Edited Transcript of GLUU.OQ earnings conference call or presentation 7-May-20 9:00pm GMT

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Q1 2020 Glu Mobile Inc Earnings Call SAN FRANCISCO Jun 24, 2020 (Thomson StreetEvents) -- Edited Transcript of Glu Mobile Inc earnings conference call or presentation Thursday, May 7, 2020 at 9:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Eric R. Ludwig Glu Mobile Inc. - Executive VP, COO & CFO * Harman Singh Glu Mobile Inc. - VP of Finance & IR * Nick Earl Glu Mobile Inc. - President, CEO & Director ================================================================================ Conference Call Participants ================================================================================ * Andrew Edward Crum Stifel, Nicolaus & Company, Incorporated, Research Division - VP * Dillon Griffin Heslin Roth Capital Partners, LLC, Research Division - Research Associate * Douglas Lippl Creutz Cowen and Company, LLC, Research Division - MD & Senior Research Analyst * Franco Rafael Granda Penaherrera D.A. Davidson & Co., Research Division - Senior Research Associate * Jeffrey A. Cohen Stephens Inc., Research Division - Analyst * Matthew Andrew Cost Morgan Stanley, Research Division - Research Associate * Matthew Corey Thornton SunTrust Robinson Humphrey, Inc., Research Division - VP * Michael Joseph Hickey The Benchmark Company, LLC, Research Division - Senior Equity Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2020 Glu Mobile Earnings Conference Call. (Operator Instructions) I would now like to hand the conference over to your speaker today, Harman Singh, Vice President of Finance and Investor Relations. Please go ahead, sir. -------------------------------------------------------------------------------- Harman Singh, Glu Mobile Inc. - VP of Finance & IR [2] -------------------------------------------------------------------------------- Thank you, operator. Good afternoon, everyone, and thank you for joining us on Glu Mobile's First Quarter 2020 Earnings Conference Call. On the call today are Nick Earl, President and Chief Executive Officer; and Eric Ludwig, COO and Chief Financial Officer. During this call, we will be making forward-looking statements regarding future events and the future financial performance of the company. Any forward-looking statements that we make today are based on assumptions that the company believes to be reasonable as of this date. We undertake no obligation to update these statements as a result of future events. We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statements in the press release and during this conference call. These risk factors are described more fully in our documents filed with the SEC, specifically the most recent reports on Forms 10-K and 10-Q. During this call, we will present both GAAP and non-GAAP financial measures. The non-GAAP financial measures are not intended to be considered in isolation from, a substitute for or superior to GAAP results, and we encourage investors to consider all measures before making an investment decision. For complete information regarding our non-GAAP financial information, the most directly comparable GAAP measures and a quantitative reconciliation of those figures, please refer to the supplemental presentation accompanying today's earnings call that can be accessed via our investor website, www.glu.com/investors. As a reminder, consistent with our financial presentation and for all of the information aside from bookings or as otherwise stated below, we will discuss results on a GAAP basis and refer you to changes in deferred revenue, the deferred cost of revenue and the non-GAAP operating expense total in our financial tables. This data will provide a GAAP to non-GAAP reconciliation of the quarter's financial results based on the same methodology we've used in prior quarters. We are also providing a supplementary excel file on our IR website to more easily aid in this reconciliation. Both the PowerPoint and Excel file are now accessible on the website. We encourage you to follow along with the slides during this earnings conference call. And now with that, I would like to turn the call over to Nick. -------------------------------------------------------------------------------- Nick Earl, Glu Mobile Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Thanks, Harman. Hello, everyone, and thank you for joining us today for Glu's first quarter 2020 earnings call. On today's call, I will provide some overall thoughts on the impact of COVID-19 pandemic. I will then discuss first quarter highlights and provide an update on our game development progress. After that, I will turn it over to Eric who will discuss our financial results and guidance in more detail. First off, I hope you and your families are well during this difficult and unprecedented time. We appreciate the commitment of the people and organizations that have come together to address this global health emergency, and our thoughts are with all those impacted. Our primary focus during the pandemic is the health and safety of our employees, their families and the gaming community. At Glu, the business continuity planning pre-COVID put us in position to quickly implement a remote work policy, providing our employees the resources and support needed to productively operate in a safe environment. This allowed us to successfully launch Tap Sports Baseball 2020 and Disney Sorcerer's Arena, reflecting our preparation and the dedication of the entire Glu team. Global shelter-in-place mandates have provided an opportunity for our current players to spend more time enjoying our games and for new players to discover us, resulting in higher engagement and increased organic downloads. Further, we have been seeing significantly lower CPI since mid-March, which has given us the opportunity to invest across our portfolio. These 2 factors combined have driven sizable DAU growth for 4 of our key titles: Design Home, Covet Fashion, Diner DASH Adventures and Kim Kardashian: Hollywood. These new cohorts so far have had similar retention and monetization to our existing players, providing us with the confidence they will continue to enjoy our games in the months and years ahead. In the first quarter, we continued our strong momentum from last year's fourth quarter. We meaningfully beat our top line expectations with 15% bookings growth year-over-year to $106.5 million. We also met our bottom line expectations even while increasing our UA investment to expand our user base for future growth. These strong results were driven by accelerated bookings increases in our Growth Games and an improvement in the rate of decline in our catalog games. We maintained a liquid and debt-free balance sheet with $115 million in cash at the end of the quarter, providing the support to execute our growth plans. Design Home experienced its third consecutive record quarter with bookings of $46.8 million driven by an impressive monthly series performance and a larger player base. Looking ahead, the team continues to execute a robust live operations plan while continuing to fine-tune the new user flow and further deepen the elder experience. Covet Fashion delivered its strongest Q1 ever with bookings of $17.1 million. This record performance was driven by new theme-based events paired with a strong content lineup from Prop Shop, including hair accessories and Covet collection pieces. Covet has a strong content pipeline through the year and continues to focus on new systems and meaningful enhancements to its social game play. Tap Sports Baseball 2020 had the franchise's strongest first quarter ever and drove record total franchise bookings of $16.2 million. This year's versions include -- this year's version includes authentic MLB stadiums, faster performance and new features, including Target Bash!, which has become an instant community favorite. These improvements have led to a higher engagement and monetization, with bookings currently tracking ahead of last year despite the delayed start to the MLB season. This is a testament to the team's phenomenal live ops expertise and the ability to generate content that drives consumer engagement. Diner DASH Adventures bookings were $7.5 million driven by our recently launched update in late March that included fresh content and several new chapters and events. This title is transitioning to being systems-based, adding scalability to the title and putting it in a better position to realize its Growth Game potential. We are very encouraged by the progress we have seen in Diner DASH Adventures since last year's launch. Turning to a catalog highlight, Kim Kardashian: Hollywood continued its strong Q4 momentum with Q1 bookings of $10.4 million, its highest bookings quarter in 2 years. This outperformance came on the strength of continued effective marketing to drive both new and returning players, leveraged by a strong live ops schedule and new in-game merchandising techniques. Additionally, we are extremely pleased to announce that we have extended our license deal with Kim through 2023, which Eric will cover in more detail. Finally, we successfully launched our newest