Glu Mobile Inc. Q2 2010 Earnings Call Transcript

Aug. 3.10 | About: Glu Mobile (GLUU)

Glu Mobile Inc. (NASDAQ:GLUU)

Q2 2010 Earnings Call Transcript

August 3, 2010 4:30 pm ET


Seth Potter – IR, ICR

Niccolo de Masi – President and CEO

Eric Ludwig – SVP of Finance, Assistant Secretary and CFO


Tavis McCourt – Morgan Keegan

Todd Greenwald – Signal Hill

Scott Searle – Merriman Curhan Ford & Co.


Good afternoon. My name is Asha and I will be your conference operator today. At this time, I would like to welcome everyone to the Glu Mobile second quarter 2010 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you.

Mr. Potter, you may begin your conference.

Seth Potter

Okay. Thank you, and good afternoon, everyone. And thank you again for joining us on the Glu Mobile second quarter 2010 financial results conference call. This is Seth Potter from ICR. And on today call, we have Niccolo de Masi the CEO, and Eric Ludwig, CFO.

During the course of this call, we will make forward-looking statements regarding future events and the future financial performance of the company. Generally these statements are identified by the use of the words such as expect, believe, anticipate, intend, and other words that denote future events. These forward-looking statements are subject to material risks and uncertainties that could cause the actual results to differ materially from those in the forward-looking statements.

We caution you to consider the important risk factors that could cause the actual results to differ materially from those in the forward-looking statements in the press release and in this conference call. These risk factors are described in our press release and are more fully detailed under the caption Risk Factors in the Form 10-Q filed with the SEC on May 14th, 2010.

During this call, we will present both GAAP and non-GAAP financial numbers. Non-GAAP measures exclude acquired in-process, research and development, amortization of intangibles, stock-based compensation charges, gain or impairment of auction rate securities, restructuring charges, the non-equity component of the MIG earn out, transitional expenses and foreign currency gains and losses primarily related to revaluation of assets and liability. These non-GAAP measures are not intended to be or considered in isolation from or substitute for or superior to our GAAP results and we encourage investors to consider all measures before taking an investment decision.

For complete information regarding our non-GAAP financial information, the most directly comparable GAAP measures and a quantitative reconciliation of these figures, please refer to today’s press release regarding our second quarter results.

The press release also has been furnished to the SEC as part of a Form 10 – 8-K. In addition, please note that the date of this conference call is August 3, 2010 any forward-looking statements that we may make today are based on assumptions that we believe to be reasonable as of this date. We undertake no further obligation to update these statements as a result of future events.

Lastly, this call is the property of Glu Mobile and any recording, reproduction or rebroadcast of this conference call without the expressed written permission of Glu is strictly prohibited.

With that, I will turn over the call over to the company, Niccolo?

Niccolo de Masi

Great, thanks Seth. Good afternoon and thank you everyone for joining us today. Over the three past months, we’ve continued to execute on our plan. I will focus today on four topics, our balance sheet, the evolution and expansion of our executive team, our product roadmap and Q2 results.

Our balance sheet has been strengthened on schedule, as we anticipate receiving $13.5 million of new money surely after shareholder approval on August 26. Stockholders representing more than half of our outstanding shares have entered into voting agreements supporting our financing which has seen wide scale participation from both existing and new investors.

Following the closing of the financing, we believe our current business plan will be fully funded with the financial resources to scale our smartphone revenues across all platforms worldwide.

To strengthen execution of our new social product strategy, we’ve attracted key talent to Glu and are pleased to announce the appointment of John Carlos Murray [ph] as Chief Creative Officer. Previously at Activision, EA and Microsoft, John Carlos brings a proven track record in creating successful original IP and a wealth of game and experience to Glu. Prior to Glu, John Carlos has had creative leadership roles on titles and franchises such as Activision’s Tony Hawk and True Crime as well as several DreamWork’s titles including Shrek the Third, Bee Movie and Kung Fu Panda.

John Carlos responsibilities will include providing an overarching creative direction to Glu, as well as developing our original IP into recognized franchises. To drive growth of monetization of Glu’s user base across all smartphones we’re delighted to announce Arthur Coleman [ph] as VP of eCommerce and Michael Breslin as VP of Marketing. Also with formally at, Ironkey and Seafarers, and we’ll bring industry-leading expertise to the role.

