Profit turned to loss for Glu Mobile in the first calendar quarter as a number of its key titles failed to perform as expected.
In a call with investors following the publication of the results, Glu CEO Niccolo de Masi said that 2016 has brought, "unanticipated softness in several catalog titles, as well as the tail on our Kendall and Kylie game being weaker than anticipated." Kendall and Kylie was another release built on the celebrity brand of the Kardashian family, but despite a very strong start - entering the top ten grossing games on the US App Store - it has not shown the same resilience as Kim Kardashian: Hollywood.
Glu discussed similar problems in its last earnings call, and it has not been able to engineer a turnaround in the time since. In the quarter ended March 31, 2016, it earned $54.5 million in GAAP revenue, and $54 million in non-GAAP revenue - the former fell from $69.5 million the prior year, the latter from $62.4 million. That decline was also evident in Glu's bottom line, which turned from a $1.1 million GAAP profit in Q1 2015 to a loss of $8.6 million this year, and a non-GAAP profit of $2.1 million in Q1 2015 to a $4.2 million loss this year.
According to de Masi, the company is fighting this trend with a, "long-term plan of bringing fixed OpEx into line with our more predictable catalog revenue... Doing so will ensure that new launches are all upside each year as opposed to requiring a fair level of success to cover annual fixed OpEx." Glu has pledged to complete that objective by the end of 2017.
"VC for gaming startups has dried up, leaving a handful of larger operating companies including Glu as increasingly the only capital providers"
And it has just wrapped up one of the first big steps towards that: a "global restructuring program" that involved transferring, "fixed OpEx to lower cost locations." One example of this is Glu's shooter development resources, which have now been consolidated to a single low-cost location. This contributed to the elimination of around 100 full-time roles over the last five months. "We cut nothing that was actually going to deliver in our mind certain revenue later this year," de Masi said on the investor call.
Just before moving to the open Q&A part of the call, de Masi reinforced the idea - put forward by Glu in the past - that the next two years will see "considerable consolidation" within the mobile games industry. "Venture capital for gaming startups has dried up, leaving a handful of larger operating companies including Glu as increasingly the only capital providers," he said. "As a result of this phenomenon, and we've been cautious about consummating large M&A opportunities in the short-term, as we believe the prices may come down further."
Glu;s upcoming releases include Tap Sports Baseball 2016, Britney Spears American Dream, Gordon Ramsay Dash and WeFire, the shooter it is making in partnership with Tencent.