title, Disney Sorcerer's Arena worldwide. The game is resonating with both core RPG players and fans of Disney and Pixar alike. The title is exhibiting strong monetization based on events featuring characters from iconic Disney and Pixar franchises, including The Lion King, The Incredibles, Toy Story, Aladdin, the newly released film Onward and more. This experienced team is equipped to maintain a robust live operations and events calendar, and will continue to roll out new characters and game features over the coming quarters and years. While we have seen solid organic trends to date, we look forward to participating in additional marketing initiatives after shelter-in-place mandates have been lifted. We are extremely impressed by the talent of the Disney Sorcerer's Arena's team, and we'll continue to invest in this title given our belief that we have the makings of a successful Growth Game. Moving to our pipeline. Originals, our interactive story platform, continues development of Toronto studio as the team continues to add and refine content. While we are pleased with the short-term retention and early monetization, we still need to significantly increase the D30 retention and elder monetization. We are pleased with Deer Hunter World's progress on stability and early retention in select beta territories. The team will now focus on implementing social features and enhancing meta with new modes in advance to drive longer-term retention and monetization. Deer Hunter World will also support our cadence-inspired player-versus-player for the first time while maintaining the traditional core loop and progression that has fueled this franchise's enduring success. We continue to be excited about this title's potential and are on track for a global launch in the second half of the year. Our Glu Sports studio in Orlando continues to make progress on our social Fishing game, including game stability and new user flow enhancements. We are focused on further developing social and meta features and fine-tuning the core mechanic. This title is currently in beta, early beta stage, and we believe is on track for a global launch in 2021. Development continues on our next Crowdstar title, P3. This title is a key part of our 2021 pipeline and will further build out our lifestyle umbrella brand, which includes Design Home and Covet Fashion. We believe both the Glu Sports and Crowdstar brands drive our leadership position in these categories as well as across the mobile gaming industry. Next, I'd like to give an update on 2 of our longer-term growth opportunities. On the M&A front, we continue to assess additional studios that will complement our existing portfolio and Growth Game strategy. Glu has a proven track record of finding talented teams and studios and then nurturing new titles with the critical resources and expertise necessary to achieve accelerated growth and profitability. Second, we are focused on opportunities that will broaden our audience and deepen connections with our players through cross-platform connected play. This opportunity includes extending 2 of Glu key franchises, Design Home and Tap Sports Baseball to the PC web browser, which will expand our audience and increase accessibility. We have made strong progress with this initiative and expect to have both soft-launch by this summer. Our better-than-expected first quarter results, the very strong start to the current quarter and the successful launch of our Disney title gives us -- give us confidence in significantly raising our full year outlook. Shelter-in-place mandates have helped drive higher engagement and DAUs across our key titles paired with significantly lower CPIs. We believe these positive trends amplify our continually improving live ops as well as our ability to increase retention and monetization. While the second half of the year brings an unusually high level of uncertainty, we are confident that we are in a position to meet our raised financial outlook. Glu is in a great position to continue stacking our Growth Game bookings. And now with the addition of Disney Sorcerer's Arena and the improvements of Diner DASH Adventures and Kim Kardashian: Hollywood, we have greater momentum moving into 2021 and beyond. In closing, I'd like to thank our employees and our community for their fortitude in these unprecedented times. I'll now turn it over to Eric who will provide details on our financials and outlook. -------------------------------------------------------------------------------- Eric R. Ludwig, Glu Mobile Inc. - Executive VP, COO & CFO [4] -------------------------------------------------------------------------------- Great. Thanks, Nick, and good afternoon to everyone on the call. I will provide a closer look at our financial results for the first quarter and make high-level comments on how we are managing the business through the coronavirus pandemic. I will also highlight our UA investment strategy, and then will walk through guidance for the second quarter and full year 2020. Before I discuss our financial results for the first quarter, I wanted to provide general comments on how we are operating amid the pandemic and the shelter-in-place. Glu has a robust business continuity plan in place due to the fact that our headquarters is located in an earthquake zone. In February, as the first cases of the coronavirus were reported in the United States, we started preparing for a potential work-from-home scenario. At the end of February and in early March, most of our teams initiated working-from-home tests for 1 to 2 days. The goal was to assess employee productivity and determine bottlenecks on Internet, home WiFi, VPN access and other IT impediments. This helped isolate specific issues. And based on those tests, we ordered equipment to solve those challenges. On March 10, all of our North American employees began working from home, our India location did the same on March 25. Virtually, all of our infrastructure and tools bought and built are cloud-based, and we have leveraged Zoom for video conferencing for over a year. We have managed our live operations for all of our games and launched 2 new titles, Tap Sports Baseball 2020 and Disney Sorcerer's Arena, with 100% of our employees in a work-from-home mode. All of this has been done without any discernible loss of employee or business operations productivity for both our live games and new games in development. We host biweekly town halls with our employees and continue to interview, hire and onboard new employees virtually. Our primary focus right now is the health and safety of our employee base. Although there is very limited testing of our 740 employees worldwide, we do not have any reported cases of the coronavirus. Our eventual return to an office environment will be in coordination with our local state and government mandates and guidelines. Given our ability to effectively work from home, we will be cautious to not initiate a return to the office prematurely. In this year's first quarter, we delivered better-than-expected top line results led by accelerated performances in our Growth Games and improved performance in Kim Kardashian: Hollywood. Looking at the first quarter, revenue was $107.3 million. Bookings reached $106.5 million, a 15% increase over last year's first quarter. Royalty-free Glu IP titles generated 72% of bookings. Ad bookings were $11.3 million or 11% of total bookings. Normally, CPIs and ad revenue per impression, or CPM, move in the same direction. This correlation started to change in March. Despite CPIs declining, our ad revenues were flat as a percentage of bookings quarter-over-quarter. We believe this was due to the advertisers we work with across our rewarded video and other ad formats that are largely performance-based and not brand-focused advertisers. We also focus exclusively on programmatic ad revenue in partnerships with many exchanges and demand side platforms, and Glu does not have a direct ad sales team. This has allowed our ad demand to remain robust and uninterrupted. Thus, the CPI decreases that we are seeing on platforms like Facebook for UA have not materially impacted Glu's ad revenue business. Our 3 Growth Games grew 11% year-over-year and contributed 75% of total bookings. On a year-over-year basis, Design Home grew 11% to $46.8 million, a new all-time record and the third consecutive quarter with a new bookings record. The Tap Sports Baseball franchise increased 21% to $16.2 million, including $3.7 million from the 2020 version, which launched on March 16. Covet Fashion was up 2% to $17.1 million. Disney Sorcerer's Arena launched on March 24 generated $1.4 million for the quarter. Diner DASH Adventures delivered $7.5 million in bookings, and Kim Kardashian: Hollywood generated another strong quarter with bookings up 25% to $10.4 million. On the expense side, adjusted platform commissions were $28.5 million, adjusted royalties were $6.4 million and hosting costs were $1.9 million. In mid-March as North America began sheltering in place, we saw a pronounced reduction in CPIs as many industries curtailed their UA spend on mobile ad networks. We leaned into this favorable CPI