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Glu Mobile Inc. (NASDAQ:GLUU)

Q1 2014 Earnings Conference Call

April 30, 2014 4:30 PM ET

Executives

Greg Cannon – VP, Finance and Corporate Controller

Niccolo de Masi – CEO

Matt Ricchetti – President, Studios

Chris Akhavan – President, Publishing

Eric Ludwig – EVP and CFO

Analysts

Sean McGowan – Needham & Company

Michael Graham – Canaccord Genuity

Doug Creutz – Cowen & Company

Mike Hickey – The Benchmark Company

Adam Krejcik – Eilers Research

Darren Aftahi – Northland Capital Market

Operator

Good day, ladies and gentlemen. Welcome to the Glu First Quarter 2014 Earnings Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this call is being recorded I would now like to introduce your host for today’s conference Greg Cannon, VP of Finance. Please go ahead sir.

Greg Cannon

Good afternoon, everyone and thank you for joining us on the Glu Mobile first quarter 2014 financial results conference call. This is Greg Cannon, VP of Finance from Glu Mobile. On the call today we have CEO, Niccolo de Masi; President of Studios, Matt Ricchetti; President of Publishing, Chris Akhavan; and CFO, Eric Ludwig.

During the course of this call we will make forward-looking statements regarding future events and the future financial performance of the company. Generally, these statements are identified by the use of the words such as expect, believe, anticipate, intend and other words that denote future events. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statement.

We caution you to consider the important risk 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 in our press release and are more fully detailed under the caption Risk Factors in the Form 10-Q filed with the Securities and Exchange Commission on March 14, 2014.

During this call we will present both GAAP and non-GAAP financial measures. The non-GAAP measures are not intended to being considered in isolation from, a substitute for, or superior to our 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 today’s press release regarding our first quarter results as well as the supplemental presentation accompanying today’s earnings call that can be accessed via our Investor website at www.glu.com/investors. The press release and supplementation presentation also have been furnished to the SEC as part of a Form 8-K.

Please also note that in addition to the presentation, you will also find on our Investor website demo videos of titles that we expect to launch in the coming months. Given the recent SEC guidance regarding the use of social media channels to announce material information to investors we are notifying investors, the media, our players and others interested in the company that in the future we might choose to communicate material information via social media channels or it is possible that information we disclose to the social media channels maybe deemed to be immaterial. Therefore, we encourage investors, the media players and others interested in Glu to review the information posted on the company’s forum, the company’s Facebook site and the company’s Twitter account. Any updates to the list of social media channels we will use to announce material information will be posted on the Investor Relations page of our website at www.glu.com/investors.

In addition, please note that the date of this conference call is April 30, 2014 and any forward-looking statements that we may make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of future events.

Lastly this conference call is the property of Glu Mobile and any recording, reproduction or rebroadcast of this conference call without the express written permission of Glu is strictly prohibited. With that, I will turn the call over to Niccolo. Niccolo?

Niccolo de Masi

Good afternoon and welcome to everyone joining us today. I am pleased to report that Q1 results came in substantially ahead of expectations and setting new top and bottom line records for Glu. Non-GAAP revenue were $47 million, were 17% ahead of the high end of guidance. Adjusted EBITDA of $6.5 million or 14% of non-GAAP revenue was also significantly above expectations and highlights the leverage in our business model.

The continues consumer traction and robust content update pipeline of both Deer Hunter 2014 and Eternity Warriors 3 drove this outperformance. Our Q3 slate were both a strong lineup of new launches including Contract Killer 3, our Kim Kardashian partnership and Hercules Theatrical Titles, our first sports game, Tap Sports: Baseball and Deer Hunter Engine were used Dino Hunter. For competitive reasons we’re not able to show demos of all exciting Q3 titles at this stage. However a free view of many of them is available on our Investor website.

It is exciting that Dino Hunter is already top 25 in data in a number of smaller territories. Though early this is an encouraging harbinger of a high organic coefficient and speaks to potential for significant worldwide launch success. Our all-time record quarterly results were achieved despite a couple of well-known new launches in the period.

Motocross Meltdown is still to gain traction with this target demographic, we believe due to a rapid alignment of its core game play to consumer expectations. Frontline Commando 2 performed in line or better than previous releases of the franchise. Yet we are disappointed with the relatively modest tail we’ve seen on the product thus far. In order to boost prospects of the stronger PDP driven tail on Contract Killer 3 we’ve elected to give this title more development time. Over the last few quarters we’ve demonstrated the impact of where appropriate keeping products in beta longer for incremental systematic refinements.

Though such actions may at times degrade near quarter revenues the overall impact to the year can be substantially greater. As mentioned on our prior calls we continue to be laser focused on our maximizing year-over-year growth even at the expense of quarter-on-quarter volatility. Significant updates to Frontline Commando 2 and Eternity Warriors 3 will arrive during Q2. However diminishing tail on DH14 and only one new launch in the quarter means we are maintaining the Q2 revenue guidance range provided on the February call.

Just a few days ago, 17 plus age ratings became a universal standard for any [shooter] on the Apple App Store worldwide. This change may adversely impact download volumes of some of our biggest franchises.

Taken together these factors mean that whilst we are uplifting full year revenue guidance to reflect the upside in Q1 we expect Q2 to remain the financial mid-year of the year. Since I started my tenure over 17 quarters ago we have understood the fundamental importance of owning globally recognized IP.

Brand recognition reduces user acquisition cost and underwrites Glu’s future on any gaming platform. As app stores have becoming increasingly cluttered the relative importance of discovery has grown disproportionate. We have a long belief that average cost per install at scaled will climb faster and gaming companies are able to grow their average lifetime value per install.

For precisely this reason we are focused on creating and nurturing franchises and IP such as our Contract Killer, Eternity Warriors, Frontline Commando and Stardom series. In March 2012 we acquired the Deer Hunter trademark from Atari, successful cross platform gaming IPs since 1997. We’ve seen improvements through the release of two Deer Hunter titles the power of combining great IP with a strong engine and compelling core game play. Our Deer Hunter franchise revenues have grown rapidly year-over-year since 2012 and we anticipate another wake up when our next title in the series launches in 2015.

As a result we’re always on the look-out for globally recognized IP that can be acquired at the right price and reinvigorated through a focused effort in our studios. Two years after our acquisition of the Deer Hunter IP I am delighted to announce that today we have transacted to bring the Diner Dash, Cooking Dash, Wedding Dash and Hotel Dash franchises in to the Glu family. We reached agreement this morning to acquire PlayFirst, owner of the Dash series which in aggregate has been installed 715 million times on all platforms over the past ten years. In celebration of its tenth year anniversary Diner Dash has been brought to market in Q4 and its first inclination as the fully free to play product from the ground up.

We believe that Glu’s global reach and scale will accelerate and broaden Diner Dash 10’s reach to a worldwide audience. Though we’ll be making an offering investments for the first two quarters post transaction close we anticipate PlayFirst to be earnings accretive for Glu from Q4 on. Diner Dash 10 will be the first new major release of the franchise in approximately four years. We believe as such has healthy potentially for upside from this significant pent up demand amongst its global fan base.