Michael Breslin is a digital gaming veteran and joins us from Oberon Media/I-Play and previously Disney Interactive. We’ve created a new SVP of R&D position and appointed Kellier [ph] to this role overseeing global development. Kell was previous VP of Text Services and oversaw Glu’s Global Research & Tools and Porting teams. In this new position, Kell will be focused on driving studio efficiency as well as growing our capacity to sustain our upcoming games as a live service.

Today, we also announced (inaudible) since he accepted the role of VP of Production, overseen all executive production worldwide. Our executive producers in San Mateo will allow us to leverage our low cost development while still ensuring cultural relevance for North America and Western European Smartphone consumers. Previously, Darren was head of our San Mateo studio and has played a pivotal roll in the development of our most successful and reasonable IP to-date, Super K.O. Boxing and Glyder.

Working in partnership, Kell and Darren will ensure we leverage our global studios to create innovative products on schedule to capture the consumers’ imagination.

With this – with these new appoints and positions we believe Glu now has a bend strength and expertise to deliver growth in our chosen battle ground of mobile social gaming.

Moving now on to our new product strategy, our premium product lineup a few for has taken shape and we’ll see five persistent titles launch during the quarter. Glu’s technology in D platform expertise will allow us to deliver a growing pipeline of persistent social games, not just for iPhone but also Android, Windows and HP Palm.

Glu users will be able to invite their friends to play both with and against them, regardless of operating system, career or form factor. We believe our global reach and cross platform gameplay we allow greater virility in potential volume size and single platform competitors. Glu is focused down on three zones where we’ve had historic strength and anticipated continued market growth, same as in virtual world, action, adventure and alternative sports.

Our five persistent Q4 titles are comprised of three similar titles, one action adventure and one alternative sports title. We will also be launching a small ground of non-persistent premium test product at the end of Q3. We’ll have a formal and valiant of our titles that will launch event in San Francisco in early October. Beyond Q4, we expect to launch at least one quality social title per month and we expect volumes to ramp up significantly in the second half of 2011.

Moving finally under our Q2 results highlights, progress continued in the second quarter with smartphone revenues growing 21% quarter-over-quarter to $1.9 million even with very limited new launches. We averaged over 130 minutes of monthly gameplay on our iPhone titles alone, micro-transaction and advertising accounted for over 16% of Q2 smartphone revenues, more than doubling from Q1. Our daily active user base on iPhone grew to over 300,000 and we believe is monetizing on par with online social game audiences.

Q2 feature phone revenues declined less than expectations due to increasing market share and solid execution. This along with $1.6 million reduction in OpEx since the first quarter helped us generate $610,000 in falls of operating cash flow. Feature phone revenue contribution is allowing us to invest aggressively in our social smartphone roadmap.

We believe that our foundation for success continue to strengthen as we’ve addressed both financial and strategic concerns overhanging in our business. The Glu team is now focused on operations and assuring a success of each new product launch.

I want to take this moment to thank all of our stakeholders both internal and external for the support and dedication to the new Glu. I’ll now hand over to Eric, to discuss our second quarter financial results in detail.

Eric Ludwig

Great. Thank you, Niccolo. Let me first review our second quarter results and I’ll go through our outlook.

Starting with the income statement for the second quarter, total revenue for the quarter was $16 million which was above our guidance range of $13.6 to $14 million, but down compared to $17.3 million during the first quarter 2010 to $19.9 million in the year ago quarter. Similar to the first quarter 2010, the feature phone business performed better than expected despite declining approximately 11% sequentially and 20% – 26% on a year-over-year basis.

While we were pleased with our performance, we expect the acceleration of our feature phone business to continue for the reminder of the year and we’ll remain focus on increasing our studio on porting capacity on the smartphone platforms.

Breaking down our revenues, our smartphones revenues were $1.9 million, which was up 21% compared to the first quarter of 2010, and approximately 130% over the second quarter of 2009. As Niccolo mentioned in his prepared remarks, micro-transactions and in-game advertising increased 127% on a quarter-over-quarter basis and accounted for over 16% of our smartphone revenues, and this is despite our limited launch in new titles in Q2.

The micro-transactions that we realized this quarter were from one-time consumables on our pay titles as opposed to transactions on the free-to-play games we’ll be launching in the fourth quarter. One example of our micro-transactions were table revise in World Series of Poker. As customers planned 9% table working with exempt to the head-to-head competition with the last player, if the player loses at any point during play, they could have a fourth of their buying and restart the table and perhaps take 20 to 30 minutes to get back to the head-to-head competition or they can pay $1 and get back to the point of the competition where they busted out.