environment and invested an additional $4.7 million above our guidance while still beating our adjusted EBITDA target for the quarter. UA and marketing spend was $35.6 million or 33.5% of bookings compared with $23 million in last year's first quarter. Operating expenses, excluding UA and marketing, were $36.9 million compared to $30.5 million last year. On a GAAP basis, the net loss was $8.3 million. I would point out that we have not seen any material foreign exchange impact through the end of April as 84% of our bookings are in North America and virtually all of our OpEx is as well. Looking at the second quarter guidance, I wanted to provide some additional commentary on the UA environment and how we have ramped our investment. Since mid-March, we have seen very favorable CPIs and have increased our UA budget for the second quarter by double-digit millions of dollars to further invest in portfolio growth. The incremental UA spend, coupled with lower CPI, continues to drive higher overall paid installs. Additionally, we have seen a sizable increase in organic downloads across our titles due to consumer sheltering in place and seeking a social outlet with digital entertainment. In the month of April, we prioritized top line growth over marginal flow-through due to this favorable buying window. I would like to walk through our 3 Growth Games and 3 other key titles to provide an update on what we saw in March and April to provide context to second quarter and full year guidance. Our 2 recent launches have performed very well out of the gates. Despite the lack of a professional baseball season, Tap Sports Baseball 2020 is up 23% as compared to Tap Sports Baseball 2019 for the April 1 to May 5 comparable period. In the absence of any live sports across the globe, we believe that Tap Sports Baseball has provided an outlet for sports starved fans. The outperformance over last year's version has been driven by VIP spenders, while organic downloads are down on a year-over-year basis. The new countries we have launched in conjunction with the 2020 version have contributed an immaterial amount to this total. Disney Sorcerer's Arena is off to a great start. We have seen lower CPIs in the United States during the worldwide launch than we saw in Canada during beta, resulting in an increase in our UA investments. For the full year, on a stand-alone product basis, Disney Sorcerer's Arena will be at a high single-digit million dollar loss, inclusive of team costs in UA. This is due to the investments in UA we are making to drive users during Phase 1 with the expected breakeven performance in the second half of 2020, which is Phase 2 of our pathway to scaled title profitability. This pattern is identical to Diner DASH Adventures results in last year's third and fourth quarters. Diner DASH Adventures, which launched last June, has gone through a positive evolution in the first quarter. A recent update to the game transitioned the title from a linear content cadence to a balance of live ops, elder systems and content updates. This has helped increase ARPDAU meaningfully starting in February. Combined with lower CPIs, we have increased our UA investment and saw very favorable ROI and bookings growth in the month of April. It is too early to call Diner DASH Adventures a Growth Game, but it appears to have positive momentum towards being one. Our 2 other Growth Games have seen great performance in Q1 and the second quarter to date. Design Home had a record Q1, and our DAU has increased a double-digit percentage from the fourth quarter to the end of April. The April Bohemian Wanderlust Series was our largest ever and was the 27th consecutive monthly series that has seen year-over-year growth. Covet Fashion had a strong first quarter and a record month in April due to DAU growth and a robust spring season launch. Our catalog games have historically consisted of titles that have minimal-to-no headcount and UA investment. Historically, our catalog has declined year-over-year at a 30%-plus rate. The first quarter saw Kim Kardashian: Hollywood grow 25% on a year-over-year basis, which, in turn, reduced our year-over-year catalog decline to 13%. This was driven by an influx of reactivations of lapsed players as well as increased monetization and engagement as well as UA investment for new users, and all this drove higher LTVs. We recently signed a 3.5-year extension with Kim Kardashian, which allows us to continue investing in the game through the end of 2023. This new contract was effective May 1 and continues to be exclusive. We are now able to recoup our user acquisition spend before paying royalties, providing us with the opportunity to further profitably invest and grow the user base. We believe that Kim Kardashian: Hollywood is on path to becoming a Growth Game in 2020 and beyond. I would point out that we now have 6 key titles that we are investing in, all of which are in active live operations modes. These 6 titles are across 4 genres: the lifestyle genre with Design Home and Covet Fashion, the casual genre features Kim Kardashian: Hollywood and Diner DASH Adventures, Disney Sorcerer's Arena is in the strategy RPG genre and Tap Sports Baseball is in the outdoor and sports genre. This diverse portfolio is well balanced and allows us to hedge against CPI pressure. In the future, if CPIs increase in any one genre, we should be able to lean our UA investment into genres and titles that are not under pressure. We did not have this diversity last year. We are in unprecedented times and realize that the various shelter-in-place mandates across the globe, the uplift in engagement and the favorable UA environment are temporary. While we have confidence in the performance of the new cohorts we have acquired to date, we are cautious on how long CPIs will remain low and whether the high user engagement persists. As such, we are taking a conservative approach and assuming the following in our second quarter and full year guidance. For modeling purposes, we are assuming that the favorable CPI environment does not continue. All of our title level forecasts assume that CPIs will revert to pre-COVID-19 levels in mid-May and remain at those levels through the end of the year. We have spent aggressively on UA in March and April, and we are forecasting a pullback through the CPI guidance I just mentioned. This will have an immediate impact on bookings starting in May and will continue through the second half of 2020, and our guidance reflects this reduced investment. One of the corollaries of this UA pullback will be an expected reduction in our titles' top grossing rankings as we shift focus to driving scaled profitability. We assume that nonpaying players that have downloaded our games during the North American shelter in place will have lower engagement, and thus, our DAU from these players will decline once the shelter in place mandates are lifted. As of today, it is unclear whether there will be a Major League Baseball season. Given this high level of uncertainty, we are assuming Tap Sports Baseball 2020 will be flat from now until the end of the year as compared to Tap Sports Baseball 2019. This would imply a gradual pullback in Q2 from the current quarter-to-date levels with the accelerated pullback in the second half of the year. If Major League Baseball does have a season, we believe it is possible that new organic downloads could increase and CPIs for paid UA could drop. And if that occurred, we would ramp our UA spend to capture that opportunity. Nick mentioned that we will be launching the beta over the summer, PC web-based browser versions of Tap Sports Baseball 2020 and Design Home. We have nothing embedded in our guidance for either. Now for spenders that have downloaded our game since mid-March, whether it be a paid UA or organic discovery, for now, we believe that they will remain as paying players after the shelter in place is lifted and that they will spend and play the same way as other monetizing cohorts. We base this assumption on our analysis that our mid-March and April paying players are behaving very similarly as compared to pre-COVID-19 monetizing player cohorts. Now our booking guidance philosophy is to exclude any contribution from new titles until the quarter after such title was launched. Disney Sorcerer's Arena went worldwide live in late March. We will now include bookings from that game in our guidance for both the second quarter and full year 2020. This obviously implies that our guidance will exclude any bookings from Originals, Deer Hunter World, our new Crowdstar title, code named P3, Tap Sports Fishing and any other titles we have not spoken about. For the second quarter, based on the assumptions I just discussed, we expect bookings in the range of $150 million to $155 million. On the expense side, and at the midpoint of our bookings guidance, we expect adjusted platform commissions of $40.9 million, adjusted royalties of $10.7 million and hosting costs of $2.3 million. UA costs will be up approximately $56.5 million, up significantly due to the favorable CPI environment I just spoke about. All other adjusted operating expenses are expected to be $37.7 