PlayFirst brings Glu one of the largest casual gaming brands of all time, as well as the studio DNA to take it to ever greater height. PlayFirst employees will be joining the Glu family in San Francisco. Combined with our existing casual franchise Stardom at our Toronto studio we consider ourselves to now have a critical competitive mass in this genre both from an IP and talent perspective.

We anticipate enhanced top growth and success for Glu in the casual sector over the coming 18 months. Today we also filed an S3 to potentially provide Glu with the financial firepower to be continued consolidator in our space. Our prior S3 was used over three year life to fund acquisitions of studios, IP and technology as well as the investment capital required to build the smartphone revenue business from scratch to current levels.

Our new shelf filing will be used equally prudently and judiciously with the continued sharp focus on accretion and downside protection any acquisition we make. Deals such as today’s PlayFirst acquisition as well as our transactions to acquire the Deer Hunter IP, our Seattle and Toronto studios and games by technologies have all added tremendous enterprise value to our company.

None of the transactions consummated in my 17 quarter tenure has been impaired, a rarity in industry. This is a testament to the quality and conservatism of inorganic thinking amongst Glu’s leadership teams.

A few weeks ago we signed a partnership with MGM and EON to be the first company in history to bring the James Bond franchise to mobile and tablet gamers worldwide. Our title will be excitingly innovative, free to play from the ground ups and is enjoyed nearly a year of pre-production. The 007 series enjoyed global audience recognition as the biggest fan franchise of all time. As the franchise continues to set ever higher box office grossing records we’re optimistic about our titles prospects of very significantly uplifting Glu’s financial trajectory from H2 2015 on.

2014 is shaping up to be the biggest and most profitable year in Glu’s history. With the next installment of the Deer Hunter franchise as well as the launch of our James Bond title we’re optimistic that 2015 will be considerably bigger still. As discussed in detail on prior calls we’ve patiently laid firm foundation for Glu in all studio and publishing functions over the past 18 months.

Monetization, user acquisition, retention and core game play development are all institutionally stronger than ever. Great IP plus great game engines can lead to outsize success in an industry which now supports a number of $500 million plus lifetime revenue franchises. In order to maximize the chance of a breakout we’re sparing no expense in our support for 2015 Deer Hunter and James Bond releases. Capital investments are being made as well as in those dedicated numbers talented studio personnel of both of these driver titles.

We are willing to trade some EBITDA outperformance in 2014 for potentially exponential return in 2015. Both the 2015 Deer Hunter and 007 games will possess uniquely strong name recognition and differentiated core game play. I believe that never before in Glu’s history has so graded a potential existed for breakout revenue growth.

I now hand you over to Matt Ricchetti for an update on our studio and portfolio.

Matt Ricchetti

Good afternoon, everyone. In our last earnings call I shared some of the successes we had with Deer Hunter 2014 and Eternity Warriors 3. Our record Q1 performance was again driven by the ongoing strength of these two titles. The top 20 grossing iPhone and Android title for all of Q4 Deer Hunter 2014 remained a top 50 grossing title for all of Q1. This has been a testament to our ability to support the title with a robust amount of new content and features. Since its launch more than six months ago Deer Hunter has seen a total 17 updates, an average of one update every 13 days, an incredible accomplishment for us.

Eternity Warriors 3 has also been heavily supported this past quarter with two major binary updates in endless power mode and [room socketing] system as well as weekly events and numerous constant updates. Eternity Warriors 3 continues to be on pace to double the lifetime revenue generated by Eternity Warriors 2. Next on tap for Eternity Warriors is our biggest update yet, [Synchornus PDP] coming later this quarter.

These two titles have demonstrated that Glu is delivering on the game business service gas strategy we promised last year. As the year enfolds we expect to see more titles with the longer tails, ongoing live updates and social competitive features that have carried Deer Hunter 2014 and Eternity Warriors 3 to success.

Frontline Commando 2 has been a solid performer for us as Niccolo mentioned, could not break out hits like Deer Hunter or Eternity Warriors. We faced a few development challenges on the title that have since been address and leave us in an improved position for the rest of the year. A major update on Frontline Commando 2 is also coming this quarter that we believe will help carry our portfolio through a quarter relatively light on new releases.

Going forward my outlook remains very bright for Glu. We have a strong release slate for the second half of the year that includes several of our top franchises, Contract Killer 3, a follow up to the Frontline Commando D-Day franchise and a reboot to our Blood and Glory IP. Dino Hunter Deadly Shores a new title off the Deer Hunter engine takes hunting to exotic new locations with extreme new weaponry.

We also have another movie license in Hercules Battle for Redemption and a fresh take on mobile sports gaming and Tab Sports Baseball. Further out in 2015 we’re looking forward to the launches of our James Bond mobile gaming franchise and the next generation of Deer Hunter. As Niccolo described both of these titles will be receiving extra time, path and product attention to maximize our chance of success. We believe that the mobile gaming industry matures our revenues will increasingly be driven by our largest and most successful titles. We have seen this internally over the past two quarters and externally in the increasing revenue concentration at the top of the iOS and Android grossing charts. I am confident that our upcoming portfolio offers multiple opportunities to break in to the upper echelons of these charts.

Lastly I would like to welcome PlayFirst and the Diner Dash franchise to Glu as someone who started my mobile gaming carrier, my gaming carrier working with casual titles at Pogo.com I am experiencing the next generation of flows play spinning in adventures to mobile gamers worldwide. The Diner Cooking and Wedding Dash IP continue to have strong cultural cache and are an excellence fit with today’s mobile gaming audience. They expand the breath of the group portfolio and most importantly create additional opportunities for breakout top growth and success. I now hand you over to our President of publishing, Chris Akhavan.

Chris Akhavan

Thanks Matt. Hi everyone. We continue to demonstrate our colorful mobile distribution capabilities throughout Q1 subscribing approximately a 105 million total downloads across our portfolio. Our new launches including Robocop, Front Line Commando 2 and Motocross Meltdown had highly successful launches when measured by downloads on the app store and Google Play. We are pleased by accomplishing organization’s ability to consistently drive millions of installs to our new title launches and believe our distribution power combined with our IP strength is rivaled by very few companies in the industry.

In addition to successfully promoting new launches in Q1 we continued to drive effective user acquisition campaigns for Deer Hunter 2014 and Eternity Warriors 3. Both titles have benefited from longer tails due to our upgraded performance marketing and user acquisition capabilities.

Eternity Warriors 3 alters the strong local support from our teams in Korea and China which are the two largest markets for the title after the U.S. The H14 and EW3 will continue to receive the bulk of our internal user acquisition attention during Q2 while we gear up our new title launches at the beginning of Q3. Our advertising revenue continues to grow at a health rate. Despite Q1 being the slowest seasonal quarter for ad revenue we were able to grow non-GAAP add revenue by around 156% in Q1, 2014 compared to Q1, 2013. We are focused on further optimization of ad revenue channels in Q2 and believe there are many growth opportunities ahead for Glu in this area.

