsets.” Financial terms of the deal were not released.

For Zynga - which recently filed a prospectus for an IPO - the acquisition is the 15th for the company in 13 months.

Small, profitable app developers with a proofen track-record are high up on the wish list these days. Check out G5 Entertainment!

http://www.nordicinvestor.de/

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