million. The first quarter actual results, combined with our Q2 guidance, implies that adjusted EBITDA profitability for the first half of 2020 will be in the mid-single-digit millions versus our prior implied guidance of a loss of mid-single-digit millions. This is due to the upside we are seeing in the second quarter. If CPIs remain low for the entirety of the second quarter, we may have higher bookings, and we will balance flowing that upside through to adjusted EBITDA versus continuing to spend on UA. We are very focused on showing adjusted EBITDA leverage in the second half of 2020. For the full year 2020, we expect bookings in the range of $490 million to $500 million. This revised range includes the $11.5 million first quarter beat, an increase of $15.5 million on our core business and the addition of $40 million from Disney Sorcerer's Arena. The beat and raise on the core business, excluding Disney, is $27 million and includes increases from Design Home and Covet Fashion based on the record performance we are seeing, increases from Diner DASH Adventures and Kim Kardashian: Hollywood based on the renewed momentum from both of these titles. These uplifts are partially offset from an approximately $10 million reduction from our prior internal forecast for Tap Sports Baseball 2020 due to our assumption of bookings being flat year-over-year with the assumption that there is not a professional baseball season. We expect Q3 bookings to be down sequentially from the expected midpoint of Q2 as a result of the flow-through from our lower UA spend, higher CPI assumptions and lower DAU. Q4 bookings are expected to be roughly flat with Q3 bookings levels. Our second half of 2020 bookings guidance assumes no uplift from the shelter-in-place mandates and low CPI environment. We could see potential upside to our third and fourth quarter guidance if there is a Major League Baseball season, if CPIs remain favorable or if organic downwards continue at elevated levels. We have taken a cautious view in setting second half of 2020 guidance due to the uncertainty around consumer behavior. On the expense side for the full year 2020, and at the midpoint of our bookings guidance, we expect adjusted platform commissions of $133.1 million, adjusted royalties of $32.2 million and hosting costs of $7.5 million. UA costs will be approximately $130 million, reflecting 26.3% of bookings. All other adjusted operating expenses are forecasted to be $152 million. In terms of second half of 2020 profitability, UA spend is expected to decline quarter-to-quarter in both the third and fourth quarters, very similar to last year. This will lead to adjusted EBITDA increases from Q2 to Q3 and again from Q3 to Q4. We anticipate exiting 2020 with an adjusted EBITDA margin of at least 15% in the fourth quarter. From a liquidity and capital resource perspective, Glu remains debt-free, and we expect to end 2020 with at least $155 million of cash. Our CapEx requirements are approximately $2 million to $3 million a year, and thus, generally, last quarter's adjusted EBITDA becomes this quarter's free cash flow. In summary, we are very encouraged by the recent improvements in Diner DASH Adventures, the extension and resurgence of Kim Kardashian: Hollywood and the successful launch of Disney Sorcerer's Arena. We have been positively impacted by lower CPIs and higher organic installs over the last 2 months. This has also served as an accelerant on top of executing our strategy of stacking bookings from our 3 Growth Games, and now we are further stacking increasing bookings from these 3 potential Growth Games. New titles later this year and next year will add to the stacking effect. I look forward to updating on our progress in August. And with that, we'll open the call for questions. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Franco Granda? -------------------------------------------------------------------------------- Franco Rafael Granda Penaherrera, D.A. Davidson & Co., Research Division - Senior Research Associate [2] -------------------------------------------------------------------------------- Congratulations on the excellent execution. Can you talk a little bit about the deal with Kim Kardashian? Obviously, you mentioned that you'll be kind of recouping the UA before paying any royalties. What does this mean for sort of the percentage of royalties that you'll be paying out? -------------------------------------------------------------------------------- Eric R. Ludwig, Glu Mobile Inc. - Executive VP, COO & CFO [3] -------------------------------------------------------------------------------- Yes. So Franco, thanks for the question. So we've not specifically said what Kim's royalty rate was in the past. What I can say is the royalty rate remains the same, though we're going to recoup our user acquisition dollars that we spend in any given quarter. And then we apply that royalty rate to the net revenue minus the UA, and that then becomes the effective royalty payments to Kim whereas, in the past, for the last 6 years, it has been net revenue times the royalty rate. So this is a real opportunity for both Glu and Kim to share the upside of growing the user base and keeping her very relevant in the zeitgeist for the next 3.5 years, which will allow us, in today's day and age, to invest in UA. And frankly, 6 years ago, when we signed the original deal, there was not the need for user acquisition because there was just a lot of organic discovery. And so this is really reflecting the reality of the business model today, and we are really appreciative of being able to invest with her, grow her user base and grow that opportunity. -------------------------------------------------------------------------------- Franco Rafael Granda Penaherrera, D.A. Davidson & Co., Research Division - Senior Research Associate [4] -------------------------------------------------------------------------------- Okay. Sounds good. And then I guess do you -- with that said, do you expect to turn that game to sort of your -- to add it to your growth catalog over time? Or is this sort of like momentarily? -------------------------------------------------------------------------------- Nick Earl, Glu Mobile Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- Yes. Franco, it's Nick. That's certainly the intention. And I would even say, given the tremendous momentum we started to see in Q4 carry into Q1, we feel that this is certainly a candidate for a Growth Game. We can't officially call it one until next year when we see what the revenue is at the end of '20 versus '19. But it's got the signals and the signs of being one. And furthermore, we are really doubling down on our investment from a resourcing perspective given the fact that we've closed this deal, it's a really strong deal for both us and Kim, and we feel this is worthy of doubling down on the investments going into the game. So given the extra content, new systems, features, continuing to fine-tune the experience, we feel like this is a strong candidate. So we'll be able to officially answer that question next year, but we're certainly treating it as such. And we will definitely be on top of trying to grow this game even further. -------------------------------------------------------------------------------- Franco Rafael Granda Penaherrera, D.A. Davidson & Co., Research Division - Senior Research Associate [6] -------------------------------------------------------------------------------- Okay. And then one on Disney. Obviously, launch is off to a good start. And -- but I guess, what are you seeing in terms of retention, D3, D5, D30 now since you've launched it? -------------------------------------------------------------------------------- Nick Earl, Glu Mobile Inc. - President, CEO & Director [7] -------------------------------------------------------------------------------- Yes. Listen, we're seeing -- so Disney is still in its early Phase. The Phase 1 where we're investing in the game. But the KPIs that we're seeing, engagement, retention, monetization, conversion right across the board, our KPIs, we're really happy with. And many are above our original expectations, some are at our expectations. So for the most part, we're feeling like this has got the componentry of being a really solid game for us going forward. But it's still in the early innings, we've got a lot of investment, and it's going to go through its natural arc that our games like Diner DASH has gone through and is just ahead of Disney in that respect. So yes, we're very happy with where we are right now in the KPIs, and it's a very talented, experienced team who's done this before. We believe that they're going to improve the KPIs, improve the -- both top and bottom line, and we'll take it into -- through Phase 1, into Phase 2 and into Phase 3 next year. We think it's going to be a very solid game. And again, like Kim, it's got signals and signs of being a Growth Game. Again, it's early, but we feel that this is certainly on the path. