Is Glu Mobile Doomed?

Glu Mobile (GLUU) announced first quarter ended March 31, 2016 total revenue of $54.0 million, down 7 percent quarter-over-quarter from $57.9 million in fourth quarter of 2015 and down 13 percent year-over-year from $62.4 million in first quarter of 2015. Going forward, the company estimates second quarter of 2016 total revenue to be in the range of $46.0 million to $49.0 million.

In a weak spot

Glu Mobile declared first quarter of 2016 adjusted EBITDA loss of $3.8 million, down 236 percent quarter-over-quarter from $2.8 million of adjusted EBITDA in fourth quarter of 2015 and down 197 percent year-over-year from adjusted EBITDA of $3.9 million in first quarter of 2015.
Moving ahead, the company estimates second quarter of 2016 adjusted EBITDA loss in the range of $(5.5) million to $(7.0) million.

Glu Mobile reported continued sequential and year-over-year decline in both its top and bottom lines primarily due to greater restructuring charges, stock-related compensation expense, litigation and transitional costs and settlement expenses.

The continued sequential and year-over-year decline in both the company’s top and bottom line is primarily due to increased expenses during the quarter including restructuring costs, stock-linked compensation costs, settlement costs, litigation and transitional costs.

The revenue contributions of North America, Asia Pacific and the rest of the world from third quarter of 2015 continued to decline steadily mainly driven by increased core and non-core expenditures for the quarter.

The greater expenses for the quarter in particular have negatively impacted the company’s top and bottom line growths both in total and geographically.

The contribution of revenue from iOS, Android and all other platforms continued to decline sequentially and year-over-year due to the company’s failure to predict key hits and therefore, it just projects non-hit revenue numbers.

The Kendall and Kylie game contributed $8.6 million or 16% of total first quarter of 2016 revenue followed by Sniper X, sequentially contributing $0.6 million or 1% of net quarterly revenue. Other unique games include Deer Hunter 2016, Eternity Warriors 4, Mission Impossible and Tap Sports Football, each contributing $4.9 million, $0.8 million, $0.6 million and $0.4 million respectively during third quarter of 2015 and making total revenue contribution of $6.7 million or 12% of total revenue during third quarter of 2015. Cooking Dash 2016 and Tap Sports Baseball 2015 each contributed $9.0 million and $1.3 million respectively to total second quarter of 2015 total company’s revenue of $10.8 million which is 20% of total non-GAAP revenue pie.

The extremely well-diversified revenue streams of Glu Mobile from several of its popular games introduced in the previous years and from those expected to be launched is believed to drive sustainable long-term company growth while delivering attractive shareholder returns.

There’s notably increasing consumer interest for the past several years for Glu Mobile's innovative set of mobile game solutions with sequential and year-over-year expanding cumulative installs.

Not in good shape

The sequential and year-over-year declining Daily Active User (DAU) and Monthly Active User (MAU) trends for Glu Mobile indicate weaker customer traction for the company’s latest released games for mobile platforms including 8 key introductions planned for 2016 such as Kendall and Kylie, Britney Spears: American Dream, Frontline Commando, Racing Rivals, Tap Sports Football and Tap Sports Baseball, Kim Kardashian: Hollywood, Contract Killer, Deer Hunter, Dino Hunter: Deadly Shores, Diner Dash, Cooking Dash, Mission Impossible: Rouge Nation, and Eternity Warriors.

The overall rising consumer interest for Glu’s recently launched new mobile games is countered by the continuously declining DAU and MAU trends which suggests that customers are spending less time playing these games on the mobile devices.

Importantly, Glu Mobile has entered into a strategic partnership with Tencent to modernize WeFire with Glu’s popular Shooter game IP called Frontline Commando. It is a hugely social game having scaled backend and PvP capabilities and is estimated to become live in North and South America, New Zealand, Australia and EMEA during late 2016 summer.


Overall, the investors are advised to “Hold” their position in Glu Mobile, Inc. considering the company’s significant long-term growth prospects being supported by a solid financial position with total cash of $159.28 million and no debt, encouraging the company to make future growth investments. However, the profit margin of -7.18% seems disappointing and signifies no profit but loss. The PEG ratio of -1.18 indicates no growth but decline compared to a somewhat healthy industry’s growth average of 0.88.
Published on May 25, 2016
By Subhen Mittra

Copyrighted 2016. Content published with author's permission.

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