A key focus particularly this year is investing in our infrastructure. During Q1 we rolled out upgrades to our business intelligence systems that have enabled us to more rapidly put the right data in the hand of product owners to drive faster and more intelligent decisions. We have an ambitious tools in infrastructure road map for 2014 and believe we are investing in the right technology to drive growth in our business.

Finally I’d like to mention that we are excited by the progress we are making on the game we are co-developing with COLOPL in Japan. We are looking forward to launching title this year and believe it will be Glu’s best effort to-date to interest the large Japanese mobile gaming market. I now turn it over to Eric for a review of our financials and guidance.

Eric Ludwig

Thank you, Chris. I am very pleased with our continued strong execution during the first quarter as we significantly exceeded expectations across all of our financial metrics. I will first detail our Q1 results and discuss the PlayFirst acquisition and I will conclude by provide our outlook for the second quarter and full year.

As I mentioned last quarter for 2014 and beyond we will only report total revenue versus breaking out feature phone and Smartphone revenue. This is due to the immaterial contribution of feature phone revenue in 2014 which will be less than 1% of total revenue. Our key financial highlights in the first quarter of 2014, are total non-GAAP revenues were record $47 million a 10% increase quarter-over-quarter and a 90% year-over-year increased. This was substantially about the high end of our guidance range.

Non-GAAP gross margin was 69%. We achieved record adjusted EBITDA of $6.5 million or 14% of revenue. Our non-GAAP net income was 5.4 million or EPS of $0.06 per diluted share. We increased our cash balance by $8.5 million to $37 million. We had a 105.6 million downloads of our titles during the quarter and our daily active users in the month of March 2014 increase to 7 million while our monthly active users for March were similarly up to 64.5 million.

Summarizing the full results for the first quarter total non-GAAP revenue of $47 million was significantly above our guidance range of $38 million to $40 million. Our three largest titles during the first quarter represented approximately 66% of total non-GAAP revenues with Deer Hunter 2014 generating $17.2 million or 37% of total non-GAAP revenue.

Eternity Warriors 3 generated $10.2 million and Robocop came in at $3.5 million. It’s important to note that the $10.2 in Eternity Warriors 3 in Q1 is a Glu overall record if you exclude the last two quarters of under-performance. I am quite pleased that this quarter we were able to increase overall revenue while also decreasing our dependence on any one single title which was the case in the last quarter.

During the first quarter our non-GAAP gross margin was 69.3% down from 73% during the fourth quarter. As we mentioned in the last quarter’s call this quarter-over-quarter decrease was expected and the actual results were slightly better than guidance. The priority drivers increasing cost in Q1 were royalty cost related to Robocop and an increase in hosting cost form our first heavy [inaudible] title. Total Non-GAAP OpEx was $26.7 million in the first quarter and approximately $1 million higher than guidance this is due to increase variable marketing spend which helped drive the incremental revenue.

Despite the slightly high than expected OpEx during the first quarter we reported record adjusted EBITDA of $6.5 million or 14% total non-GAAP revenue. This is significantly better than our prior guidance of EBITDA of $1.5 million to $2.5 million due to the revenue beat. It also highlights the significant leverage we have in the business beyond break even. We reported a non-GAAP net income of $5.4 million which also significantly exceeded our guidance of $700,000 to $1.6 million resulting in non-GAAP EPS of $0.06 per diluted share.

And a full recon of GAAP to non-GAAP financial measures was included in the press release and the supplemental presentation we issued today.

Now turning to the balance sheet, as of March 31, 2014 our cash equivalents totaled $37 million which was up $8.5 million from the prior quarter. During Q1 we generated $3.8 million of cash from operating activities and received approximately $5.4 million in proceeds from stock option and warrant exercise and [inaudible] under our ESPP. This was partially offset by approximately $800,000 in cash used in investing activities.

Before I discuss our financial outlook I want to provide some additional details of the acquisition of PlayFirst we announced today. Under the terms of the agreement we will issue 3 million shares at Glu common stock and assume up to $3,502,000 of net liabilities. At today’s closing stock price of $4 this equals equity value of $12 million and a total max value of approximately $15.55 million. In 2013 PlayFirst generated approximately $11.4 million in non-GAAP gross revenues and a $5.2 million loss. This calculates out to an approximate 1.4X prior year revenue multiple.

The company is currently on an annual $7 million gross revenue run rate and a $2.4 million annual loss. The revenue and loss declines have reflected restructuring to enter consider of capital and extend the run way.

The position was opportunistic for Glu given their balance sheet and history of operating losses. As Niccolo mentioned we are very excited to add the Dash franchise which has over 75 million installs in iOS alone and which is launching its first premium in the fourth quarter. The acquisition bolsters Glu’s casual expertise and provide us with an additional team of games and the service experts. We expect the integration of PlayFirst to be very smooth. Our corporate office are two blocks from each other in San Francisco and we have a great track record of integrating studio talent.

We expect the operation to close by the end of May and we will realize a modest amount of OpEx synergies in 2015 once its office lease expires. We are very confident in our ability to realize a significant return on investment given our past M&A successes including James bond and Deer Hunter.

Over the last 24 months since acquiring the Deer Hunter brand from Atari we’ve recognized over $61 million in gross revenue primarily driven by the ability of our team to reinvigorate the IP with Glu studio and monetization expertise. We were previously paying a target 35% of net revenues in royalties after the platform fees. As such we have saved over $16.2 million in foregone royalties in just last 24 months by buying the entire brand for $5 million. This 3.2X savings were only magnified as we update the current title and launch sequels in the perpetuity.

Given the number of opportunities we are seeing worldwide similar to PlayFirst we decided a strategic sense to enhance our financial flexibility. We did so this afternoon by following a $150 million shelf registration statement. This shelf is subject to SEC review before it can be declared effective in U.S. by Glu. We do not have any definitive plans to utilize the shelf at this time but we wanted to provide ourselves increased flexibility to raise capital to enable us to make additional acquisition should the right opportunities arise.

Now turning to guidance. Included in our supplemental presentation you will find a detailed breakdown of our guidance for standalone Glu, PlayFirst standalone and the combined entities. For purposes of this call I would just discuss the combined guidance. For the second quarter of 2014 we are maintaining our total non-GAAP revenue guidance range with the inclusion of PlayFirst with revenue of $30.6 million to $32.7 million. As we discussed last quarter the sequential decrease compared to the first quarter of 2014 is due to the combination of a lighter release schedule and the anticipated trailing off of Deer Hunter 2014 and Eternity Warriors 3.

However this is still up 32% to 41% on a year-over-year basis. During the second quarter we expect non-GAAP gross margin to be approximately 67% which is also lower than Q1. This decline is primarily due to the higher cost of Robocop and higher hosting cost not being offset by the lower revenue figures.

Our non-GAAP OpEx for second quarter is expected to be approximately $25.8 million. This decline is primarily due to higher cost of RoboCop and higher – cost not being well set by lower revenue figures. Our non-GAAP OpEx for the second quarter in expected to be approximately 25.8 million this is lower quarter-over-quarter as due to lower favorable marketing on a lower revenue. And as a result we continue to expect to have a negative operating result in second quarter. Adjusted EBITDA loss is expected to range from 3.4 million to 4.5 million.