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- And your next question comes from the line of Matthew Thornton from SunTrust. -------------------------------------------------------------------------------- Matthew Corey Thornton, SunTrust Robinson Humphrey, Inc., Research Division - VP [9] -------------------------------------------------------------------------------- A couple if I could. I guess when we think about where revenue could land for the year versus the guide, I think you called out a couple of things. Obviously, the guide does not include Originals or Deer Hunter, which was expected. We've got the PC web initiative, which, if it gets some steam, could be helpful. A Major League Baseball season kicking off would be helpful. Anything else I missed there? And the other thing I wanted to get at is user acquisition, obviously, you're taking up spend here late 1Q into 2Q given this extremely unusual window, which is obviously great to take advantage of. But my question is, how does that flow through to the numbers in the back half of the year? I guess what assumptions are you making on how that spend converts and lands in the back half of the year? Just any color there would be helpful. Then I've got one follow-up. -------------------------------------------------------------------------------- Eric R. Ludwig, Glu Mobile Inc. - Executive VP, COO & CFO [10] -------------------------------------------------------------------------------- Yes. Sure, Matt. Yes. So our guidance is very conservative, I would say, for the second half of the year. I think the implied guidance is about $120 million-ish for Q3 and Q4 each on the back half of the year. And we're at $150 million to $155 million for Q3, really based on a lot of what we've seen in the month of April as well as a tail off in May and June. That tail off in May and June, as I mentioned in my prepared remarks, is really largely under the expectations that our UA will dial back because we've seen this great CPI environment in March and April, but we know that that's not going to last forever. That's kind of point number one. Number two, we've seen really great organic downloads in mid-March and April as well. We're also assuming that that dials back as well. So I think just on the face of it, if CPI environment stays favorable, if organic downloads stay favorable due to the summer months or maybe sheltering in place continuing, that could be an upside both in Q2 and beyond. Secondly, you did rightly point out the baseball season. So I've got -- my assumption is that baseball, which I think surprised most people on this call, was up 22% on a year-over-year basis from April 1 to May 5 whereas I think most people thought it was down. We are taking a very cautious outlook that for the balance of the year, it's going to be on par with last year. Just we don't know what's going to happen to consumer behavior and baseball fan behavior in the absence of a season. We do believe that if a season does occur, that should drive down CPI costs because right now, we're seeing pretty elevated CPI costs for baseball in the absence of a season. So a season would be helpful on CPIs. We certainly believe that a season would be helpful on organics and then, obviously, it would be helpful on the top line. In my prepared remarks, I talked about we kind of cut about $10 million out of our guidance from last time to this time for the baseball season not happening, so that was a downdraft. So we had an overall increase to the guide of up to $500 million, but I took out $10 million because of the lack of a baseball season. And then lastly, you rightly pointed out as well, we have nothing from Originals and Deer Hunter, which are both slated for this year as well. So I'd say those are probably the 5 or 6 key items that could prove that our guidance is conservative for the year. I will say that we're sitting here today, looking at this guidance of $150 million to $155 million, feeling very confident in that given the very, very strong April that we had to date and the very, very strong 7 days of May so far to date as well. So that's kind of how we view this guidance. -------------------------------------------------------------------------------- Matthew Corey Thornton, SunTrust Robinson Humphrey, Inc., Research Division - VP [11] -------------------------------------------------------------------------------- And then maybe just a 2-part follow-up there on Tap Sports Baseball. Is there anything that you're seeing to date in the data that informs that decision to take the $10 million out? Are you seeing that kind of slowing as the would-be season kind of progresses? And then secondarily, I know you used the baseball analogy around a lot of the new titles. I'm just wondering if you'd be willing to talk about how you're thinking about Disney as well as Diner DASH in the realm of whether you think that's a single, a double or approaching a double, if you'd be willing to provide any color there. -------------------------------------------------------------------------------- Eric R. Ludwig, Glu Mobile Inc. - Executive VP, COO & CFO [12] -------------------------------------------------------------------------------- Sure. Sure. Yes, yes. Thanks, Matt. Yes. So the answer -- short answer on baseball is no, we've not seen any degradation from the performance in the month of April to be cautious. However, we just do not know what's going to happen. And rather than having guidance that we have to walk backwards, we wanted to be cautious and conservative in this guidance. But no, we've seen record Fridays. I think several days -- several weeks in a row, we've seen record Fridays, Friday on Friday on Friday, as we've had big events in the game. We will have one tomorrow. I would expect that to be maybe not a record but certainly very, very elevated. But no, nothing we've seen so far to give us support to not show baseball being up, but it's just more of the abundance of caution given we just don't know what's happening in the environment. And then in terms of baseball [parley], so yes, so maybe for those that aren't informed on some of the conversations I've had in the past, we've talked about our games being singles, doubles, triples, home runs, grand slams. We've got one triple with Design Home in the $200 million range. We've got -- Baseball is a double in the $90 million to $100 million range. Covet Fashion is a high single at $70 million-ish. And then kind of the low end of the singles is about $25 million to $75 million. I would say that we don't believe that a game hits its potential in year 1. So I would say out of the gate right now, my guidance of Disney at $40 million for 3 quarters of a year, that is a very solid single. I would like to believe that in a year from now -- this is a forward-looking statement with just guesstimation -- with a full year under our belt, along with monetization improvements and live operations and events, hopefully, Disney a year from now is on a track of maybe it's very high single and could be approaching double category. Diner DASH last year did about $25 million for half a year. This year is in the probably 30-plus. We did $7.5 million in Q1 and I mentioned that it's been improving in the month of April. So that's kind of right there at the low end of the single but starting to migrate towards mid-single. So -- and then Kim Kardashian just did $10 million this last quarter, $10.5 million, so that would be firmly in the single category. And Kim Kardashian has, in the past, been even higher than that, 4, 5, 6 years ago. So I'd say -- what I'd really say is our strategy has been to stack our bookings from our 3 Growth Games that have been growing year on year on year. And now we believe we have 3 potential additional titles many that people have written off, frankly, last quarter and last year that we believe very well could be additional stackings on top of impossible Growth Games when we're sitting here 6 months and a year from now. