Glu Mobile's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Glu Mobile Inc. (GLUU)

Q1 2012 Earnings Conference Call

May 02, 2012 4:30 PM ET

Executives

Greg Cannon – VP of Finance, Corporate Controller

Niccolo de Masi – President and CEO

Eric Ludwig – EVP and CFO

Analysts

Sean McGowa – Needam & Company

Darren Aftahi – Northland Securities

Michael Graham – Cannacord Genuity

Atul Bagga – Lazard Capital

Mark Argento – Craig-Hallum Capital Group

Adam Krejcik - Roth Capital Partners

Greg Scott – B Riley & Co.

John Taylor – Arcadia Investment Corporation

Presentation

Operator

Good afternoon. My name is Hope and I will be your conference operator today. At this time I would like to welcome everyone to the Glu Mobile First Quarter Earnings 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. Greg Cannon, Vice President of Finance, you may begin your conference.

Greg Cannon

Good afternoon everyone and thank you for joining us on the Glu Mobile first quarter 2012 financial results conference call. This is Greg Cannon, VP, Finance from Glu Mobile. On the call today, we have CEO, Niccolo de Masi and CFO, Eric Ludwig.

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 actual results to differ materially from those in the forward-looking statements.

We caution you to consider the important risk factors that could cause actual results to differ materially from those in the forward-looking statements in the press release and during this conference call. These risk factors are described in our press release and are more fully detailed under the caption and Risk Factors in the Form 10-Q filed with the Securities and Exchange Commission on March 14th, 2012.

During this call, we will present both GAAP and non-GAAP financial measures. Non-GAAP measures exclude the change in deferred revenues and royalties, amortization of in-process development contracts, amortization of intangibles, stock-based compensation charges, restructuring charges, changes in the fair value of the Blammo earn out, transitional costs, release of MIG pre-acquisition tax liabilities and foreign currency gains and losses primarily related to revaluation of assets and liabilities.

Additionally, we will be discussing adjusted EBITDA, which is defined as non-GAAP operating income or loss, excluding depreciation. These non-GAAP measures are not intended to be considered in isolation from, a substitute for, or superior to our GAAP results, and we encourage investors to consider all measures before making an investment decision. For complete information regarding our non-GAAP financial information, the most directly comparable GAAP measures and a quantitative reconciliation of those figures, please refer to today’s press release regarding our first quarter results.

The press release has also been furnished to the SEC as part of a Form 8-K. In addition, please note that the date of this conference call is May 2 nd, 2012 and 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 obligation to update these statements as a result of future events.

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

With that, I’ll turn the call over to Niccolo.

Niccolo de Masi

Good afternoon and a warm welcome to everyone joining us today. Before I begin, allow me to direct you to the supplemental presentation accompanying today’s earnings. It can be accessed via our investor website, glu.com/investors. In addition to the presentation, you will find video demos of our upcoming summer titles.

I am delighted to announce that in Q1 2012, we delivered $17.4 million of non-GAAP Smartphone revenue. This was ahead of expectations, representing 158% growth from the same period last year and a 17% growth quarter-on-quarter. The percentage of total non-GAAP revenue derived from Smartphones increased from 75% in Q4 ’11 to 81% in Q1 ’12. During the first quarter of 2012, we generated a modest adjusted EBITDA profit due to our strength Smartphone revenue, favorable gross margin expansion and tight cost controls. We anticipate the Smartphone revenue will continue to grow from Q1 levels in order to cover planned headcount growth, annual merit increases and direct marketing spend. Glu is expected to be sustainably adjusted EBITDA and operating cash flow positive from Q4 of this year onwards.

Underpinning these strong results were our update to our Q4 ’11 title launches as well as solid performances from new releases, Small Street and Samurai versus Zombies Defense. The latter was our first title from our Griptonite studio that we acquired last August. Both of these titles benefited from additional live beta testing prior to worldwide release. While launching later than originally anticipated, we believe this additional refinement period will lead to larger lifetime revenues and would have otherwise resulted from a more premature release.

Looking at these positive data points, we will be applying a similarly elongated live beta period for future new launches. This will reduce the number of titles reaching worldwide release in Q2. However, we believe in turn that this will set up Glu up for a strong second half of the year.

Read the rest of this transcript for free on seekingalpha.com

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