Glu Mobile’s Q3 smartphone revenues fall 7.3% Q-over-Q to $18.4M on weak game performance

Glu Mobile reported soft earning results for its third quarter, blaming declining smartphone revenues on weaker than expected game performance and the pre-iPhone 5 slowdown in downloads, spending and advertising revenues.

According to Glu’s Q3 2012 earnings report, the company’s smartphone revenues were $18.4 million — down 7.3 percent from Q2’s $19.9 million, but up 91 percent year-over-year. iOS and Android games now account for 86 percent of the company’s revenue, up slightly from Q2, when smartphone revenues were 84 percent of the company’s sales.

Overall, Glu’s total revenue for the third quarter was $21.3 million, up 26.3 percent year-over-year, but down from the $23.6 million the company earned last quarter. As a result, the company’s operating loss was $4.2 million — significant, but still down from Q2’s operating loss of $5.2 million. Under non-GAAP terms (generally accepted accounting principals), Glu’s net loss was $1.6 million for the quarter, which translated into a loss of $0.03 per share.

According to Glu CEO Niccolo de Masi, underperforming titles and reduced consumer and advertising demand in anticipation of the iPhone 5 launch were the main factors behind the company’s soft quarter.

“As expected, both consumer adoption of new hardware, and advertising demand, slowed over the summer in anticipation of new device launches,” he said in the company’s earnings statement. “These industry headwinds, along with weaker-than-anticipated monetization from most new launches during the quarter, resulted in a sequential decline in smartphone revenue from Q2 2012.”

Although Glu launched 11 new freemium games during the period, the company only considers two of those titles: Blood and Glory: Legend and Eternity Warriors 2 as successes.

Once again Glu reported a slight increase in daily active users (DAU) across its catalogue of games, reporting an average of 3.8 million DAU for the quarter. Glu was also able to reverse two straight quarters of declining monthly active user (MAU) counts, reporting a 29.5 percent quarter-over-quarter increase in MAU to 37.6 million. However, the company’s retention (the percentage of MAU to DAU) declined to approximately 10 percent, due to unsuccessful titles.

The company also saw its conversion rates and average revenue per daily active user (ARPDAU) fall across its entire catalogue. In September, 0.7 percent of all MAU converted to paying customers, with an ARPDAU of 7.5 cents — down from June when the company saw a 1.7 percent conversion rate and ARPDAU of 8.5 cents. The company’s female-focused game Stardom: The A List once again boasted the highest conversion and ARPDAU, with 1.1 percent of MAU converting and ARPDAU of 11.1 cents, down from June when 3.9 percent of all MAU converted with an ARPDAU of 13.2 cents. New title Eternity Warriors 2 reported the highest DAU count, with 331,000 players logging in daily.

Glu also revealed how much its individual smartphone titles earned on a non-GAAP basis during the quarter. The most lucrative title was Frontline Commando, which earned $2.6 million, followed by Eternity Warriors 2 at $2.0 million.

Looking forward to Q4, Glu is predicting its non-GAAP smartphone revenues will fall somewhere between $17.5 and $18.5 million, the same estimate it gave for Q3. For the full year, the company is now estimating total non-GAAP smartphone revenues will be between $73.6 and $74.6 million, down from Q3’s estimate of $81.9 and $83.9 million. Glu is still expecting to finish the year with $21.5 million of cash on hand.

The company’s stocks fell significantly on the report, dropping more than 19 percent to $2.61.