Glu Q3 analyst call: more details

Yesterday, Glu Mobile announced its Q3 financials, reporting revenues of $23.9 million for the quarter. You can read the basic details in our story last night, as well as news of Glu's plans to expand into web social games.

However, last night Glu held its analyst conference call, in which there was a bunch more stats and opinion from the company on Q3 and its outlook for the future. Naturally, we've been listening in to the webcast (and you can read a full transcript here), but here's some highlights.

• Recent acquisitions MIG and Superscape generated $5.6 million of Glu's $23.9 million of revenues in Q3. Strip those out, and Glu's year-on-year growth was $16.7 million to $18.3 million.
   
• Own-IP games generated 28 per cent of Glu's Q3 revenues up from 11 per cent in Q3 2007, thanks to games from MIG and Superscape mainly.
   
• New titles generated 48 per cent of Glu's Q3 revenues (43 per cent a year ago), while Glu's top four carriers accounted for 44 per cent of its Q3 revenues (49 per cent a year ago). One carrier accounts for 21 per cent of Glu's revenues.
   
• Geographical split in Q3: 49 per cent North America, 29 per cent EMEA, 22 per cent in the rest of the world.
   
• Royalty payouts during Q3 were $5.8 million 24.1 per cent of Glu's revenues. R&D spending was $8.8 million (37 per cent), and sales and marketing costs were $4.1 million (17 per cent). These three areas account for 78.1 per cent of Glu's total revenues.
   
• Glu CFO Eric Ludwig estimated that the company will end the year with around $17 million n cash, short-term investments and marketable securities, plus an additional $8 million of cash available in a credit facility.
   
• However, as part of the MIG acquisition deal, that company's shareholders are due a payment of $19.8 million in cash and stock (well, $12.1 million in cash, $5.2 million in cash or stock, and $2.5 million in stock) by the end of Q2 2009. "We believe we have the means to address our cas in 2009, however in tough uncertain times, we are exploring a number of alternatives to expand the liquidity," said Ludwig.
   
• Prediction for Q4 2008: revenues of $21-22 million, and operating expenses of $16.3-16.4 million. A GAAP net loss of between $6.7 million and $7.4 million.
   
• Prediction for the full-year 2008: a GAAP net loss of between $76.2 million and $76.9 million.
   
• Glu says consumer spending is slowing, meaning that individual game revenues are on the slide. "Titles that are hits today are not generating the same revenue that we would have seen for a hit last year, and this slowdown has clearly spread to parts of Europe and is even beginning to show in China."
   
• Currency fluctuations are also squeezing Glu's financials. "Even in those worldwide regions that are doing well in unit sales, our revenues are being impacted by the sudden and dramatic fluctuations in currency exchanges," said Ballard.
   
• Successes for Glu in Q3 included The Dark Knight, which sold strongly around the world, while in individual markets games like Family Feud (US), Wheel Of Fortune (France) and Brain Genius 2 and Beijing 2008 (Spain).
   
• The initial success of iPhone (and to a lesser extent N-Gage and Android) has hurt sales of traditional mobile games through carriers. Or, as Ballard put it, they have "had the initial effects of growing some of best-downloading customers away from the carrier-base business... the number of people downloading on carrier-base handsets has diminished since the launch of the iPhone."
   
• Glu has already shifted nearly 30 per cent of its development resources for 2009 products into "higher-end devices", with the aim of capitalising on iPhone, N-Gage and Android "without increasing our overall R&D expenditures". Every Glu game in 2009 will be published on at least one of these next-generation platforms.
   
• Ballard said Glu is enthusiastic about N-Gage, even through it's not generating meaningful revenues yet. "Europeans will tell you that the N-Gage to them is as much a phenomenon as the iPhone is in the States." Really?
   
• "Tens of thousands of people" are playing Glu's two Android games, although they're both free, so no revenues there.
   
• Glu has used Space Monkey as a tester on the App Store, particularly with its price point. "We offered Space Monkey for free for just over a week. Within days, it became the number two up and the number one free game with an impressive number of downloads... We have made update and improvements for the game and we released it for $0.99. Our sales increased ten folds and then reentered the top 50 paid games for a time."
   
• However, Ballard admitted "we may have been too cautious with our iPhone approach", although he claimed that neither EA Mobile nor Gameloft has "gotten a substantial lift from the iPhone in Q3", so Glu hasn't missed out. That said, Gameloft revealed earlier this week that the App Store is now its single largest sales channel.
   
• Could there be layoffs in the offing at Glu? In response to an analyst question about how Glu is cutting back its cash burn, Ballard said: "We are working throughout the organisation to find places that we can preserve cash and we are doing all the things that you would expect the company will do to preserve cash in that situation. So, we are focusing on growth but at the same time, we are looking to squeeze as much efficiency as we can over the company and also to do the typical things that a company does to preserve cash in a situation where it is not dire but nonetheless we have to be careful with everything that we are spending."
   
• Both Ballard and Ludwig stressed that Glu is "roughly breakeven right now", aside from those MIG earn-out payments.
   
• Glu is looking at a bunch of new business models: "everything from item-based pricing to advertising models" said Ballard, who went on to say that such innovation was difficult within the carrier world, but that they can be explored more on iPhone and Android. "We do not know what the result of those experiments will be, but it certainly opens up a couple of different paths to monetising games that perhaps did not exist for us even six months ago."
   

Tonight, we'll have an interview with Greg Ballard to explore some of these topics in more depth.