In the second quarter across all titles, we generated 294,000 micro-transaction billable events. We remain extremely encouraged by this trend given our new free-to-play persistent titles launching in the fourth quarter.

As a reminder, we define smartphone revenue as the revenue from title for about Android, Windows Mobile, Blackberry, iPhone, iPad, Palm and OV as well as revenues from in-game advertising. I have one point of clarification that Niccolo mentioned in his script, we had 130 million minutes of gameplay in the month of June on the iPhone platform.

Turning to specific revenue metrics, our top ten titles accounted for 38% of revenue down from 46% in the prior quarter and up from 37% during the same quarter last year. The average revenue for top ten titles was $606,000 in the second quarter 2010, down from 791,000 in the first quarter 2010 and $734,000 during the same period last year. Our largest title was 6% of revenue, this is down from 9% in the first quarter 2010 and up from 5% in the year ago quarter.

During the second quarter revenue from new titles represented 42% of revenue down from 50% of revenue in the first quarter 2010 and down from 54% in the same period last year. In terms of the mix of revenue between licensed titles and original IP, original IP was 19% in the second quarter 2010, down from 20% last quarter and 21% during the second quarter of 2009. Since the majority of titles being launched in the fourth quarter and beyond on original IP we anticipate this percentage to turn higher.

Turning to the breakdown by career, our top four careers are accounted for approximately 36% of revenue in the second quarter 2010 compared to 40% in the first quarter 2010 and 43% in the second quarter of 2009. We had one career in the second quarter of 2010 that represented 10% of more revenue, Verizon at 16%.

By geography, our revenue mix in the second quarter of 2010 was 51% in North America, 28% in EMEA and 21% in the rest of the world. Royalties in the current quarter were $4.9 million which represented 31% of revenue compared to 27% for the first quarter of 2010 and 31% during the same period last year. They should be noted that we incurred a royalty impairment totaling $665,000 due to two movie titles in a large multi-title license. Excluding the royalty impairment charges in the second quarter 2010 and $589,000 in the second quarter of 2009, royalties as a percentage of revenues would have been 27% in Q2 2010 and 29% in the second quarter 2009.

Although, we are disappointed by this royalty impairment, I would like to point out that this is had the effect of just increasing the effective royalty rates of the impaired titles to the largest impairment this quarter this have the effect of causing the overall effective royalty rate to increase from 25% to 27% which is still 600 basis points lower than our overall average branded royalty expense of 33%.

Turning to profitability, we’ll be providing non-GAAP measures for each second quarter 2010 expense category, a full reconciliation of GAAP to non-GAAP financial measures were included in the press release we issued today. Non-GAAP gross margin was 69% in the second quarter 2010, which is down from 73% during the first quarter 2010 and flat with the 69% report in the same period last year. Excluding the royalty impairments in the second quarter 2010 and second quarter 2009, non-GAAP gross margin increased to 73.2% from 71.5% in the second quarter 2009.

Total non-GAAP operating expenses in the second quarter 2010 were $11.4 million, down 12% from 12.9 million during the first quarter 2010 and down 13% from 13.1 million during the same period last year. The sequential and year-over-year decline was result of our ability to cut cost more quickly and realized savings from recently announced restructurings. We expect quarterly OpEx to remain approximately at this level for the reminder of the year.

Breaking down our expense levels on a non-GAAP basis for the second quarter, R&D was 6.1 million or 38% of revenue compared to 6.5 million or 38% of revenue in the first quarter 2010. The absolute decrease was driven by the reallocation of headcount from more expensive studios to our lower cost studios to support our new product strategy. Sales and marketing expense was $2.4 million or 15% of revenue down from 2.9 million or 17% of revenue in the first quarter 2010. This decline was primarily due to converting our Latin American sales and marketing team from a fixed employee structure to a third-party variable distribution plan.

G&A was $2.9 million or 18% of revenue for the quarter, down from 3.5 million or 20% last quarter due to the continuation of cost control across entire organization.

The better-than-expected – the combination of the better-than-expected revenue from our feature phone business growth to smartphone revenues and aggressive cost reductions resulted in us reporting a non-GAAP loss from operations for the second quarter of $360,000 which was well above our guidance of a loss of between 1.8 million and 2.1 million.