Finally we expect our cash balance at the end of the second quarter to be approximately 33.5 million this includes paying down approximately 3.5 million of debt in trade payables from PlayFirst during the first quarter.

Glu’s standalone is expected to be overall breakeven as we compare to cash to Q1 level. Regarding the full year 2014 we are increasing our total non-GAAP revenue to be in a range of a 155 million to 161.5 million compared to our prior guidance of a 142 million to 150 million. The increase reflects adding the full Q1 beat to the full year making no further changes to remainder of the year for Glu’s standalone but including the expected post-closing revenues generated by PlayFirst.

We continue to view this as a strong outlook especially given our full year top line does not assume any Deer Hunter side titles. We currently expect non-GAAP gross margin to be approximately 67% for 2014 down slightly from our prior guidance of 68%.

As a reminder the year-over-year declining gross margins is primarily due to the mix of titles based on original IP versus licensed and third party content and in addition in incorporate incremental – cost this quarter gained in service titles. Non-GAAP OpEx for 2014 is expected to range from a 101.2 million to 103.7 million the increase in last quarter’s full year guidance is approximately $4 million from PlayFirst plus the modest additional investment to support our D2015 titles Deer Hunter and James Bond that Niccolo mentioned.

As a result adjusted EBITDA for 2014 is now expected to be in a range of 5 million to 6.7 million. We’re not adding a full Q1 EBITDA – to the full year due to the incremental investment in our key 2015 titles that coupled with the losses from PlayFirst in 2014 will keep full year EBITDA essentially breakeven at the high end guidance on a combined basis for the last three quarters of the year. Finally, we expect to end 2014 with approximately 34.5 million in cash and short term investments and no debt.

In summary, I’m extremely pleased with our strong execution in Q1 and are excited to add the Dash franchises and the PlayFirst – group. We remain confident in our ability to execute our strategy. We also believe we will maintain momentum given the investments we’ve made in our senior management team and infrastructure. I look forward to updating to you on the progress this quarter and with that we open the call for questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) and our first question comes from [inaudible] from Piper Jaffray. Please go ahead.

Unidentified Analyst

Hey guys, good afternoon. I had a couple of questions so there seems to be a trend as most of your titles have had past releases are kind of outperforming those past releases which suggest a broader improvement and interesting in general monetization strategies is there anything you can really can kind of talk about your secret sauce here whether is there anything you can say about what’s changed in your strategy that’s working?

Niccolo de Masi

So we will give you a couple kind of thoughts and I’ll pass over to Matt and then won’t tell you our secret sauce anyway. So, obviously this – included for years and will be for probably the best of the – so obviously growth in the number of addressable devices around the world and the fact that we are arguably the most efficient company in our class ads ensuring that our games around all those devices, hit up all those languages, hit up all the new 30 markets as they begin to see the upgrade cycle, move from feature phones to smartphones and move from laptops to tablets et cetera and so quarterly outperformance comes from the fact that every year the market gets bigger.

But I think more recently the sort of super outperformance you see has surely been coming from the foundations we’ve laid in the last 15 months with new skills, new management team and is focused on both how we get people through the doors as well as how we keep growing. But I think we will see those trends carrying on frankly for years to come because we’re really just scratching the surface a world that can get too and probably the market was strongest and we’re also scratching the surface of how high our – can get when you look at from other markets in the world like Japan and Korea so loss is big for the macro reasons to be bullish for a couple maybe hints kind of you’re thinking about let me hand it to Matt.

Matt Ricchetti

Yeah thanks Niccolo. And thanks for the question Mike it’s definitely one of the things we’ve spend a lot of time talking about internally and I think Niccolo covered a lot of the macro stuff more specifically on the product I kind of structure my comments around this data points on Deer Hunter and Eternity Warriors that we’ve supported the games very well.

And that has kind of led to longer tails on our names and that’s I talked about kind of social features and competitive features as part of – maybe come on Glass as support as a big part as well so those backs needed to be if you don’t have any social features in it and we’re looking to add PDP so to that and then I think – as Nick already said we’ve kind of deepened and adjusted our monetization in our games and so those product names and then – it all starts with being able to take these interesting franchises and continue to drive increased downloads from the net than we’ve had in the past, this we’ve done excellent job on relationships with Apple and Google and acquiring users.

Yeah I think the biggest thing to come there again platform ownership has been stronger than ever been. Our local approach in markets like Korea, China and Japan have really paid off and on the direct marketing side the organization has gone sort of – media buying to have a sophisticated data prevent user acquisition and then all the things combined really amplified our distribution power.

Niccolo de Masi

So we’re clearly steering into which is another thing I tried to kind of recall in my remarks we’re steering into our top franchises in recognition of these trends. If again the trend I think Mike you can see in every month it has sort of a parallel between the top ten and bottom 100 in terms of revenue, the big the bigger right you see in the film space, the music space the big and bigger the faster than the market gets bigger.

And ultimately one of the things that is paying off for us is obviously continue to invest in brand that are getting bigger all the time, if you look at our investment in this quarter you can see some of the installed momentum and special momentum from things like – and Deer Hunter 2014 and both of those are impressive at the number of people in play zone just the past quarter.

And if you think about how do you play this in the last year or years we’re into make 100 to millions in some cases, which is why the reasons we were excited about the opportunities bringing PlayFirst that franchise to Glu, another franchise that has hundreds of millions of people to play it, lot of recognition with the right love and investments likely a lot of those site potential that we have in coming years.

Unidentified Analyst

All right. Thanks very much.

Operator

Thank you. And our next question comes from Sean McGowan from Needham & Company. Please go ahead.

Sean McGowan – Needham & Company

Thanks. I have got few questions about PlayFirst and the Diner Dash. So the last time it was out in the market how did the Diner Dash performed?

Niccolo de Masi

The Diner Dash has been out in a number of form so pay upfront pay per download as well as the sort of free paying in live version where you downloaded for free pay for new levels. – is obviously hasn’t going a long time and PlayFirst going on I don’t know this ten, 12 years and so on and it predominantly built around that franchise so I don’t think that we can give you a number off the top of our heads from our notes that shows you exactly how it did four years ago in the –.

But I think it’s fair to say that it seems consistently high success in everything from the PC download markets through to the feature phone space when Glu actually used to license the brand and IP half the decade or so on has continue to see a good amount of organic of a non-cade traction on a monthly basis. So the semifinal installed an iOS Eric referenced that happens with all marketing experiment which is an exceptionally good indication of the fan base and their willingness to engage even without the newest context there is.

Sean McGowan – Needham & Company

Is all the revenue that they did last year and they expected to do this year based on the Dash series?

Niccolo de Masi

The super majority is certainly.

Sean McGowan – Needham & Company

Did I cut it off edge?

Niccolo de Masi

Yeah I know Sean otherwise moving on years back six, seven, eight, nine years ago we were licensing for the- the Diner Dash series then we saw over a four to five year time horizon multi million dollars a year of revenue on the feature phone on the carrier networks from the – Diner Dash series so we’ve know these for quite a long time, we know the – we know we think we can do we’re very excited about what the team over there can do on the bringing up the fully ground up premium title in the first quarter.

