May 15, 2008
GLUU: Guides to 74% 2008 Gross Margins; Looks to iPhone as Possible New Platform
By admin
Submitted By Knobias ClipReport
Trading on Glu Mobile Inc (NasdaqNM: GLUU) was up 6.856% following this morning’s earnings call in which the company reported Q1 revenues of $20.59M, up 31.15% from last year and beating consensus by 7.41%. Q1 EPS was -$.21, down 133.33% from last year and missing consensus by 320.00%. Adjusted Q1 EPS was $.0.00. For Q2, Non-GAAP net loss is expected to be between -$400,000 and breakeven, or between a loss of -$0.01 and -$0.00 per basic share for the 2nd quarter. The Q2-08 earnings forecast is in-line with current consensus estimates.
During yesterday’s conference call, the company raised its full year guidance as result of better than expected results in Q1 due to the extended Hasbro brand, including other businesses involving China and Mig. The company has also made progress on the integration of its Mig acquisition, as well as its more recent purchase of Superscape. Glu Mobile now ranks as the number one provider of games in China and number two in North America.
Despite a weaker than expected opening at the box office for the film adaptation of Speedracer, the company does not believe the potential challenges at the box office will hinder resutls and expects to produce revenues in the Q2 or Q3 timeframe. Said President & CEO Greg Ballard, “Speedracer has a brand of its own. It’s a racing game as well as a movie, so we expect it to do well regardless of box office numbers. We don’t think it will effect the marketing of the actual game.” Going forward, the company has guided to 74% in gross margins for Q2 and believes that those margins should hold for the year as a result of the increased contribution from Mig and a back half release slate.
With the Nintendo DS portable phenomenon occuring in mobile gaming, the company expects the smartphone gaming experience reach the type of experience seen on DS within the year depending on publishers and developers and how much can be done on new platforms. Said Ballard, “A year from now I think people won’t be talking about DS and iPhone experience being much different, just different in terms of the group of people who are playing it. A lot of people aren’t carrying around a DS, but they’re are carrying iPhones. It may prove to be transformative.”
The company’s hestitation in expanding toward DS has been related to the sudden opportunities with other platforms such as the iPhone, Blackerry, Android, Sidekick, etc., which are more closely aligned with Glu Mobile’s expertise. The detriment in expanding too rapidly into PSP and DS is that Glu’s buisiness model is too different, and runs counter to models of physical goods which can have a number of drawbacks. “We like having platforms that make DS and PSP less compelling than it might have been even six months ago,” said Ballard. “There are different competitive advantages on new platforms. Java and others will continue to be as complex, so the titles that will do best on new platforms will emerge from other mobile platforms due to the branding momentum they’ll have there. And most of what we do is making games work in a portable environment.”
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