Income tax during the quarter was comprised of a tax benefit of $61,000 and $259,000 expense performed with holding taxes for a net income expense, for a net income tax expense of $198,000. Our non-GAAP net loss of $689,000 or loss of $0.02 per basic share exceeded our guidance range of a loss of $0.08 to $0.09 per basic share.

Let me now walk through our results to the second quarter of 2010 on a GAAP basis, which include $1.1 million related to the amortization of intangibles, $349,000 related to the allocation of stock-based compensation, a $693,000 restructuring charge, and $429,000 of foreign exchange loss, the following expense levels determine in accordance with GAAP. Cost of revenues 5.9 million, R&D 6.2 million, sales and marketing 2.4 million and G&A 3.1 million.

The restructuring charge we recorded this quarter was up $693,000 related to severance of separation costs from employee termination as well as a further non-cash impairment of our portion – of a portion of San Mateo headquarters. For the second quarter, GAAP loss from operations of $2.5 million and net loss applicable to common shareholders was 3.2 million. Based on 30.7 million basic shares outstanding net loss applicable to common shareholders was a loss of $0.10 per basic share.

As I mentioned earlier, reconciliation of GAAP to non-GAAP, gross profit expenses, loss from operations and net loss can be found be in our press release and current report of Form 8-K filed with the SEC today.

Now, turning to the balance sheet, cash and cash equivalents were $6.2 million as of June 30, compared to $10.5 million at the end of the first quarter and above our expectation of $4.3 million. The better-than-expected ending cash balance at the end of the quarter was due to the generation of $610,000 in cash from operations as we achieved strong collections during the quarter. This is the fifth consecutive quarter for Glu reporting positive cash flows from operations and it should we note that we’ve cumulatively generated $3.3 million in positive cash flows from operations over the last year and half, six quarters.

The strong positive cash flow from operations was offset by the $5,256,000 make earn out payments made during the quarter. Additionally in July 2010, we paid $438,000 of taxes that had been withheld on the June 30th special bonus payment made to the former MIG shareholders in China.

In regards to remaining obligations to the former MIG shareholders, we are $6,125,000 of principle and $161,000 of accrued interest which is due as follows; $3,063,000 of principle and $107,000 of interest due in September 30, 2010 and a final payment of $3,062,000 of principle and $54,000 of interest due on December 31, 2010.

Addition, at the end of the second quarter 2010, we had $2.8 million outstanding on our credit with Silicon Valley Bank, down from 3.1 million during the first quarter 2010 and $4.7 million during the fourth quarter of 2009 and we were in compliance with all the financial covenants related to the facility. During the second quarter of 2010, we achieved EBITDA is defined by a lender of a positive $164,000 which was well above the covenant of a loss of 1.1 million.

To help you reconcile our second quarter GAAP loss of $3,218,000 to the second quarter EBITDA is defined by our lender, you need to add back $137,000 of interest expense, $198,000 of income tax expense, $548,000 depreciation expense, $158,000 of amortization of intangibles, $349,000 of stock-based compensation, $663,000 of royalty impairments and the $429,000 foreign exchange loss.

So in summary, I’m very pleased with our ability to generate positive cash flow from operations as we continue to move forward on repositioning the business. The combination of better-than-expected feature phone revenues, ramping smartphone revenues and accelerated reduction in operating expenses from recent restructuring initiatives and strong receivable collections led to the solid quarter.

As Niccolo mentioned in the prepared remarks, we are pleased with our ability to address our liquidity concerns given the recently announced private placement of $13.5 million which is expected to hit the balance sheet within a few days after the shareholder approval on August 26, assuming the other customary conditions to closing would be satisfied. With the private placing proceeds I believe that Glu is well-positioned to execute this new strategy and look forward to sharing additional product news over the coming quarter.

Now, let’s review our guidance. Over the third quarter of 2010, we currently expect revenues in a range of 13.6 million to $14 million. The factors driving the sequential decline include the continued deterioration of revenues from feature phones as the industry transition to smartphones and limited smartphone growth during the next quarter as we execute our product shift to begin releasing our premium titles in the fourth quarter. We expect OpEx for the third quarter of 2010 to be $11.7 million. This is up slightly on a sequential basis, as we expect to invest in our product pipeline and adding to our senior management team.

