August 2nd, 2007 by Anonymous Blogger Posted in Analysis & Editorial | No Comments »
Glu reported their Q2 07 financial results. Besides the metrics in the report, the conference call also showed some interesting data like the loss of several licenses by the end of the year.
During Q2 2007, Glu managed to pull in $16.4 million which is a 43% increase on Q2 2006.The GAAP net loss in Q2 07 was $ 898,000 or $ 0.03 per basic share compared to the GAAP net loss of $2.7 million in Q2 06 which was $0.55 per basic share.
The non-GAAP net income was $ 730,000 or $0.02 per diluted share which excludes amortization of intangible assets of $620,000 and stock-based compensation charges of $1.0 million, compared to a non-GAAP net loss of $(1.7) million, or $(0.35) per basic share in the second quarter of 2006.
The top ten mobile games from Glu managed to pull in 53% of the revenue in Q2 07. During Q2 06, the top ten represented 62% of the revenue. The average top ten game revenue was $ 872,000, 23% more then last year. There where no titles representing more then 10% of the revenue during Q2. The original games grew from 7% of $ 854,000 in Q2 06 to 12% or $ 2 million in Q2 06 which was more or less the same in Q1. During Q2, 10 new mobile games where launched by Glu.
49% of the revenue came from the top 4 carriers which was 54% in Q2 06. 50% of the revenue from Glu originated in North America. 36% came from Europe. Royalties where $ 4.4 million, 26.8% of revenue which was 32% in Q2 06.
“Glu continued to execute against our strategy in the second quarter, which was highlighted by our first non-GAAP profit, overall solid financial results, a strong list of new titles and our continued expansion in all our global markets,” said Greg Ballard, Glu’s chief executive officer. “We are especially pleased by our continued momentum with world class licensing partners as evidenced by our recent announcements with PopCap and Konami and the early success of TRANSFORMERS, a Hasbro license. During our IPO, we detailed our plan to drive Glu’s success in the mobile games market through a combination of great games, world class licensing partners, global distribution and advanced technology, and we are proud to have executed successfully against this plan once again.”
Part of the negative results ($ 120,000) where caused by a chapter 11 filing of admobile according to the conference call of Glu. Half of it was a loss of revenue, the other half a write-off in the operating expense category. The closing of Amp’d will also show some negative effects, these will be noted as operating losses as well.
2007 H1 results
During the first half year, Glu received $ 32.1 million in revenue, 64% more then H1 06 (including iFone’s pro forma effects). The GAAP net loss during H1 07 was $1,7 million or $ 0.09 per basic share compared to $ 6,2 million or $ 1.30 per basic share during H1 06.
The non-GAAP net income for the six months ended June 30, 2007 was $152,000, or $0.01 per diluted share which excludes amortization of intangible assets of $1.2 million, stock-based compensation charges of $1.6 million, gain on sale of assets of $1.0 million and $3.1 million relating to the non-cash deemed dividend, as compared to the non-GAAP net loss for the six months ended June 30, 2006 of $(3.2) million, or $(0.67) per basic share which excludes in process research and development of $1.5 million, amortization of intangible assets of $1.0 million and stock-based compensation charges of $523,000.
Rocky Pimentel, chief financial officer, said, “We delivered another solid performance and demonstrated the inherent operating leverage in our model that drove our first quarter of non-GAAP profitability. We believe we are at the forefront of a large opportunity in the mobile gaming market, and with our balance sheet significantly bolstered by the proceeds from our IPO, we are well-positioned to drive forward with our long term growth strategy to build the world’s leading mobile games company.”
Business outlook
The GAAP revenue is expected to be between $ 16.7 and $ 17.2 million.
Gross margin excluding amortization is expected to be between 70.5 percent and 72 percent.
Operating expense guidance excluding stock based compensation and amortization of intangibles is expected to be between $12.2 million and $12.4 million.
Income tax expense is expected to be between $250,000 and $300,000.
GAAP net loss is expected to be between $(900,000) and $(1.3) million, or $(0.03) and $(0.04) per basic share; weighted average common shares outstanding for the third quarter of 2007 are expected to be approximately 29.2 million basic and 31.2 million diluted.
Non-GAAP net income is expected to be between $500,000 and $900,000, or $0.02 and $0.03 per diluted share, which excludes $550,000 for amortization of intangibles and approximately $1.2 million of anticipated stock-based compensation.
Though the results for Glu are very positive, they are heading for some bad weather by the end of the year as for example Atari has sold back a number of brands to Hasbro. One of these is Monopoly. The brands licensed by Glu from Atari are up for renewal by the end of the year. Though Hasbro announced to be satisfied with other licenses that Glu has turned into mobile games, Hasbro did express they rather have a partner that can work on multiple platforms and so, a partner that is working also on PC and consoles. This could mean a partner like EA. For this reason, Glu doesn’t expect a renewal for both Monopoly and many other Atari licenses. Deer Hunter, Centerpiede and Asteroids will however remain with Glu for now. Glu expected the licenses lost, would not account for more then 10% of the revenue. For the 2008 roadmap, Glu will hang strong on Warnerbros., Activision, PopCap and Konami licenses. Zuma, from PopCap, remains the top selling mobile game. For Konami however, the deal has been limited to Europe only. Konami has a strong Asian background and also in the US, they seem to draw their own plan for now. For PopCap, Glu sees them experimenting to enter the market themselves, but don’t expect them to risk the titles running on Glu and EA Mobile at the moment.
Full 2007 expectations
GAAP revenue is expected to be between $68.0 million and $69.5 million.
GAAP net loss, excluding $3.1 million for non-cash, non-recurring deemed dividend, is expected to be between $(2.9) million and $(3.5) million, or between $(0.12) and $(0.15) per basic share; weighted average common shares outstanding for the year-ended December 31, 2007 are expected to be approximately 24.0 million basic and 29.0 million diluted.
Non-GAAP net income is expected to be between $2.2 million and $2.8 million, or between $0.08 and $0.10 per diluted share, which excludes $2.3 million for amortization of intangibles, approximately $4.4 million of anticipated stock-based compensation, $1.0 million for gain on sale of assets and $3.1 million for non-cash, non-recurring deemed dividend.