Sean McGowan – Needham & Company

Now we did saw a long in development that fully free to play model or are you starting from scratch?

Niccolo de Masi

Well they are far enough along for to be important for the color that we can side them in our decision making process. Let me sort of practice the math to give you his staff but certainly we wouldn’t have been progressing with this deal expedition they quickly be warned and very confidence about was heading the right direction and has the right hooks and right designs and a built in from the ground up.

Sean McGowan – Needham & Company

Okay.

Niccolo de Masi

Yeah honestly don’t have anything else to add beyond that a bit but that we would never consider a transaction like this much we feel confident that the game is moving in right direction.

Chris Akhavan

Games the right direction teams exceptional and I understand their IP better than anybody as well as how to take it from a sort of paid and premium model to a fully free to play model. And free online free to play model so it’s going to be another gaps title for Glu.

Sean McGowan – Needham & Company

Okay. And is it the structure of the deal is it a set number of shares and whatever the price happens to be on the day of the closing that’s what it is or are there caps or other limits?

Eric Ludwig

That number of shares period as for the past release 3 million shares and assumptions of that.

Sean McGowan – Needham & Company

So no adjustment to that with regard to Glu stock price up or down right?

Niccolo de Masi

No right.

Sean McGowan – Needham & Company

And last question on that. Were there any bidders in this process?

Niccolo de Masi

Yeah we don’t talk about the competition obviously the source out there they could have been talking to you but we will go in details to see who else is in there.

Eric Ludwig

Safe to say that something that’s compelling. I mean there is only some rebrands in world I think that are ever sold with three quarters in the billion people have played them. And right now most of those brands around by people like say Kings or Super sound phone sort of actively largely GLU. So sort of we surely saw a unique opportunity of all the Deer Hunter Caliber and off-course are hopping a long term is it between the various sub brands of the Dash franchise or hotel wedding, cooking dinner.

There should be very meaningful impact of Glu year in year out here. So another big contributor for 2015 along with the Bond and the Deer Hunter next release.

Sean McGowan – Needham & Company

Thank you well I will check the rest when I am offline. Thank you.

Operator

Thank you and our next question comes from Michal Graham from Canaccord. Please go ahead.

Michael Graham – Canaccord Genuity

Thanks and congrats on the great progress guys. And I have a couple, the first one may be just for Matt which is can you just give a little more depth on any commonalities in terms of monetization success between Deer Hunter and Eternity Warriors and just you know may be a little more color about systematically what might be going right there and as you look at the upcoming launches are there some that you think are going to fit that more particularly well are you really excited about some of them?

And then now as much as others or just any color you can provide there and then I will come back with my next question thanks.

Matt Ricchetti

Just to repeat we are looking for commonalities among Deer Hunter and Eternity Warriors 3. And then the second half question was?

Michael Graham – Canaccord Genuity

Well just that you know as you look at your upcoming launches. Are there any of those commonalities that you think really fit in some of the games that you have coming out?

Matt Ricchetti

Yeah so you know in some ways as Deer Hunter and Eternity Warriors are very different games and I think we kind of touched on that like we are actually quite fortunate to have a diverse portfolio and have games of pretty different kind of knowledge and experience and cash performing well I think that’s a test to our ability to monetize just in general.

And but again in my remarks they kind of touched on a big driver than monetization has been ongoing support and our ability to kind of keep the games fresh add new things to buy new things to pay social events the both Deer Hunter and Eternity Warriors 3 have regular events keep players engaged. And the core account is very different but the account of ongoing experiences are similar in terms of things that I am very excited about obviously Dino Hunter is coming right off the basket Deer Hunger and Super tried it above that they feel like it’s got enough of what makes Deer Hunter so special of just really easy to pick and put down of same economy of the same kind of Medigame features a really experience like Hunting Dinosaurs feel really different the locations are totally different.

And we’ll look kind of continue to have more that franchise in its own unique direction as it evolves and Niccolo mentioned it’s off a fantastic start already. I am to pick out just one thing I would say that’s it but there is more in I could keep going.

Niccolo De Masi

I mean look Michael what instead of add institutionally and this is kind of my script. How we think about monetization, user acquisition, retention, core game plays. Now the other piece of business which is sort of market timing we see are excite a bit. And so really what is about it and how scientific can we be and how much can be bring discipline? To the – or which we think through these aspects of each game during the moment cycle.

And I think that the biggest commonality that I think we’ve improved probably across the whole portfolio is the discipline rigorous which we are bringing the Green light process to our milestone process and the importance that we now know we can drive better and better tales and games by regular updates et cetera, et cetera. So we are just getting started here sill I would say and we reach the new plateau that we are according to the I think about but the teams very much crashing the service they think of how much better we can get.

At all of this our franchise is getting bigger our engines are getting better and as usually that improving you are also going to see more engine reuse opportunities like this Dino Hunter.

Michael Graham – Canaccord Genuity

Okay. That’s really helpful thank you. And then Eric have you used to talk about a construct in terms of guidance where you had taking to and sort of come up with an average revenue rate for the game and sort of use that as a way to compute guidance I guess.

And I am wondering if you know would the success of some of these recent games have you sort of raised of adverse monetization bogie when you think about guidance? And related to I am just wondering if you can give any context around the run rates of Deer Hunter and Eternity Warriors sort of at the beginning of the quarter and as we exit the quarter? Thanks a lot.

Eric Ludwig

Yeah sure Mike thanks for that. And so yeah I mean my guidance studying is always evolving based on probably in only two keepings, one is the catalog itself and one is doing at lead to be paces. Then secondly is the release slate that we have and our expectations of what each of those titles I will do. So for example this quarter is down quite substantially but it’s were are not lower in guidance because we expected this to happen last by the combination of we had a very back end loaded release say last quarter for Q2 and we’ve exaggerated that a bit by pushing out CK3 out of the quarter completely once been is probably offset by the strengths of some of those scales and other titles.

But you are right you can obviously tell from the charts as well as you might reach starting revenue for EW3 and Deer Hunter in January and my week ending was a pretty sizable drop hence the reason my guidance is coming down and we expected that. So we expected this to happen in Q4 it didn’t we expected to happen a bit in Q1 it didn’t. But it has exited March at much lower rate than we start the quarter hence the reason for the guidance.

And then the second question I didn’t take your second question.

Michael Graham – Canaccord Genuity

Well I was just looking for some you kind of classify about some clarification about where we entered and exited the quarter in terms of run rate for those two of the games?

Eric Ludwig

Yeah entered higher and exited lower. Yeah I mean it was always into the lower for sure but I am not going to give percentages of differential from start to ending.

Michael Graham – Canaccord Genuity

And thank you very much.

Eric Ludwig

Thanks Mike.

Operator

Thank you and our next question comes from Doug Creutz from Cowen & Company. Please go ahead.

Doug Creutz – Cowen & Company

Yeah thanks excuse me. Niccolo you mentioned in age rating change of the applet institute in the app store. Can you talk in practical terms what that means for your shooter games and how that might change your download characteristics?