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- And your next question comes from the line of Darren Aftahi from ROTH Capital Partners. -------------------------------------------------------------------------------- Dillon Griffin Heslin, Roth Capital Partners, LLC, Research Division - Research Associate [14] -------------------------------------------------------------------------------- Hey, it's Dillon on for Darren. First one, sort of on Tap Sports Baseball. With the strength that you've seen so far on the new game year-over-year even without an MLB season, do you view that as sort of like a favorable tailwind for your Fishing game given that Fishing doesn't necessarily have a -- such -- as big of a season per se aspect to it? -------------------------------------------------------------------------------- Nick Earl, Glu Mobile Inc. - President, CEO & Director [15] -------------------------------------------------------------------------------- Yes. I think -- so I think there are a lot of reasons why we like Fishing. That is certainly one of them. It's not tied to a season. And secondly, it's just got such a massive and broad following, not only in the U.S. but worldwide. So we like it for that reason. We love it for the fact that we're not paying royalties. So that's another reason why we like it. We also love the fact that it's really following the playbook that has been set up by our Glu Sports studio. There's a lot that goes into the design and the structure of a game that has a simple but really enjoyable and engaging core mechanic with a very, very deep elder game that is built around an RPG-style structure. So there's a lot of reasons why we like it. It's still incredibly early for that game. We're out testing it, as you know. But we're still in the "Let's make sure that it is stable. Let's make sure that the new user flow works. Let's make sure the mechanic works." It's still in that stage. We haven't really built out the social and elder features yet. So stay tuned. We'll have a lot to talk about over the coming earnings calls on Fishing. But we like where it is right now, and we like our trajectory. -------------------------------------------------------------------------------- Dillon Griffin Heslin, Roth Capital Partners, LLC, Research Division - Research Associate [16] -------------------------------------------------------------------------------- Got it. And then sort of when you talk about some of the new players that you've gained during these sort of stay-at-home mandates behaving similarly to your older players, but are they monetizing at similar rates as well? Or were you talking more towards engagement? -------------------------------------------------------------------------------- Eric R. Ludwig, Glu Mobile Inc. - Executive VP, COO & CFO [17] -------------------------------------------------------------------------------- Yes. Yes. So Dillon, this is Eric. Yes. So kind of bifurcating players that are nonspenders that we've acquired and players that are spenders, the players that we've acquired, either organically or by via paid user acquisition, they are paying and playing. Their behavior, their retention, their engagement, their monetization look very similar to a prior playing cohorts. We have seen several of our titles, Diner DASH in particular, Design Home in particular, over the last 1.5 months, we've seen actually increase monetization. We chalked some of that up to maybe sheltering in place, staying at home, but other parts of it like Diner DASH Adventures, we did a big update in late January. And in February, we saw a significant increase in average bookings per daily active user. So this is well before any sheltering in place took hold. So some has been monetization improvements due to features and events we've done. Some has happened just naturally. But just generally, the people that we are acquiring in the sheltering at home, they're behaving very much like prior cohorts. And so that gives us confidence that even somebody who's a Design Home player -- paying player that we downloaded in the past month, we don't believe that when they go back from sheltering in place to doing their day-to-day life, that they're not going to play 2 or 3 events a day for 5 minutes each event. That's not going to be a huge difference for them. And we think that once they're paying, that they're already now engaged and liking that game. -------------------------------------------------------------------------------- Dillon Griffin Heslin, Roth Capital Partners, LLC, Research Division - Research Associate [18] -------------------------------------------------------------------------------- Got it. And last one for me. On the potential soft launch this summer of the cross-platform games, what exactly does that entail? Like would you market it at all? Or would it just be released to your existing players and sort of push towards them? Just curious on your thoughts. -------------------------------------------------------------------------------- Nick Earl, Glu Mobile Inc. - President, CEO & Director [19] -------------------------------------------------------------------------------- Yes. Yes. Just the term soft launch certainly implies that we're not marketing. We're going to be putting out there, making sure that it fits and it's complementary to the mobile version, even though it has a different audience potential. We want to make sure that it is fully complementary to the mobile games and that it is fully stable and it's enhancing the ecosystem that we've created for those 2 audiences in those 2 games. But we will not really be marketing them until later in the year, to be determined. This is really a test for us because we've not done it before. So we'll take this very cautiously and carefully. But we do believe there is a tremendous opportunity to be able to get these games on the PC in front of even larger audiences. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- And your next question comes from the line of Drew Crum from Stifel. -------------------------------------------------------------------------------- Andrew Edward Crum, Stifel, Nicolaus & Company, Incorporated, Research Division - VP [21] -------------------------------------------------------------------------------- So Eric, the second half adjusted EBITDA margin is implied in the 17% to 18% range, if my math is correct. Understanding that doesn't include the launch of 2 new games as part of your bookings guidance, assuming they're in Phase 1 of their life, how should we think about how the profitability moves around? -------------------------------------------------------------------------------- Eric R. Ludwig, Glu Mobile Inc. - Executive VP, COO & CFO [22] -------------------------------------------------------------------------------- Yes. So obviously, Drew, you know your math. So my guidance was that Q4 would be at least 15% plus. And yes, you're right, when you back into the math, it is a higher number than 15%. Yes. So obviously, we've talked about 2 titles launching in the back half of the year. Our guidance has already included the launch budgets for those titles, so my EBITDA guidance reflects that. -------------------------------------------------------------------------------- Andrew Edward Crum, Stifel, Nicolaus & Company, Incorporated, Research Division - VP [23] -------------------------------------------------------------------------------- Okay. And then separately, you guys talked about the organic downloads for Disney Sorcerer's Arena being solid. Can you talk about your plans for investment on UA for that game? -------------------------------------------------------------------------------- Eric R. Ludwig, Glu Mobile Inc. - Executive VP, COO & CFO [24] -------------------------------------------------------------------------------- Yes. So I mean pretty much like -- I think it looks a lot like Diner DASH last year. Diner DASH last year, I've used the term escape velocity. The first quarter -- the first month or 2 at launch, we spend more on UA than we do any other time usually because CPIs are lower. We had the benefit of launching 2 new games at the lowest CPI environment we've seen in probably 2 years. So I think that was very helpful for us. And because of that, we leaned even further into the UA investment on Disney Sorcerer's Arena. And then as we get into Phase 2, we're really managing that title to be breakeven on an overall basis. So revenue, bookings, minus fees, minus team costs, minus UA, and so we'll be getting into that phase for Disney starting in Q3. And that's kind of how we'll be managing the business. -------------------------------------------------------------------------------- Nick Earl, Glu Mobile Inc. - President, CEO & Director [25] -------------------------------------------------------------------------------- Yes. Hey, Drew, it's Nick. I'll just add a couple of things on Disney. The game is really all about live ops and live events. It responds incredibly well to what the team is doing from a live operations perspective. We see tremendous lift in monetization when it's paired with a Disney or Pixar movie, of which there are many that are coming out for the remainder of the year and, obviously, well beyond that. But yes, this is all about events and challenges and getting guilds versus guilds and things like that to engage. And we're really starting to see that build. So that's one of the reasons why we're excited about what the future looks like. We know this is an expensive audience to attract, and we do know that organics are always hard to come by in today's environment. But Disney seems to be helping as a brand as well as Pixar. And most importantly, we have strong co-marketing that is coming once shelter-in-place lifts, and we can really start to execute. -------------------------------------------------------------------------------- Andrew Edward Crum, Stifel, Nicolaus & Company, Incorporated, Research Division - VP [26] -------------------------------------------------------------------------------- Okay. One last one for me. What is implied in your bookings guidance with respect to ad bookings in 2Q? And are you assuming some recovery in the second half? -------------------------------------------------------------------------------- Eric R. Ludwig, Glu Mobile Inc. - Executive VP, COO & CFO [27] -------------------------------------------------------------------------------- Yes. I mean we're running