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There's More to Glu Mobile's Blowout Quarter Than Meets the Eye

By Rick Munarriz - Nov 7, 2018 at 8:07AM

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It's another quarter of boosted guidance, but the increase isn't all that special once you take a closer look.

Glu Mobile (GLUU) is living up to the stickiness of its name. The mobile game developer posted better-than-expected financial results shortly after Tuesday's market close. It also boosted its guidance, something that it has done every quarter this year -- but there's more to that move than meets the eye.

Total bookings rose 18% to hit $100.7 million in the third quarter. History will look back at this as the first time that Glu Mobile cracked nine figures in bookings, but for now investors will be content to know that the showing blasted through the app publisher's earlier guidance calling for just $94 million to $96 million in bookings. 

Covers for 10 Glu Mobile app releases.

Image source: Glu Mobile.

Sticking to the roof of your guidance ceiling

Glu Mobile's full-year guidance for bookings has been inching higher every three months since the outlook was initiated nine months ago. This is typically a great sign, but see if you can spot the problem in the bookings guidance. 

  • February: $325 million to $335 million
  • May: $360 million to $370 million
  • August: $374 million to $378 million
  • November: $380.7 million to $382.7 million

An initial observation may be that the three increases this year have gotten smaller with every passing update, but that's not a deal breaker. There's less of the year to go around. The reason Tuesday's boost isn't the jackpot that we've seen in the past stems largely from what happened in the third quarter. 

Glu Mobile beat its guidance of $94 million to $96 million for the third quarter by $6.7 million on the low end or $4.7 million on the high end. The midpoint of the beat is $5.7 million. The midpoint of the full-year range went from $376 million in August to $381.7 million, or -- drumroll, please -- $5.7 million. In short, it's not raising its fourth-quarter guidance at all from what was implied back in August. Guidance for the fourth quarter actually calls for a sequential decline, but we've seen Glu Mobile be conservative before. 

Investors may also want a bit more diversification in the product line here. Bookings for Glu Mobile's three biggest current hits -- interior decorating simulation Design Home, Major League Baseball licensed sports game Tap Sports Baseball, and fashion design experience Covet Fashion -- all grew faster than total bookings. In other words, Glu Mobile is relying more on these three releases to keep momentum going, as they accounted for 79% of the total bookings (up from 76% in the second quarter). Design Home continues to defy gravity, rising from 38% of the mix three months ago to 41% now. This will be problematic the moment that any of these needle-moving releases start to fade in popularity, an inevitable elephants graveyard for trending apps.

There is obviously still plenty here to be excited about. Glu Mobile continues to grow. Its monetization metrics are trending higher. There's a pipeline of potential hits to fill the gaps as today's stars fade. There are fates far worse than following up a blowout quarter with ho-hum guidance, and Glu Mobile will live for a chance to impress the market next time around.

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