Niccolo De Masi

Well you know there is kind of two effects of the balance and this is a change which is impacted us globally even though it was probably driven by some territories like Korea and China who have been pretty concerned of the governmental level around action games as well as the new game addiction in some cases. So you know automatically there is going to be some subset of people who have preventable controls on their device and ultimately will not be able to access these games.

And we think that is counter bound to some extends and by the fact that there is a sort of natural additional call it enthusiasm which people have for sort of updating the forbidden fruit. And so we think that ultimately net-net it a headwind but it’s not a headwind which is currently not discuss far to get particularly concerned about the rest of the year. And we will see how life plays out here and it may impact the ability to get title feature to the same extent and there is following year – some territories for these types of games from apple stores from managers.

There’s another reason why our expanding tools casual division makes a lot of sense right now, alright. I don’t like Diner Dash, Wedding Dash, Cooking Dash, Hotel Dash ultimately play very well and – very well for all demographics and they play very well with the kind of brand values that Apple, Google, Amazon, Microsoft want to be in the store.

Doug Creutz – Cowen & Company

Okay great thanks.

Operator

Your next question comes from Mike Hickey from The Benchmark Company. Please go ahead.

Mike Hickey – The Benchmark Company

Hey guys thanks for taking my questions and congrats on a great quarter. Obviously Dino Hunter it looks like it’s getting some transaction and you’re enthusiastic about can you just give us any sort of insight on maybe how the data here is the – as compared to Deer Hunter? And also I’ve a French question that you guys consider trade marking Hunter for your games?

Niccolo de Masi

Okay well I’ll pass the data question to Matt and Chris and our General Counsel may give us some thoughts on.

Matt Ricchetti

I believe trade mark is Hunting this – for Deer Hunter we’re typically up for anything we can.

Eric Ludwig

I’ll comment on the distribution side we’re seeing the early data performance in terms of download ability is kind of comparable to what we saw at the same time data for Deer Hunter 2014 so we’re pretty encouraged on the download ability front.

Niccolo de Masi

Yes not much more to add there it’s early so there’s a road to go but early signs are very positive.

Chris Akhavan

Yeah I might like to add here it’s a great thing about the Hunting season Dinosaur Hunting is all year along.

Mike Hickey – The Benchmark Company

That’s awesome.

Niccolo de Masi

One of other comments those things we expect to see is broader global appeal right we’re like markets in Asia, not so keen about Deer Hunting I think there’s going to be more of markets for Dino Hunter game.

Matt Ricchetti

So to your question on Hunter I mean it’s very difficult to try to manage and protect something that is large we will have an opportunity to obviously keep using engines that successful cash on retaining market life and it appears that Deer Hunter and – we believe Dino Hunter is on the way to successful use the engine. There’s obviously additional applications across the hunting shown so we will be applying the use of the name I call it by being first to market and to protecting the virtue of use and being there easily catch by the market I think.

Mike Hickey – The Benchmark Company

Fair enough – so just curious on timing obviously a couple of big games here for ‘15 it looks like I think the volume in Q4 so it’s kind of reasonable to think that the game in Q4 and then Deer Hunter hunting season kind of a Q4 event as well?

Niccolo de Masi

So we haven’t given anything specific on the Deer Hunting game and seriously as we’ve been very pleasantly surprised by the breadth and longevity of interest by hunter and non-hunter rely globally for the game in and out given. The bond side where we announced our press release going to out in the third quarter last year so thinking of late summer so it will in advance of the film.

Mike Hickey – The Benchmark Company

Okay last question the PlayFirst just curious the headcount there.

Matt Ricchetti

Yeah that’s 33 headcount.

Mike Hickey – The Benchmark Company

Okay and then your total headcount shrinking a number here but where that is kind of quarter end high expect that’s a trend kind of ex-places to?

Matt Ricchetti

Yeah Mike we were 547 at the end of March so with PlayFirst 570 and then 580 and then we will have some incremental hedge obviously throughout the year we talked a bit about the bond and throughout the 2015 investments so it will be over 600 by the end of the year.

Niccolo de Masi

So excluding same contractors on – numbers on higher cost aboard count those.

Mike Hickey – The Benchmark Company

Okay and the Dash franchise just curious I think you said annual run rate is $7 million how much of that is advertising and how important do you think maybe add money is would these kind of monetizing that franchise moving forward you guys now?

Eric Ludwig

Yeah this – of a question actually ad revenue is quite minimal without currently – so we do rather something we want to engage with frequently.

Niccolo de Masi

We’re trying to look at assumptions and believe that we can bring them up to sort of average level ad revenue to Glu enjoy the cost which is 20ish plus percent.

Mike Hickey – The Benchmark Company

Okay that’s very helpful, thanks guys, good luck.

Niccolo de Masi

Thanks Mike.

Operator

Thank you. And our next question comes from [inaudible] from Stifel. Please go ahead.

Unidentified Analyst

A couple questions on PlayFirst, first of all what is the exposure to Asia the game or the franchise that play well in that market or do you see an opportunity going forward and were there any earn outs related to this transaction?

Niccolo de Masi

Yeah so it’s all – I mean there’s virtually little very little revenue in Asia it’s certainly one of the things that we will be slowing over the next six months as whether we can either reduce some localization and or additional recordings different handsets across the Asia ecosystem with the English version. But no, there are no earn outs in the deal half of the shares half of the 3 million fixed number of shares will be held between four months but that’s just a transactional hold back in case of things looking out in the – but not it is the 3 million share counts plus the assumption of up to 3.5 million of debt.

Eric Ludwig

Well on the business outlays and everyone at PlayFirst is becoming a standard new employee on transaction close – there’s a nice thing about this deal that I would point out is that just like Glu PlayFirst is a 100% run by professional managers we’re very – about the culture we see in that trend so once again we’re going to have continue to merge company where everybody is running in the same direction every year everyone is – to same way and that is mainly about ensuring to drive shareholders returns for the future regardless of what has worked in past.

Matt Ricchetti

And Andrew this is the first transaction that we’ve done that will be not only will be in the same city but we almost have same time zones, we’ve got transactions in China in India in Russia in Canada this company is too large for – infrastructure and we’re very excited about the cultural fit and the ability that really effect across training without having to have coach on 12 hour delay phone calls.

Unidentified Analyst

Yeah it’s okay and then Niccolo in press release you talked about launching Deer Hunter 2014 on Amazon – TV can you talk about the traction you’ve gotten there to date and how do you see that going forward as the viable platform for Glu teams?

Niccolo de Masi

So Glu is I think renowned for this point for with all willingness enthusiasm around the 40 new addressable consumer devices for our partners so whether its’ of Apple, Google, Microsoft or Amazon we’re always have the cutting edge. And we’re the first company that built again for Google Glass last year and we will likely be carrying on with our investments in those living room call it TV price expansion as well as giving up the – available space. Not only the initiatives are near term revenue impact us.

All of these initiatives are long-term investment and our ability to know soon as everybody else what it takes to making game working on these new form factors that build the middle ware technology and expertise to enable us to quickly take our games to these it’s the one to take off and most of all there are investment obviously in being a good and unique technology partners with some of the largest they are coming to – to control consumer hardware platform software building relationships and ultimately marketing distribution as well.