at about 11% for the rest of the year. We were at 13% Q1 and Q2 of last year, 11% right now in Q1. And given some of the strength in in-app purchases that we've seen in Q2, we don't want to get over our skis in guiding that growing, but I'm very pleased that we're able to be able to guide it flat given what other folks in the industry are seeing on their more interstitial and banner ad situation. -------------------------------------------------------------------------------- Operator [28] -------------------------------------------------------------------------------- And your next question comes from the line of Matthew Cost from Morgan Stanley. -------------------------------------------------------------------------------- Matthew Andrew Cost, Morgan Stanley, Research Division - Research Associate [29] -------------------------------------------------------------------------------- So you mentioned in the prepared remarks about -- I think this came up a moment ago as well about payers that you had in March and April sort of behaving in a similar way to prior cohorts of payers. That kind of implies people, I guess, that have gotten into the ecosystem and sort of moved up to the point of spending money. Are you seeing any difference in the behavior of people who've come in further down into lockdown, maybe late April and early May, where they're coming in and they're behaving in a way that's leading you to believe they probably won't retain into the back half or monetize as well as maybe some of these earlier players have? And then just secondly, can you just give a little bit more detail about what exactly you're changing in terms of going to a systems-based version for Diner DASH just in layman's terms, how we should think about how that should impact the way that people (multiple speakers) play the game and spend money? -------------------------------------------------------------------------------- Eric R. Ludwig, Glu Mobile Inc. - Executive VP, COO & CFO [30] -------------------------------------------------------------------------------- Perfect. Yes. Great 2 questions. I'll take the first one, and Nick will follow up on the second one on Diner DASH. So in terms of are the paying players playing and paying differently, whether they -- we demoed them earlier in the shelter-in-place versus later, we've not seen any differences in terms of the behavior. Our paying players -- if you become a paying player, you reveal yourself within the first 24 hours. It is not like you wait 7 days to start spending money in the game. Payers start to play and pay within the first session or 2. And so I would say that we're still seeing folks that were organically getting to download the game or folks that were paying for in this week looking a lot like the ones from 3, 4, 5 weeks ago. -------------------------------------------------------------------------------- Nick Earl, Glu Mobile Inc. - President, CEO & Director [31] -------------------------------------------------------------------------------- Hey, Matt, this is Nick. I'll take the second question. So Diner DASH Adventures is moving to what we call system-based elder game. And what we mean by that is, if you think about, at a very high level, an elder game or what you do in the game, days, weeks, months, years into the experience really can be delineated into heavily content-based. In other words, a lot of content has got to be released and come out, and consumers will consume that content and then wait for more, or it can be very systems-based. And a good analogy would be the game of basketball. You've got 2 hoops and a ball, but you can just play a game over and over and over for years and years. We are trying to move to systems-based for all of our games. One, because it's just way more productive for our teams to not have to create content every single day. But two, it just creates a much deeper and more engaging experience for players in the experience to be able to engage with systems as opposed to just consume this new content that's coming out. Which is also way more economical for us in terms of driving revenue and most -- more importantly, driving EBITDA. So Diner DASH is really building out systems that allow for competitive play and all sorts of play that revolves around these systems as opposed to just consuming features. And as we go through this transition, we are starting to see tremendous improvements to those KPIs in the game. And we've seen this with other games like Design Home and plenty of others as they transition from pure content to a mixture of content and systems. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- And your next question comes from the line of Mike Hickey from Benchmark Company. -------------------------------------------------------------------------------- Michael Joseph Hickey, The Benchmark Company, LLC, Research Division - Senior Equity Analyst [33] -------------------------------------------------------------------------------- Nick, you sounded a little bit more confident on maybe getting some deals done here on the M&A front, curious if I picked up on that correctly or not. And if I did, if you could just sort of speak to the current environment and what you're seeing that is sort of maybe elevating your confidence a bit here. -------------------------------------------------------------------------------- Nick Earl, Glu Mobile Inc. - President, CEO & Director [34] -------------------------------------------------------------------------------- Yes. I think there is there's 2 factors, Mike. The first is that we're just in a really great position as a company, just structurally and financially, to be looking for additional studios to join. We've got a very healthy balance sheet. We've got a very strong corp dev team that is out there in the industry engaging with studios, engaging with personalities out there who are potentially looking for a home. And given that we've -- I would say, we've really completed the first part of our strategy, which is to build a creative culture that can build these Growth Games, I think we have now proven that out. It is -- I think it's definitely time for us to expand horizons and look out there. So part of it is that we're structurally and culturally in a better place to be looking. And then I'd say the second part would be we just believe the market is -- in terms of supply of really strong candidates, we just think it's in a stronger place for us to go and acquire/acquihire studios to bring into the mix. We think we're a very friendly platform. We've got the right culture. We're a good fit for a studio that is building Growth Games, as we've seen our games, and really going to grow over the years that you really nurture. We've got a strong umbrella brand in lifestyle. We've got a strong umbrella brand in sports. We've got a strong casual set of games now, especially with the resurgence of Kim. And now we've got an RPG as well. So we've got good coverage across the broad spectrum of categories. So I think it's both the structure for the company and the position for where we are in our life that really kind of started 3.5 years ago as well as just far greater supply of studios out there that we would love to have as part of the Glu family. -------------------------------------------------------------------------------- Michael Joseph Hickey, The Benchmark Company, LLC, Research Division - Senior Equity Analyst [35] -------------------------------------------------------------------------------- It seems like historically, you guys have sort of been value buyers. I mean you've definitely priced these assets extremely opportunistically, at least in my view, do you -- are valuations in line with that philosophy? Are you seeing distressed assets? Or are you just willing to sort of pay up for something that you can have confidence can be a Growth Game? -------------------------------------------------------------------------------- Nick Earl, Glu Mobile Inc. - President, CEO & Director [36] -------------------------------------------------------------------------------- Yes, I mean, it's a very good point. We are seeing everything out there. We're seeing valuations all over, some very high valuations. But we do tend to want to come through and find the assets that we think not only are a good structural and cultural fit but are really accretive. We had a tremendous result and partnership with Crowdstar. We'd love to get another one of those. But we do think they're out there. You just have to look high and low. Fortunately, we've got a strong corp dev team that we think can really ascertain the right candidates. But yes, I mean to answer your question, it is -- it's just -- there's a lot of variability in valuations right now. We have not seen signs that there is a massive deterioration given the environment, but we'll obviously be watching that as we get deeper into this pandemic and see if there's some recessionary factors that come into play in terms of valuations. -------------------------------------------------------------------------------- Michael Joseph Hickey, The Benchmark Company, LLC, Research Division - Senior