Shares of Glu Mobile (GLUU) are moving higher after another better-than-expected financial report. Revenue and bookings for the second quarter blew past Wall Street targets, and the publisher of mobile games is once again boosting its full-year guidance.
Everything seems to be going according to plan, but an important distinction here is that Glu Mobile's guidance calls for a slight sequential dip in bookings for the current quarter. There is certainly some seasonality to Tap Sports Baseball -- the baseball game with annual installments peaking in the springtime, when a new Major League Baseball season is getting started -- but total bookings still managed to increase sequentially in the third quarter of last year. Glu's guidance this time around suggests that it will play out differently this year.
There's just too much riding on Design Home, the interior decorator simulation that's accounting for 38% of total bookings for Glu Mobile. It also doesn't help that most of the increase in Glu's guidance for bookings for all of 2018 was already realized in the second quarter. The market's applauding this otherwise great financial update, but what will happen the moment that Design Home peaks? We can raise a glass to Glu Mobile for an amazing second quarter, but it's fair to question where things go from here.
Image source: Glu Mobile.
Sticking with Glu
Glu Mobile came through with a record second quarter. Revenue rose 31% to $90.2 million. Bookings -- the more widely followed top-line performance metric for mobile gaming companies -- rose 20% to $99.2 million. Glu's guidance three months ago was calling for just $90 million to $92 million in bookings for the period. We're looking at a beat of $8.2 million at the midpoint.
Glu's three biggest contributors -- Design Home, Tap Sports Baseball, and Covet Fashion -- posted healthy sequential and year-over-year gains. The three titles accounted for 76% of Glu's revenue for the quarter, and the heavy concentration is probably not a good thing in the long run. All of Glu's evergreen titles including Kim Kardashian: Hollywood and Cooking Dash clocked in with sequential declines in bookings.
It was another quarter of red ink for Glu Mobile, but the operating deficit and net loss narrowed substantially from a year earlier.
On to guidance: Glu Mobile now sees $374 million to $378 million in bookings this year, up from its $360 to $370 outlook back in early May. We're talking about an $11 million addition at the midpoint of both ranges, a welcome boost but we need to realize that $8.2 million of that increase already happened during the second quarter.
For the third quarter, the mobile gaming specialist is modeling $94 million to $96 million in bookings. Bears will argue that this is a sequential decline. Bulls will argue that guidance for the second quarter was lower than that -- and Glu Mobile obliterated expectations.
There's still a lot riding on just a couple of titles. Another potentially problematic metric is that both daily and monthly active users have declined over the past year. Glu Mobile is just getting better at getting players to commit to more in-app purchases. It's fair to say that Glu Mobile got a lot of things right in its latest quarter, but it will need to exceed expectations and boost its guidance again in three months to keep the party going.