So I’m bullish about the living room, the Glu’s is bullish about the living room, we’re bullish about the free to play business model eventually coming to living room in a grand way but not this quarter let me put it that way.

Unidentified Analyst

Okay, thanks guys.

Operator

Thank you. And our next question comes from Adam Krejcik from Eilers Research. Please go ahead.

Adam Krejcik – Eilers Research

Yeah hi thanks for taking my questions. First one is on strategy so you guys have done a great job in the action adventure category and I imagine some of that success is leveraging the player base and demographics you have in those games so kind of thinking about the Diner Dash series which is very casual by nature and some of the other casual games you guys are planning to release this year.

Now how do you kind of ensure more success in these casual joiners that appeals to a different player demographic in some of the core group titles that you have right now come down to marketing just kind of talk us through that – thanks.

Niccolo de Masi

Alright let me give you a couple of comments and I’ll pass this to Matt and Chris so that you get answer from everybody. First of all we actually do have a high degree of casual expertise in our senior management team because Mr. Kedy they used to work in these casual games space in his career now all he would – to describe that. But and I go through Chris and Matt both individuals here are extremely familiar with how the markets and how it has demographic how to capture users retain them to pay. 31st is the business unit that like with our Plano studio in Toronto is self-contained and PlayFrist move before directly to Matt Ricchetti and we are making this acquisition because we are getting a lot of experts with a game that looks good as well as IP. And so this is something which is already well on its way we believe to be in successful and that’s a case of 10 week turtle charge and how do we turtle charge it?

Matt Ricchetti

On the markings that was here with Niccolo that we have 20 people here with casual background and feel confident about our ability to market a casual title in addition to having already had enough experience marketing to start on Hollywood franchise and then so think we are well positioned there.

Eric Ludwig

Hey I would just add that on little bit like a personal ramp but I think to some degree like casual and then hardcore could be kind of read hearings you know when you really look at what those things mean how then work in casual gaming for a number of years there are very, very hardcore players in terms of behavior to play casual game I mean look at games like Candy Crushing and things like that and are very sort of casual players of shooter.

So I think ultimately what casual on hardcore come downs he was more of a question of been but so – not actually the theme game and we are very confident in the divider of the orders that come in the play for the studio they’ve been living and breathing those that theme for a long time and I know better than anyone else. But when you look up and look underneath you can that you a drive the economy and the drive gas games are actually all very similar across the board and then not to minimize difference in games around something like that but I think there is actually much more that we can kind of share learn from each other than the – is different.

So I think it’s overall something that allow we can show PlayFirst and then in terms getting more out of the game – them to about how to make our shares more successful.

Chris Akhavan

The insurance action Adam I think is we trying to act clearly we have a very high threshold of down fight protection and upside opportunity GLU. We pass on one of things we don’t chase the price up ever typically but this transaction has unanimous enthusiasm across our sea sweet and everyone that we expose it to. But precisely the things that just outlined. We are getting a bold stream of a casual position but we actually believe this much will be brought to our business to a long term institutionalization of success as we will be bringing to it.

And that’s very exciting for us when we have a group like monitor individuals culturally similar physically nearby and really give us an opportunity think to grow another leg to the Glu story and we are the leader in the action venture franchise think for none we talked repeated the fact that we shift the biggest action game for years going out but we think that there is certainly continued room if you look at the top growth fee charts to get very big games for the last market in the casuals three year. We have a franchise of top chart of driven Atlanta that’s been reused for Kim production partnership.

For the Dash franchise is something we think that’s very special, and tremendous room for upside tremendous for longevity tremendous recognition and there is a lot of attentive demand waiting for great games. And so we believe our timings been quite optimal for this transaction as well.

Adam Krejcik – Eilers Research

Okay great I appreciate the details response and color there. And second question and it’s juts on sales and marketing you mentioned. So clear acquisition cost are going up in this industry for everyone. But if I look this quarter CPI’s for you guys quite bit going down so he record number of installs and sales and marketing was pretty down sequentially. Are you is that function on more efficient marketing spend? And can you kind of talk about what are the most factors uses of sales and marketing that implied acquisition avenues is anything change in that? Thanks.

Chris Akhavan

This is Chris. So I think when we talked about cost going up we are talking about paid acquisition cost going up which we do see as well. And I think the reason why our blended cost per user went down in Q1 is just due to the strong franchise value of our IP driving significant amount of organic inflow. So for us and it’s a big advantage well thus the industry might be struggling with acquiring only paid users we have very strong organic coefficients to drive our total acquisition cost down.

Niccolo de Masi

Whenever as we say every quarter well into the 90’s percent of our installs we are not paying for. So we are quite a unique gaming company compared to other say players out there we’ve always believe this in my prepared remarks in the long term consumers naturally gravitating towards recognized IP is may be the most important determinant of success. If you don’t get them through the door you don’t have a chance to keep them or get them to pay.

So we are getting better at everything and Chris has done a great job in last year at getting more efficient and expanding the number of channels we market to I think were up to 50 also distinct marketing channel we routinely used for all of our product. And not leave it on average your ability to scale and keep paid acquisition cost low is greater than using fewer channel.

We are getting more localized with those channels and as I sort of repeatedly say I think I mostly told, continue investing our franchisers means that bigger recognition drives a high organic coefficient that bring down the overall acquisition cost on a blended basis.

Adam Krejcik – Eilers Research

Okay. Great thank you.

Operator

(Operator Instructions). And our next question comes from Darren Aftahi from Northland Capital Market please go ahead.

Darren Aftahi – Northland Capital Market

Hey guys can you hear me. Congrats sorry something on two different calls so then it has been asked I apologies. But can you help that on two things one first it seems like add revenue as improved dramatically the last two quarters obviously 4Q is pretty seasonal. But just on a related basis it’s up by I think that 30% 40% percent year on year. You kind of give a little bit more color on that?

Secondly sort of similar to Dino Hunter can you give us color on plans kind of reusing game engine mechanics to kind of create future games sort of taking may be things are little bit out of your comfort zone like the baseball game you have and just you know the mentality and then in terms of the thinking? Thanks.

Niccolo de Masi

So there are two things we’ve done but it’s Dino Hunter.

Chris Akhavan

Yeah hey Darren this is Chris I think the question on add revenue. And so before I join Glu my background was heavily in mobile advertising. So when I saw here those big priority I’ve say what we’ve done to grow add revenue is open up multiple new channels new partnerships to get add demand into our games as well as putting lot of focus in attention of optimizing how we display adds in our games so we are maximizing add revenue while minimizing disruption to users particularly not disrupting paying users. But I think we’ve done a good job on both bringing a new demand as well as of optimizing where and how and out we are showing out to our user base.

Eric Ludwig

And Darren if you look at the percentage of revenue and the absolute – revenue from Q4 to Q1 it is down as I was expecting because Eternity Warriors 3 was a $10 million revenue title and there are fewer adds being given the age and nature of that title. So that’s why you’ll see the absolute dollars but it was not a surprise.