Our non-GAAP operating loss for the third quarter is forecasted to be a range of a loss of 1.6 million to a loss of 1.9 million. Our income tax expense for the third quarter is expected to be $589,000 and reflects formal holding taxes of $381,000 and an income tax expense of $208,000. Non-GAAP net loss for the third quarter is expected to be between a loss of 2.3 million and a loss of 2.6 million or loss of $0.07 per basic share. The non-GAAP loss excludes 1.1 million for amortization of intangibles approximately $341,000 of stock-based compensation and a restructuring charge of $50,000.

Weighted average common shareholders outstanding for the third quarter of 2010 are expected to be approximately 35.3 million basic and 35.8 million diluted and reflects only one month of the addition 13.5 million shares from the fund raising currently expected to close at the end of August.

GAAP net loss for the third is expected to be between a loss of 3.7 million and a loss of 4 million or loss between $0.10 and $0.11 per basic share. And consistent with last quarter where we’re framing from providing full year income statement guidance, we are forecasting cash from operations to be slightly negative in the third quarter with no change in the line of credit draw down of $2.8 million and an ending cash balance of approximately $14 million after the closing of our private placement and repayment of the September 30 payments to the former MIG shareholders.

Once this financing is completed, our business plan will be fully funded and we expect to end 2010 with over $13 million in cash and equivalents in the balance sheet which includes our repaying for the remaining or non-payments to the MIG shareholders and it assumes a line of credit has drawn down at the current level of $2.8 million.

With that, I’ll turn over to the operator for questions. Operator?

Question-and-Answer Session


(Operator instructions) Your first question comes from the line of Tavis McCourt with Morgan Keegan.

Tavis McCourt – Morgan Keegan

Hi, thanks for taking my questions. Niccolo, I want to be good, kind of repeat, or maybe give a little more detail on the launch schedule for games. You said something about kind of the ramp really getting aggressive in the back half of 2011, well what rate of kind of game launches should we expect and is that really the name of the game or is it really about trying to comp with homerun titles? And then secondly, Eric, what is the full share count expected to be after the capital raise?

Niccolo de Masi

Sure, great. Okay so, let me jump into the first question. We, of course, believe that we’re trying to deliver titles with the highest value and average if possible. So the – this is the business that of course will have an exponential difference between premium, premium titles success versus your average and below average titles. But at the same, we are realistic I’ve been in this business for 8 or 9 years about how big titles can be and anyone given the penetration of smartphones in the marketplace and tablet and so on.

And to give you some color on that, you – we’re all very, very hard press to find an iPhone only title for example, that generates more than $10 million of revenue a year so given that, there has to be a substantial volume of titles behind that for us to be business that’s able to grow it’s overall revenues. So we are focused on every title being capable of a homerun. We’re also focused on ensuring that any title whether or not to homerun is as persistent as possible for those very long tail on the revenue, every title we launch is capable of being operated as a live title and a live service. But at the same time, we do believe that our historical capacity for bringing new titles to market is probably approximately right and we typically I believe put out 25 to 35 titles a year. We are looking to ensure that after Q4 the rate only is maintained or increased. So we’ve mentioned today we have five titles that will go live before Christmas. Thereafter, we expect a similarish rate probably in the first half of the year and we expect that rate to obviously increase get to our historical average in the second half of 2011.

Eric Ludwig

Great. And Tavis on the share count that we’re guiding that Q3 shares will be $35.8 million which has about 4.4 million weighted average shares from the fund raise and then we are anticipating by year-end it’ll be 46.4 million shares outstanding with the full 13.5 million shares from the fund raise. And that does not include any of the dilutive effects from the warrants because and our current assumptions and the current stock price that warrants are not dilutive but at a ramping stock price and the warrants will become dilutive easing the treasury method to buyback shares.

Tavis McCourt – Morgan Keegan

Yeah, understood. And then repeat what’s your operating cost guidance with for Q3 and then how should we expect that to ramp as the game launches increase?

Eric Ludwig

Yeah. So we’ve been very aggressive in our cost cutting exercises as we’ve taken out expensive locations with headcount in London in particular, and we’ve been rehiring folks in China and Russia. So we guided Q3’s OpEx to be $11.7 million and you can expect Q4’s is probably pretty consistent between the Q2 and Q3 numbers. And we’ve not yet given guidance for 2011 yet but we’re working as much as possible to try to keep headcount flat and leverage the cash that we’ve got to be breakeven.

Tavis McCourt – Morgan Keegan

Great. Thanks a lot.

