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While the whole gaming market was focused on Zynga (NASDAQ:ZNGA) and the social media gaming platform of Facebook (NASDAQ:FB) in 2011, Glu Mobile (NASDAQ:GLUU) quietly focused on building a mobile gaming empire. The company is scheduled to launch a total of 18 games in the back half of 2012.

The company is leading global developer and publisher of freemium games for smartphone and tablet devices.

The company that entered 2012 with some promise but little in the way of results is now growing smartphone revenues by 100% year-over-year. With Q4 set to begin next week, the company has a slew of strong titles including the currently popular Indestructible that ranks highly in the iOS app store.

Q3 Guidance

The company provided the following guidance from the Q2 earnings report:

  • Non-GAAP revenue is expected to be between $20.25 million and $21.25 million and non-GAAP smartphone revenue is expected to be between $17.5 million and $18.5 million.
  • Non-GAAP gross margin is expected to be approximately 89%.
  • Non-GAAP operating expenses are expected to be approximately $22.6 million.
  • Adjusted EBITDA loss, defined as non-GAAP operating loss excluding depreciation of approximately $600,000, is expected to range from a loss of $(3.1) million to a loss of $(4.0) million.
  • Income tax expense is expected to be $(0.2) million.
  • Non-GAAP net loss is expected to be between $(3.9) million and $(4.8) million, or a net loss of $(0.06) to $(0.07) per weighted-average basic share.

The company expects sequentially lower revenue due to a lack of new game launches in the 1H of 2012. Also, most of the Q3 launches were towards the end of Q3 leaving limited time to produce revenue this quarter.

Q3 Game Launches

Per the game list on the Glu Mobile website, the following games have been launched in Q3:

July 16 - Mutant Roadkill

July 30 - Gears & Guts

August 15 - Tavern Quest

August 21 - Eternity Warriors II

August 23 - Ham on the Run!

August 29 - Blood & Glory: Legend

September 5 - Campers!

September 5 - Bombshells: Hell's Belles

September 12 - Enchant U

September 12 - My Dragon

September 20 - Indestructible

The list is long and impressive, not to mention that it exceeds the expectations from the earnings call. The CEO only mentioned one title for August, yet the company released four games. On top of that, highly successful Indestructible was released in September, apparently early. That game currently ranks sixth on the Apple app store free game category. Under the action section, it is currently second.

Another strange move was the release of Blood & Glory: Legend in August after the CEO stated that it would be released in Q4.

The analysts were all over management on issues with releasing games on time, so these results should help alleviate some of the concerns.

Estimate Beats

This company has established a history of smashing earnings estimates recently. The last four quarters have seen the company beat estimates by an average of over $0.07.

Oddly, though, the analysts jumped right on the company's guidance of a $0.06 loss for Q3. Based on recent history, the company might just breakeven for the quarter. The game launch list suggests that actual numbers should crush the estimates.

Conclusion

Glu Mobile provides an interesting investment opportunity. The company that appeared sleepy when reviewing it last year has turned into a mobile gaming powerhouse. As the industry has turned to mobile apps and away from Facebook, the company is sitting in the sweet spot of the market.

Game makers such as Zynga and Electronic Arts (NASDAQ:EA) still derive a majority of revenues from other platforms or consoles leaving Glu as a leading mobile pure play. The company will undoubtedly face more competition from the big players, and questions will surface on whether the $20M in cash is enough to survive.

With only a $300M market cap, investors might have the opportunity to invest in a future market leader that wasn't provided with Zynga, which quickly topped out with a valuation over $10B. With expectations that Q3 results should be strong, investors need to look into loading up on this stock.

Source: Glu Mobile: Social Mobile Gaming Play

Additional disclosure: Please consult your financial advisor before making any investment decisions.