Why Glu Mobile Stock Just Dropped 12%

What happened

After a strong performance in 2018, shares of Glu Mobile (NASDAQ:GLUU) are plunging today, down 11.7% as of noon EST after the mobile “freemium” game maker reported Q4 2018 earnings that fell short of Wall Street estimates.

Analysts had predicted that Glu would earn $0.07 per share (pro forma) on sales of $96.3 million. Instead, Glu announced “adjusted” earnings of just $0.03, despite scoring “adjusted” sales of $98.2 million.

Game Over over silhouette of hand holding a cellphone

Remember Glu Mobile’s great 2018 performance? Easy come, easy go. Image source: Getty Images.

So what

It gets worse. The numbers discussed so far have been “adjusted” to exclude restructuring costs and the cost of stock options — both of which are real costs. And when analyzed under generally accepted accounting principles, which recognize this fact, Glu actually lost money for the quarter — $0.01 per diluted share. Also, Glu’s sales were only $95.6 million (GAAP).

Glu managed to grow its sales 19% year over year in the fourth quarter, which sounds good. On the other hand, though, sales grew 28% for the year as a whole — thus Q4 represented a marked slowdown in Glu’s rate of sales growth.

On the plus side, while Glu ended up losing money for the quarter, its loss wasn’t as big as the $0.29-per-share loss reported in the year-ago quarter. Glu’s net loss for the year — $0.09 per share — also wasn’t as much as the $0.72 per share lost in 2017.

Now what

Guidance-wise, Glu announced that in Q1 2019 it expects to report between $88 million and $90 million in “bookings,” and between $435 million and $445 million in bookings for the year. While it would be nice to know what the company expects to report in terms of revenues and profits, management demurred: “Glu does not provide guidance on a GAAP basis primarily due to the fact that Glu is unable to predict, with reasonable accuracy, future changes in its deferred revenue and corresponding cost of revenue.” Furthermore, “Glu is unable to provide a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure without unreasonable effort.”

In other words, Glu really has no clue what it might earn this year — and it’s not even going to try to guess.

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