Equity Analyst [37] -------------------------------------------------------------------------------- Last question from me. Just helpful maybe to clean up the Kim narrative a little bit. Were you planning on re-signing her? Or was it sort of her business and your game with her inflected and you sort of got remotivated, re-signed her? I'm just sort of curious if you could just walk through that. And also wondering how motivated she is to be a part of that success because, originally, when she came onboard, she was very, very active. And of course, over time, that went down a lot to maybe nothing. I don't know. But how motivated is she and just sort of a couple ABCs for me in terms of where you got with her on the new contract? -------------------------------------------------------------------------------- Nick Earl, Glu Mobile Inc. - President, CEO & Director [38] -------------------------------------------------------------------------------- Yes. This was something that we have been talking about for the last few years. We've been very focused on the 3 Growth Games. So I think there was a period where we weren't quite as focused on what the future looked like. We knew we had a strong business there. We have a great partnership with Kim. She's terrific and being a partner for helping grow this game for this last 5, 6 years. But about a year ago, we started to really think it was a really good candidate for an extension. And as we saw Q4, and then we saw the results in Q1, we had tremendous energy and conviction to go and extend the deal and just spent a lot of time working through a deal that would make sense for both of us. And this is where we arrived. We think it does that and more. And in terms of her motivation, I mean we'll see how it all plays out. But certainly, that's the intention going in. And certainly, by the tone and tenor of our discussions, we feel like she is going to be a big part of this. And it's a tremendous opportunity to continue to expand that game. We are frankly amazed at how well it's doing. And given that we've got this extension now in place, we are really going to double down on the content, the feature set, systems and anything we can do to create a more engaging and enjoyable experience for the players because they just love it. And it's just one of those brands that attracts organics just incredibly well. So we feel like we're onto something strong, and we're very excited about the next 3.5 years. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- And your next question comes from the line of Doug Creutz from Cowen. -------------------------------------------------------------------------------- Douglas Lippl Creutz, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [40] -------------------------------------------------------------------------------- Historically, your portfolio has trended very much to the U.S. as you mentioned on the call. What are you seeing with Disney? Have you been able to break out of that a bit and get more geographic penetration in other regions? Are there opportunities there you see? Any color you can give on that would be great. -------------------------------------------------------------------------------- Eric R. Ludwig, Glu Mobile Inc. - Executive VP, COO & CFO [41] -------------------------------------------------------------------------------- Yes, sure, Doug. This is Eric. Yes, so our historical mix has been 84% of revenue coming from North America. I can't say that Disney is more diversified than that. I'd say right now, probably the biggest country outside of North America that we're seeing is Japan. So that's very encouraging. We're very, very pleased with what we're seeing in Japan. Korea is in the top 10 as well. So definitely, what we were expecting to happen with Disney is happening, and we're now leaning into that by doing paid user acquisition in Japan and Korea as well as in the country. So yes, we like the outcome so far, still got a long way to go, -------------------------------------------------------------------------------- Operator [42] -------------------------------------------------------------------------------- And your last question comes from the line of Jeff Cohen from Stephens Inc. -------------------------------------------------------------------------------- Jeffrey A. Cohen, Stephens Inc., Research Division - Analyst [43] -------------------------------------------------------------------------------- I don't mean to nitpick here because you guys just had a great quarter and a great guide, but it looks like your calculated cost per install doubled year-over-year, while growth ARPDAU only increased by 2%. So I might be doing the quick math wrong, but can you maybe just reconcile that with your commentary that CPIs have trended down? And then just in light of all that, maybe could you just talk about how LTV to CPI has trended more broadly in the portfolio? -------------------------------------------------------------------------------- Eric R. Ludwig, Glu Mobile Inc. - Executive VP, COO & CFO [44] -------------------------------------------------------------------------------- Yes. Sure, Jeff. Yes. So on a year-over-year basis, you're probably looking at our lower spend last year because we were in a higher CPI environment for Design Home and Covet Fashion, and we paused around that time horizon. So there's some of that noise that's into the calculation on a year-over-year basis, coupled with what we're seeing right now in terms of downloads and overall spend is a combination of both organic and paid. So I'd say those are kind of a little bit of apples and oranges on a year-over-year basis. And then the second question, I didn't quite capture the second question. -------------------------------------------------------------------------------- Jeffrey A. Cohen, Stephens Inc., Research Division - Analyst [45] -------------------------------------------------------------------------------- Just around how the LTV to CPI has trended in the portfolio. -------------------------------------------------------------------------------- Eric R. Ludwig, Glu Mobile Inc. - Executive VP, COO & CFO [46] -------------------------------------------------------------------------------- Yes. Yes. I mean, well, certainly, in the last 50 to 55 days, we've seen a phenomenal combination of CPIs coming down and LTVs going up and then the ROIs have been phenomenal, which is why we leaned in, in the month of March, we added $5 million of UA spend, that's why in the month of April -- April, May, June, we've added double-digit millions of incremental -- on a quarter-over-quarter basis, I think we're adding $20 million of UA, so really taking advantage of this favorable spend opportunity. And some of that monetization improvement on the LTV side is probably for shelter in place. However, I'd say that was an accelerant as opposed to the only reason why it's happening. We also had other titles like Design Home with the April series, the Bohemian Wanderlust Series, Covet Fashion with the spring season launch, coupled with Diner DASH going to a systems-based approach. All of those components added monetization, and the lower CPIs and higher engagement of the shelter in place really was an accelerant, boosting those other favorable items for us. And then lastly, the third leg of the stool is really around the 2 new title launches, Tap Sports Baseball, which I mentioned was up 23% year-over-year so far to date this quarter, and Disney. -------------------------------------------------------------------------------- Jeffrey A. Cohen, Stephens Inc., Research Division - Analyst [47] -------------------------------------------------------------------------------- Got it. Really impressive on the Baseball numbers. And then if I could just squeeze one more in quickly. Nick, I think you mentioned that you'd be stepping up spend on Disney once shelter in place ends. I guess is there any reason why it would make sense to wait given CPIs would obviously presumably be worse them, so why wait? -------------------------------------------------------------------------------- Nick Earl, Glu Mobile Inc. - President, CEO & Director [48] -------------------------------------------------------------------------------- Yes. Actually, what I was talking about, Jeff, was not necessarily the user acquisition but more around the co-marketing that we're going to be executing with Disney. A lot of the vehicles that we use in partnership with them rely on having consumers physically back in various places where they are not right now. So we just had to postpone some of these or many of these co-marketing until we are out of shelter in place and at least somewhat back to normal where the traffic is going to be in places that they just are not allowed right now. So we're just talking about co marketing. We're not talking about user acquisition. It's a smaller portion of the marketing pie, but we do think it's one that's going to drive players coming into the game. -------------------------------------------------------------------------------- Operator [49] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Goodbye.