Glu fears bigger-than-expected Q3 losses after Q2 revenue slump

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Glu Mobile (NASDAQ:GLUU) warned investors to brace for bigger-than-expected losses in the current quarter after the game publisher reported second quarter revenues of $24.4 million, down 16.5 percent year-over-year.

Glu posted second quarter 2013 losses of $2.9 million, compared to $3 million a year ago. The firm anticipates an adjusted third-quarter loss of between 10 cents and 11 cents per share and revenue in the range of $19.6 million to $21 million--analysts were expecting a loss of 3 cents per share on revenue of $21.8 million for the period, according to Thomson Reuters I/B/E/S.

Glu reported non-GAAP second-quarter smartphone revenues of $21.8 million. Non-GAAP freemium revenues from in-app purchases, advertising and offers reached $20.4 million. "Our second quarter results were primarily driven by the continuing traction with our strong Q1 launches, specifically Frontline Commando: D-Day and Heroes of Destiny," said Glu CFO Eric Ludwig. "We experienced an improvement in overall monetization and retention rates on these two titles during the second quarter, which was the result of updated content and live ops events. Our updated guidance reflects an adjusted launch schedule as we continue to invest in improving expected lifetime value of our games prior to launch."

Glu released its first third-party title Black Gate: Inferno in July, with a second, Odyssey: Age of Gods, scheduled to launch this month. July also witnessed the release of two first-party titles, Tons of Guns and Zombies Ate My Friends. Upcoming Glu launches include new installments in popular franchises Deer HunterEternity Warriors and Frontline Commando.

"This year we are making significant investments in all of the technologies required to operate fully online games as a service or GaaS," said Glu CEO Niccolo de Masi during the firm's earnings call, according to a Seeking Alpha transcript. "Currently the Glu GaaS platform, nicknamed 'GluOn,' is targeted at and tightly integrated with our internal themes. Over the coming years we see this investment as engendering a sustained technology advantage which can be monetized in additional business model. Second and third-party publishing is a primary example of an additional monetization model for GluOn. Long term, we believe that the use of big data, machine learning and merchandising will progress to the level seen in firms such as Amazon (NASDAQ:AMZN), eBay and Google (NASDAQ:GOOG). We as such expect GluOn to become an ever more critical contributor to our sustained success."

The company said it would launch GluOn in the third quarter.

Glu also its revised financial statements for 2010 and restated financial reports for 2011, 2012 and the first quarter of this year. The company determined that smartphone revenues and cost of revenues for sales to consumers through digital storefronts needed to be restated to a gross accounting basis, rather than the net basis previously applied.

"What this means is that we are now including the 30 percent commission and fees at Apple (NASDAQ:AAPL), Google and Amazon among others, keep for their distribution and billing services in both revenues and cost of revenues for in-app purchases," Ludwig said. "Smartphone advertising revenues via third-party ad networks and feature phone revenues are unaffected by this and will continue to be recognized on a net basis."

For more:
- read this release
- read this Seeking Alpha transcript

Special Report: Wireless in the second quarter of 2013

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