Eric Ludwig

Great. Thanks Tavis.


(Operator instructions) Your next question comes from the line of Todd Greenwald with Signal Hill

Todd Greenwald – Signal Hill

Thanks. Hey, good job on the quarter guys. Couple of questions, just on the – maybe I wonder if you comment on some of the economics or some of these new revenue streams especially when you’re dealing with license titles like the success you’ve had with World Series of Poker, I mean what happens as your business trends, micro-transactions and game advertising, do you split up that revenue with the brand owner or is it something different and then also on that note just any change to your relationship with one of your better license or is they’ve PopCap?

Eric Ludwig

Sure. So on the economics of new revenue streams and I’m not talking specific about World Series of Poker, but pretty much all of our license agreements have revenue being the metrics, so whether it’s revenue from one-time download, micro-transactions, in-game advertising, it’s all viewed the same for the most part and the royalty rates that we’ve negotiated whether it’s a flat rate or a tiered royalty rate would be accordingly paid as a percentage of revenue. And then on PopCap, we’ve had a very, very long-term relationship with PopCap with several of their titles and they just recently announced going with another party on Zuma’s Revenge! So we definitely will be seeing Zuma revenue declining which is one of the reasons why we’re guiding our revenue down from Q2 to Q3.

Niccolo de Masi

I’ll add to that Todd, as we said when I got here that we of course were looking to increase the mix of original IP. We have raised the bar on all licensing opportunities across the board and so in some instances we’re probably going to find that other people have different calculations and different bars and different strategic priorities to sort of execute on. And so we so far have not overbid anything or lost anything that we feel to a total degree to our ability to build the business we’re trying to over the next couple of years.

Eric Ludwig

And just to add to that to what Niccolo said, of the six titles are launching the one test product in Q3 and the five premium titles, only one of those titles will be a branded IP, the rest are original IP. We’ve really ramped up that creative focus and original IP focus and that’ll be the theme for next year as well but we’re not abandoning license or but we’re definitely shifting to original IP as well.

Todd Greenwald – Signal Hill

So what do you think that the next original IP looks like say 12 months or 18 months from now, how do you think that mix can get?

Eric Ludwig

Yeah. I mean I would definitely – obviously this is going to be ramping up I think probably by the end of next year, your conservative number could be from the 19 to 20% that we’ve been managing something well above 30% but beyond that it’s still kind of an exercise as opposed to real clarity as to what it will get to.

Todd Greenwald – Signal Hill

Okay great. Thank you.


(Operator Instructions) There are no further questions at this time. I would like to turn the call back to management for closing remarks. I’m sorry. You do have a question from Scott Searle from Merriman.

Scott Searle – Merriman Curhan Ford & Co.

Hey, good afternoon. Just a quick question on China where that shook out in the quarter, it looks your overall APAC revenues were down and I thought there was a pricing impact as it related to some of the Chinese careers in the June quarter. So if you could kind of update us on China and then does that mean that the non-China biz actually grew? And then just kind of looking at the guidance for the quarter, you mentioned in one of the titles that your licensing agreement is expiring, could you – it’s not one of your – it’s not your highest gross in title I believe, so are you seeing something else on the margin that you continue to expect the feature phone revenue to come down which is very reasonable but you got it for the last quarter, we didn’t see it – are you being conservative or is there something else out there that’s really telling you now as you look at the linearity on a monthly basis that the feature phone revenue is starting to roll over?

Eric Ludwig

Okay, great. First thanks for the very last minute question there Scott. So I think there was three components to that question, I broke down two of them. So China, we didn’t specifically talk about China, we embed China in the rest of world. So it was basically flat on a quarter-to-quarter basis when you adjust out the rev share changes – rev share changes that happened in the middle of Q1. So China was roughly $1.3 million this quarter which would have been pro forma flat.

On the feature phone decline, the third question, we certainly have been guiding that our revenues will keep coming down. It didn’t happen to the degree we guided last quarter, certainly a portion of that was conservancy but we certainly do see careers focusing more and more in smartphones and less and less in feature phones and given hours in our competitors, denominator is bigger in feature phones than it is in smartphones until the crossover point happens you’re going to keep seeing decline. And given the fact that a lot of the careers have yet to fully enable their smartphone platforms to provision for all that is smartphones, you just Scott, you’ve less addressable market on the ramping smartphone market. And then third – the second question – what was second question Scott?