Darren Aftahi – Northland Capital Market

Okay. Other question was on engine reuse.

Niccolo de Masi

Yes on Dino?

Darren Aftahi – Northland Capital Market

Dino is the Deer Hunter use the – for action title they start on and then reuse and there are so many more to come that are probably on a max at this point for the year. Yeah and I mean that’s another one that sort of bigger so as up for questions about product strategy but to try to kind of condense it down I think there are sort of two or three we never be just want to be tracking out kind of a derivative looking portfolio of games because the market evolves so fast.

And because the both what competitors are doing and then market taste are some of the other extremely we don’t want to just be taking too much risk so I think we are actually in a very fourth portion position to kind of go back to our big franchise that we have a number of them diversified across different – and Deer Hunter and EW and contract killer, Frontline Commando start up now the Dash series.

So we are fortunate enough that we can kind of use those as our ten full games on the yearly basis the driver portfolio and then the next layer down do things when they make sense when the games are big enough that are reuses and then kind of next layer down from there as make sure we are also kind of growing in meeting board and trying to buy the next Deer Hunter. And you mentioned the Base Ball game that’s a perfect example of taking a very small risk we acquired a very small company because we don’t want to introduce sports games we found people that have made a number of baseball games in the past and that’s the kind of scenario what we would take a shot at that John – and we can hopefully get another franchise in our portfolio on then we have a lot to fall back on that’s kind of a general approach there is just diversifying.

Niccolo de Masi

Nothing has changed Darren in the last quarter in terms of how we think about relation to portfolio right so probably if third that was looking on is then engine reuse the third is new engine through an IP and only a third is probably in the really risky new engine new IP at the same time. And we only do the third one as Matt said if we have high confidence in the team and for the team talent alignments around what is it there attempting.

Darren Aftahi – Northland Capital Market

Great thanks.

Operator

Thank you and our next question comes from [Arven from Synergies]. Please go ahead.

Unidentified Analyst

Thank you. And I like to add my congratulations as well guys. And you know you talked about PlayFirst and how that boosters your presence in the casual genre and I heard you guys talk about some of the games in the pipeline and which you are looking for. When it comes to acquisitions so just curious what are your key parameters for those acquisitions given your shelf. Beyond just evaluation what are the key things that you would be most focused on as you go forward? Thank you.

Niccolo de Masi

Well I don’t want to give you any – the shelf is only for an organic activities when reality is this company has on toward us today and as some few quarters largely through success in our owned and operated IT and or the purchase of that IP which were already licensing. So we are very bullish on your ability to invest in the contract killer. I mean just in frank we have they are all are going to get big over year so if it is a market as well as because of the individual institution in tactics all of that.

As I said in my prepared remarks on one of the questions we have a high bar for transactions and that really is around downside protection coupled with upside potentials and what we are paying for that equation. And we are looking to first make transactions happen that are adjustable but large enough to have an impact in what will it be in the next 12 months to 18 months and so on.

And we’ve quite I’d rigorous wedding process so there is been nothing done here that hasn’t been well versioned sell through boxed out and both sort of pulls sea sweets and board wedding thinking and so on. I believe that’s really done our shareholder service. I mean you are very hard for us to find any other public gaming companies that have made by the six acquisitions last full years and not written down a lot of them. We’ve written down none of them because we are prudent and we will continue to be judicious and how we think about them and whether or not we are applying cash for stock consideration.

Unidentified Analyst

Well just one quick question on Japan. Just wondering if you can may be give us some fewer thoughts on that market new positioning there competitive landscape and how you size that market et cetera? Thank you.

Matt Ricchetti

Yes I think Japan is at this point the largest market in terms of revenue for Google Play for sure. And so it’s certainly a massive mobile game market who have been in the largest in the world. However we look up and down the top growth in charge on that market it’s dominated by a local Japanese developers trading games specifically for Japan. And so as a result most foreign companies trying to discuss on that in that market of sales and due to a failure to actually to create content for that global market.

So our first there is been the partner with one of the leading companies global and really co-produce again using a Glu engine. But rebuilding it from the ground up for the Japanese market which includes Japanese IP monetization systems Fly-Box etc. So we are definitely bullish on the market and think it’s the only way that we are going to succeed there is through tight global partnership and creating content for that market.

Niccolo de Masi

We are reporting in each ground if you are there. I mean I am very proud of the fact that Glu is by far and away the most successful mobile gaming company in China that’s not Chinese. And I think only our cells and super cells have games the top 25 – routinely locally and that also builds for Korea. So we as a company if we culturally tuned to market entrance strategies again we think through them in plan the long periods time and we are cautious as we invest.

And with Japan we are taking certainly a unique partnership approach that I believe almost none of our competitors have come down to yet or least adopted. If it works will be more of it and off-course as it works widely spectacularly and above the expectations then we have the room to be patient about thinking as we did with China and Korea about how we can get a bigger on the ground presence slowly but surely in the coming few years.

Unidentified Analyst

Wonderful very helpful guys and all the best.

Operator

Thank you and our next question comes from Mitch Bartlett from Craig Hallum Capital. Please go ahead.

Unidentified Analyst

Hi guys this is George on for Mitch. And just one question so Niccolo you mentioned that the big games keep getting bigger. And I was just wondering if you were to compare a top 20 game this year a top 100 game to a game in the same position last year. What kind of growth been just broadly speaking how much bigger are those positions?

Eric Ludwig

You got to hang on to this so I think was two things happening with the bigger figure the market is getting bitter so we try to keep – towards more. There is more concentration of revenue by consumers as they are getting. Let’s say their behaviors change by getting compelled or hooked on various titles they then tend to say sell 3 and foresee with big content update big feature updates etc.

So there is 3 or 4 kind of sub levels to ride it big at bigger right it’s market it’s tactics it’s free to play consumer behavior pattern. But ultimately we had been impressed by the facts that since 2009 I mean I don’t know of the last year but since 2009 to 2014 we are on sort of 4, 5 years. You’ve seen more doubling every year in what you can generate if you can hang out for the better part of the year in the top 10, 20 class.

And so the markets probably doubled every year but the top 10 gross we’ve done has grown faster than that. So we went from a world in 2010 when a $10 million revenue title was pretty successful to world today where people are talking about $500 million title and those probably even a billion dollar title in the form of things like puzzle and dragon and so on.

And so we expect the trend to continue we expected to benefit Glu we have IP we have scale we have engine visibility to be big in the markets of tomorrow. And I think we have an unparalleled opportunity to capture disproportionate share on things like Google Play and emerging markets they were institutionally strong at.

Unidentified Analyst

Okay. Thank you that’s helpful.

Operator

Thank you and I am not showing any further questions I would now like to turn the call back to Glu for any closing remarks.

Niccolo de Masi

All right well allow me to close fine thank you my collogues for their efforts and our stockholders for their continues support. We are pleased with their outperformance in Q1 and confident in our ability to drive long term robust sustainable growth. Thank you again for joining the call.

Operator

Ladies and gentlemen thank you for participating in today’s conference. This does conclude today’s program you may all disconnect. Everyone have a great day.

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