Glu Mobile (NASDAQ:GLUU) stock has more than doubled over the past year, getting a recent boost from an impressive first-quarter report that revealed all-round improvements in the company's business. This is a massive turnaround for Glu as Wall Street wasn't convinced about Glu's ability to grow profitably at this point last year, when its losses were mounting, but it now seems to have put those speculations to rest quite emphatically.

The company's top line shot up 43% in the quarter, and its net loss fell to just a third of what it was in the year-ago period. What's more, the bump in Glu's full-year outlook indicates that the best is yet to come for the company. But will it be able to live up to its potential, or will a volatile past come back to haunt this mobile gaming specialist? Let's find out.

Poster of Tap Sports Baseball 2017.

"Tap Sports Baseball" is a Glu game. Image Source: Glu Mobile.

It's different this time

Some think of Glu Mobile as a one-hit wonder. The launch of Kim Kardashian: Hollywood back in 2014 sent the company soaring as the game pulled in $150 million in revenue in its first year. But once the game lost its mojo, Glu suffered a tragic decline. It tried to recreate the magic with other celebrities such as Katy Perry, but the blueprint didn't work.

But a change of strategy in 2017 seems to be working wonders for Glu. The company has now built a broad portfolio of mobile games, both old and new. For instance, 64% of its bookings (the amount spent by users within games on virtual items) in the recent quarter came from three titles that Glu categorizes as "growth" games: Design Home, Covet Fashion, and Tap Sports Baseball.

These games are relatively new for Glu. It launched Design Home in late 2016, while Covet Fashion came into its portfolio at around the same time when it acquired Crowdstar. Tap Sports Baseball, meanwhile, is now in its fourth generation after the recent release of the 2018 version, which clearly points out that the company is sticking to its strategy of building successful long-term franchises.

Glu has been keeping these games interesting by adding new content for users to purchase, and also by improving the gameplay experience. For instance, the retention rate of Covet Fashion has increased 25% since January 2018 thanks to the introduction of new content. Looking ahead, bookings for Tap Sports Baseball 2018 should double in the current quarter, according to Glu's estimates, as the company has packed the title with new features such as console-quality graphics.

On the other hand, it is looking to milk more money from older titles such as Kim Kardashian: Hollywood and Cooking Dash, which supplied a fifth of its total bookings last quarter. In fact, the bookings figure for these two games increased nearly 20% sequentially last quarter. In all, five titles now account for 84% of Glu's total revenue, which is much better than where it was four years ago when just two titles supplied 52% of its revenue.

Glu is also on track to launch a new WWE wrestling game. It has also collaborated with Disney to create a mobile game based on content from the Pixar and Disney franchises, so the company is going all-out to further broaden its portfolio.

Glu's user base is stickier than ever

Now that Glu is offering variety to gamers and looking to improve the gaming experience, they have started spending more money on in-app purchases. This is evident from the company's consistently rising ABPMAU (average bookings per monthly active user) metric.

Chart showing the growth in Glu's average bookings per monthly active user.

Data from Glu Mobile's quarterly report, Chart by author.

ABPMAU refers to the amount spent by each active user in a month on Glu's games in the form of in-app purchases, so the consistent increase in this metric is a good thing to see.

Additionally, Glu is now getting a greater percentage of its bookings from in-app purchases as compared to advertising. In-app purchases supplied 89% of its bookings last quarter, up from 86% in the year-ago period.

So Glu isn't relying too much on inorganic sources such as advertising for its bread and butter, while the amount of money spent by users on its games is increasing at a solid pace. This means that Glu's user engagement is now stronger than ever, and it could take it to the next level with the help of new and popular games.

Ready to level up!

Glu is confident that it will become profitable on an adjusted EBITDA basis this year thanks to its improving game pipeline that will include key launches such as the WWE game. It plans to become free-cash-flow-positive next year as it scales up its existing games and enjoys lower development costs once the new titles are rolled out.

Not surprisingly, analysts are estimating a 15% annual growth in its bottom line over the next five years. Glu shares have the potential to march higher from current levels.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool has a disclosure policy.