Scott Searle – Merriman Curhan Ford & Co.

Actually I’m not sure, but Eric, if I could – if I could follow up on the, just on the smartphone side for a second, is most of your smartphone revenue then focused on North America or you’re starting to see some of that permeate down into two other regions just as I’m looking at the quarterly regional comparisons. And going forward, when you talk about new – the new titles that you’re going to launch, should we assume that that’s going to be across all plat – smartphone platforms in a reasonable amount of time, so iPhone, Android et cetera as opposed to some of the earlier platforms which are really more iPhone centric?

Eric Ludwig

Yeah. So there is our last question first. Absolutely within a month or two you will see all of our new titles ramping across all smartphone platforms Android, iPhone, iPad et cetera, so that is definitely part of the theme. And then on the first component of that question on the smartphones, what was the first question?

Scott Searle – Merriman Curhan Ford & Co.

Geographic mix on smartphone is really…

Eric Ludwig

Yeah. So geographically – yeah geographically, so for everything other than iPhone it’s still in the North America phenomena. On the iPhone that we certainly are seeing EMEA and rest of the world being 30 to 35% of the overall iPhone revenue coming from outside the U.S. and that’s consistent with what we’ve heard other publishers on the iPhone to experience as well.

Niccolo de Masi

I’m sure Scott, you sort of follow news, so you’ve seen the incredible up list and penetration form Android which is obviously a multi-OEM sort of software platform strategy that Google is pursuing. So we absolutely believe that it will permeate all regions albeit with probably a bit of a lag from the States overall. And one thing I just sort of add to that is sort of its sort – it is sort of central underpinnings of Glu’s strategy that we believe that when you’re running a premium model which is all about audience, you need to be able to address the entire audience and that’s something obviously we’ve been doing for 8 or 9 years on feature phones but going forward with smartphones we think it’s enormous advantage to be able to have a game that is maximum viral because of course, especially on the global business, eventually all 3 billion people that have feature phones will probably get a smartphone in the coming years. And to be a really big business, their games have to able to be viral across all platforms. You don’t have a viral game if you have to have a friend with exactly the same handset and operating system as you do. And that’s actually held back the mobile industry historically not having that sort of modernization, but Glu is of course able to tend largely sold that by a virtue of what we’ve been up to for the past 8 or 9 years with our technology infrastructure.

Scott Searle – Merriman Curhan Ford & Co.

Maybe just quickly to follow-up on your Android comment. From a – I think some of your concerns earlier would be able to monetize on that platform, is that becoming easier now and as it relates to career stores fronts, how would you characterize where they are today, are they getting to the point where it’s going to make it easy to easier to monetize it your products across multiple platforms or no, is there a still lot of work to do from a career standpoint?

Niccolo de Masi

Well all the – all the smartphone platforms that have a multi-OEM strategy, whether it’s Windows Phone 7 or RIM, not RIM actually but data multi-device strategy same with the Android. They probably are going to be integrated quite nicely into career stores by virtue of the fragmentation strategy that they’ve got and we’re seeing that career building is slowly but surely getting implemented with more and more – more and more OEMs in more and more countries. And similarly we’re seeing that career smartphone stores are slowly but surely adding more handset models and more smartphone platforms to them. So it’s still early days but the trends that we’ve been on I’m talking about for the past six months continue to play out, of course we’d like them to play out faster but we do believe that we will have a very solid market share on career smartphone stores as these of all for the next 12 to 18 months.

Scott Searle – Merriman Curhan Ford & Co.

Great. Thank you.

Niccolo de Masi

And for the platform itself, Android of course is also on it’s own right Google is integrating more billing, more in that purchase, more advertising and other monetization method to keep up with guys on marketplace.

Scott Searle – Merriman Curhan Ford & Co.


Eric Ludwig

Okay. Thanks Scott.


There are no further questions at this time. I would now like to turn the call back to management for closing remarks.

Niccolo de Masi

Right, wonderful. Well I think everyone can see we’ve had an instrumental progress in the past quarter. All the trends that we have been addressing since I rise here continue to favor Glu’s infrastructure strategy et cetera and we look forward to speak with all of you in a quarter’s time.

Eric Ludwig

Great, thank you very much.


Thank you. This does conclude today’s conference call. You may now disconnect your line.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to All other use is prohibited.


If you have any additional questions about our online transcripts, please contact us at: Thank you!