Glu Mobile Slips After Providing Weak Q2, FY16 Guidance, Announcing Job Cuts
Shares of Glu Mobile (GLUU) slipped in afternoon trading after the mobile game maker reported results for the first quarter and provided conservative guidance for the second quarter as well as fiscal 2016. The company also said it is reducing its workforce by about 85.
WHAT'S NEW: After the market close yesterday, Glu Mobile reported Q1 earnings per share of (3c) on revenue of $54.5M, compared to analysts' consensus estimates of (5c) and $48.2M, respectively. The company also provided a weak outlook for the second quarter, forecasting EPS of (5c)-(6c) on revenue of $46M-$49M, below analysts' estimates of (4c) and $58.98M, respectively. In addition, Glu Mobile said it expects EPS for fiscal 2016 of (11c)-(16c) and revenue for the year in the range of $215M-$235M, also well below the consensus of (9c) and $260.8M, respectively.
WHAT'S NOTABLE: In a regulatory filing, Glu Mobile said that on April 27, it implemented a restructuring plan with the intention of aligning its operations with "evolving business needs" and reducing fixed operating costs. The company said that the restructuring, which is expected to be "substantially completed" by May 31, would result in the reduction of roughly 85 positions, with "substantially all" job cuts in game development roles within the company's action label. As a result of the restructuring, Glu said it expects to incur pre-tax charges of roughly $2.25M-$3M, $1.25M of which will be related to employee severance and benefits and $750,000-$1.5M of which will be related to lease, contract termination and other costs. The company anticipates recognizing substantially all of the severance and benefits charges during Q2 and mostly all of the lease, contract termination, and other costs from 2Q16 through 1Q17.
STREET RESEARCH: After the earnings report, Roth Capital analyst Darren Aftahi downgraded Glu Mobile to Neutral from Buy and lowered his price target on the stock to $2.50 from $4.15, citing a lack of growth and catalysts. Aftahi said that Glu Mobile's "weak" Q2 and FY16 outlook underscores the "fading grossing ranks" of the game maker's catalog in addition to "mediocre" game beta performances. The analyst said he remains cautious on the company's ability to replicate the success of its Kim Kardashian mobile game on its upcoming line-up of celebrity games.
PRICE ACTION: In afternoon trading, Glu Mobile dropped 15.73% to $2.22.
OTHERS TO WATCH: Game makers Zynga (ZNGA) and Take-Two Interactive (TTWO) fell 1.72% and 0.5%, respectively, in afternoon trading.
Disclosure: None.