Glu Mobile: Still Speculating On What The Numbers Will Be

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 |  About: Glu Mobile Inc. (GLUU)
by: MTF Investing

Summary

The launch of Kim Kardashian: Hollywood will catapult 3rd Quarter earnings to a new level for Glu Mobile.

Using historic results of platforms and regions, investors can start to see the possibility for earnings.

While the historic percentages are a good starting point, the success of Kim Kardashian: Hollywood will likely skew the results.

"Liars can Figure, and Figures can Lie"

The end of June saw the launch of Kim Kardashian: Hollywood for Glu Mobile, Inc. (NASDAQ:GLUU), an app that will likely catapult Glu to a much higher level. For investors, the one frustrating part of this, was it came with just 6 days left in the 2nd Quarter, but turned in $1.6 million dollars in revenue for the Quarter. During the conference call, Management cautiously issued conservative guidance, however, based on past performance, investors can see how the company is currently doing.

In my previous article on Glu, I outlined what the company would have to do to meet their conservative guidance. This time I want to try and make an assessment of what is likely happening.

But first, a few Caveats and parameters:

  1. The success of Kim Kardashian: Hollywood will likely significantly alter the regional and platform percentages that have been relatively constant over the past quarters.
  2. These assumptions take into account the acquisition of Cie Games, which has not been finalized.
  3. It's too early to tell how popular Tap Sports Baseball will be. It is off to a good start, but I'm leaving it off for now.
  4. There will be a natural decline of these apps over time, however, it's the rate of decline that isn't certain as of yet. Some will fall out of favor faster than others.

In the past Glu has had some variation amongst percentage by region and by platform. The platform percentage has been fairly predictable favoring the iOS platform, and in the last Quarter the company did 56% of the revenue from the iOS and 38% from Android.

Click to enlarge

(Source: company presentation)

Regionally, the company has also been fairly constant, although the Asia Pacific percentage has been increasing and the North American percentage has been decreasing. This last quarter the company had 55% of the revenue originating from North America while 22% came from Asia Pacific and 23% came from the rest of the World.

Click to enlarge

(Source: company presentation)

I know there are some that don't like thinkgaming.com, however, I believe it provides a good starting point.

Click to enlarge

(Source: thinkgaming.com)

Glu has seen some of their previous games make the list and then quickly fall off. Hercules was briefly on the list before falling off, and currently Tap Sports Baseball is on the list, but before I would use that for a long-term prediction, I'd like to see it there longer.

Click to enlarge

So to start off, I used the data from thinkgaming.com to fill in the iOS portion of the North American revenue (in the purple shading). Again, as a caveat, these numbers will likely fluctuate over the quarter and gradually decline. Also, I included the acquisition of Racing Rivals, which won't contribute to the entire Quarter, but I'll take it out at the end. This represents the daily revenue in North America for both the iOS and Android platforms (estimated)

Next, I used those numbers to try and approximate the totals globally, based on the percentages for regions.

Click to enlarge

Again, I believe the KK:H effect on the revenues will definitely be altered after this quarter, but I believe this serves as a good starting point.

This totals up to $1,245,500 per day from the top four games per day. Based on historic trends, all other apps contribute approximately $200,000 per day in revenue, for a total of roughly $1,445,000 per day in revenue.

There are a total of 92 days in this Quarter, for a combined total estimate of $132,940,000 in revenue for the quarter. If the same percentages hold for Racing Rivals, then it would have contributed $171,816 in revenue per day. If the company closes on Cie games on the 1st of September, then it would contribute 30 days towards revenue, and I subtract out $10,309,000 from the total and arrive at an estimate of $122,631,000 in revenue for the Quarter.

The company put up conservative estimates of $80-85 million for the quarter:

Click to enlarge

(Source: company presentation)

These numbers come in at 30-35% under what my calculations put the numbers at using historic percentages. Even with a 20% discount to take into account the effect that KK:H will have on the percentages, the company will still come in at around $100,000,000.

Conclusion

Again, I want to reiterate, that I don't believe the historic numbers will hold up for the next quarter. The success of KK:H is such that it will skew the numbers. I believe revenue will be higher in the iOS platform and in North America, which will lower the numbers. However, using the historic numbers, and giving some room for "fudging," I believe management is very conservative in their guidance. However, as I stated in the beginning:

"Liars can Figure, and Figures can Lie"

Disclosure: The author is long GLUU.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.