Glu Mobile stock slips on Q1 earnings miss, but raises bookings outlook

Shares of the Glu Mobile (GLUU) decreased 5% in the after-market trading hours as the first quarter earnings failed to beat estimates. However, the company has surpassed revenue estimates. Glu has raised its bookings for the full year backed by the three gaming releases planned in 2019. The company’s stock has surged 37% this year, hitting all-time high levels last month.

Glu reported 18% jump in revenues to $95.9 million aided by 7% bookings growth of $92.6 million. Earnings came in at $0.00 per share compared to 5 cent loss reported last year. Analysts were expecting profits of 5 cents per share on revenues of $89.75 million, up 4% over last year.

First quarter bookings of $92.6 million surpassed the outlook provided by Glu last quarter of $88 million to $90 million. For the Q2 period, the company expects bookings to be between $100 million to $102 million. The company has lifted its full-year bookings to $445-455 million, an increase of $10 million compared to the prior outlook of $435-445 million.

Key Metrics Performance

Glu’s key metrics continued its disappointing trend from the last quarter. Daily Active Users (DAU) came in at 3.1 million, down 13.8% compared to 3.6 million reported last year. Monthly Active Users (MAU) decreased by 23% to 19.1 million, over 24.8 million in the prior year period. However, Average Bookings Per Daily Active User (ABPDAU) rose 22% to $0.33 compared to $0.27 reported last year and Average Bookings Per Monthly Active User (ABPDAU) jumped 38.8% to $1.61.

Talking about the Q1 performance, CEO Nick Earl said, “Glu had a strong start to the year with solid bookings growth and EBITDA profitability led by our three Growth Games. The increase in our bookings guidance for 2019 reflects our confidence in our business.”

Upcoming Launches

Glu has lined up three titles Diner DASH Adventures (July), WWE Universe (May 2019), and Disney Sorcerer’s Arena (August) for a global launch in 2019. It has also added that the beta results for these three games have been positive.

The mobile game developer is also planning to introduce two proprietary games in 2020 along with the launch of next-generation Deer Hunter franchise. The company would be hoping that these new launches are well received by the gamers, which would bring in the necessary diversification and top line growth.

At the end of 2018, three gaming titles Covet Fashion, the Tap Sports Baseball franchise, and Design Home brought in about 72% of revenues. Glu needs to reduce its dependency on these few titles and try to come up with a healthy pipeline of engaging games which would help in diversification and offset any declines from the successful titles due to decline in user growth.

Growing Gaming Market

According to research firm Newzoo, the global gaming market is expected to surpass $180 billion in 2021, an increase of 30.4% from 2018. Revenue from mobile games is projected to bring in 59% of the total revenues in 2021, which is an increase of 8% from 2018 levels. Glu Mobile is going to benefit from the increased revenues from mobile games provided it’s able to execute its plans without any hiccups.

It’s worth noting that only 5% of unique players make in-app purchases which bring in most of the revenues. Glu needs to improve its efforts to convert non-paying players to paid members which would improve the top line. It also needs to improve the number of downloads and time spent by users on the games and try to increase user engagement and monetization rates.

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