It’s easy to be skeptical about Glu Mobile and, over the years, I’ve written my fair share of such articles.
But in one critical aspect the loss-making mobile game developer can point to a corner being turned and the hope of a better, profitable, tomorrow.
The foundation of this turnaround is the $98 million generated by number one game Design Home in 2017, which lifted Glu’s annual GAAP sales 43 per cent to $287 million, an all-time record.
More important, however, was the $26 million of prepaid royalties the company wrote-off.
Incredibly this means that of the $97 million Glu has paid out to secure celebrity and other IP licences - ranging from Kim Kardashian to Katy Perry, Britney Spears and most recently Taylor Swift - since 2010, $69 million has been impaired.
Or, in non-accounting talk, 71 per cent of the money Glu spent on such licences was wasted. Great for the celebrities’ bank balances, but not so good for Glu shareholders.
Yet with only $12 million of prepaid royalties now on its balance sheet, and $8.5 million of positive cashflow generated from operations in FY17 Q4, there’s a reasonable chance that in 2018 Glu Mobile could post its first profitable quarter since 2015 and maybe even its first profitable year since 2014.
What’s next?
Of course, there’s plenty that could still go wrong but Glu seems happy to take things slow.
It’s been very conservative, officially guiding growth of between two and five per cent for 2018 bookings, although sometimes companies set a low bar to ensure they beat expectations.
Glu has set conservative guidance for FY18 sales growth of between two and five per cent.
In particular, Glu expects Design Home’s revenues to be fairly static, especially in the coming six months because it’s not adding big features such as a planned augmented reality mode to Design Home until the second half of the year.
It’s also expects what it labels its “evergreen” titles - games such as Cooking Dash and Kim Kardashian: Hollywood, the latter being the only celebrity licence to make money - to continue their decline.
In 2017, Cooking Dash was down 20 per cent and Kim Kardashian: Hollywood 18 per cent.
Filling the gap, it hopes, will be new games including tap wrestling title WWE: Universe, original IP Titan World and new Dash game Dash Town.
Given competition in the mobile games market at present, however, there’s no guarantee these titles will generate the 15 per cent of annual revenues Glu expects. For the record, Glu’s unnamed new game using IP from Disney and Pixar doesn’t appear to be due in 2018.
It all leaves the situation deliciously balanced. Although given the parlous state of Glu’s financials in previous years, it’s certainly an improvement.
