Glu Mobile Inc. (NASDAQ:GLUU) Q1 2020 Earnings Conference Call May 7, 2020 5:00 PM ET
Harman Singh - VP, Finance and IR
Nick Earl - President and CEO
Eric Ludwig - COO and CFO
Conference Call Participants
Franco Grendan - D.A. Davidson
Matthew Thornton - SunTrust
Drew Crum - Stifel
Matthew Cost - Morgan Stanley
Mike Hickey - The Benchmark Company
Doug Creutz - Cowen
Jeff Cohen - Stephens
Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2020, Glu Mobile Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [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.
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 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 non-GAAP operating expenses 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.
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 two factors combined have driven sizeable DAU growth for four of our key titles, Design Home, Covet Fashion, Diner DASH Adventures and Kim Kardashian: Hollywood. These new cohorts so far 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 topline 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’ve maintained a liquid and debt free doubt balance sheet with $150 million in cash at the end of the quarter, providing support to execute our growth plans.
Design Home experiences third consecutive record quarter with bookings of $46.8 million, driven by an impressive monthly series performance in a larger player base. Looking ahead, the team continues to execute a robust live operations plan, while continue 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 line-up from prop shop, including hair accessories and Covet collection pieces. Covet has a strong content pipeline through the year and continue to focus on new systems and meaningful enhancements to its social gameplay.
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 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 a 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 catalogue highlight, Kim Kardashian: Hollywood continue with strong Q4 momentum, with Q1 bookings of $10.4 million, its highest bookings quarter in two 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 rollout new characters in game features over the coming quarters and years.
While we have seen a 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 Disney Sorcerer’s Arena’s team, and we’ll continue to invest in this title, given our belief that we have been making of a successful growth game.
Moving to our pipeline, Originals, our interactive story platform continues development of our Toronto studio, as the team continues to add refined 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 matter with new modes and advanced to drive longer-term retention and monetization. Deer Hunter World will also support our cadent inspired player-versus-player for the first time. While maintaining the traditional core loop and progression that has fueled this franchise as 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's 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 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 two 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, who 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 two of Glu key franchises, Design Home and Tap Sports Baseball to the PC web browser, which will expand our audience increased 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 confidence in significantly raising our full year outlook. Shelter-in-place mandates have helped drive higher engagement and DA use across our key titles paired with significantly lower CPIs. We believe these positive trend 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 uncertainty, we are confident that we are in a position to meet or raise 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 up to Eric, who’ll provide details on our financials and outlook.
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 and how we are managing the business with the coronavirus pandemic. I will also highlight our UA investment strategy and then we'll walk through guidance for the second quarter and full year 2020.
Before I discuss our financial results for the first quarter, I want to provide general comments in 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 one to two days. The goal was to assess employee productivity and determine bottlenecks on the internet, home Wi-Fi, 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 two new titles Tap Sports Baseball 2020 and Disney Sorcerer’s Arena with 100% of our employees in 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 and developments. We host Bi-weekly town hall to 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 topline results, led by accelerated performances in our growth games, and improved performance and 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 awarded video and other ad formats, they're largely performance based and not brand focused advertisers. We also focused 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 three 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, and generated $1.4 million for the quarter. Diner DASH Adventures deliver $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 curtail 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 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 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 CPIs 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 topline growth over marginal flow through due to this favorable buying window.
I’d like to walk through our three growth games and three 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 two 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 1st to May 5th comparable period.
In the absence of any live sports across the globe, we believe that Tap Sports Baseball has provided an outlet for sport star 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 standalone 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 expected break even performance in the second-half of 2020, which is Phase 2 of our pathway to scale 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 two other growth games have seen great performance and Q1 and the second quarter to-date. Design Home had a record Q1 and our DAU increased a double digit percentage in 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 modernization and engagements, 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 opportunities to further profitably invest and grow the user base.
We believe that Kim Kardashian: Hollywood is on path to becoming a growth team in 2020 and beyond. I would point out that we now have six key titles that we are investing in, all of which are in active live operations modes. These six titles are across four genres. The lifestyle genre was 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 the outdoor and sports genre.
This diverse portfolio is well-balanced and allows us to hedge against CPI pressure. In the future of 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 uplifted engagement and the favorable UA environment are temporary. While, we have competence 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 and pull back through the CPI guidance I just mentioned. This will have an immediate impact on booking starting in May and will continue through the second-half of 2020, and our guidance reflects this reduced investment.
One of the corollaries of the this U8 [ph] pullback will be an expected reduction in our titles top grossing rankings, as we shift focus to driving scaled profitability. We assume that non-paying 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're 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 date levels, with 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'll 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 games since mid-March, whether via paid UA or organic discovery, for now we believe that they will remain as paying players after the shelter-in-place is lifted. And 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 is 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 titled codename 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, at the midpoint of our bookings guidance, we expect adjusted platform commissions of $14.9 million, adjusted royalties of $10.7 million and hosting costs of $2.3 million. UA cost 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're seeing in the second quarter. If CPIs remained low for the entirety of the second quarter, we may have higher bookings and we will balance flowing that upside through 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 beats, an increase of $15.5 million on our core business and the addition of $40 million from Disney Sorcerer’s Arena. The beaten raise on the core business excluding Disney is $27 million. It includes increases from Design Home and Covet Fashion based on the record performance we're seeing, increases from Diner DASH Adventures and Kim Kardashian: Hollywood, based on the renewed momentum from both of these titles. These uploads 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 environments. We could see potential upside to our third and fourth quarter guidance, if there is a Major League Baseball season, if CPIs remains favorable, or if organic downloads continue at elevated levels. We've 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 resources perspective, Glu remains debt free and we expect to end 2020 with at least a $155 million of cash. Our CapEx requirements are approximately $2 million to $3 million a year, and thus generally last quarters 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 two months. This has also served as an accelerant on top of executing our strategy of stacking bookings from our three growth games, and now, we are further stacking increasing bookings from these three potential growth games. New titles later this year and next year will add to the stacking effects.
I look forward to updating on our progress in August. And with that we'll open the call for questions. Operator?
[Operator Instructions] And your line is open. Franco Grendan.
Good afternoon. Congratulations on successful execution. And thanks for letting ask a few questions. Can you talk a little bit about the deal with Kim Kardashian? Obviously, you mentioned that you'll be kind of recruiting the UA before paying any royalties. What does this mean for sort of the percentage of royalties that you'll be paying out?
Yes. 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 get 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 six years, it has been net revenue times the royalty rates. So this is a real opportunity for both Glu and Kim to share the upside and growing the user base and keeping her very relevant in these rate cases for the next 3.5 years, which will allow us in today's day and age to invest in UA.
And frankly, six 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.
Okay. Sounds good. And then I guess, with that said, do you expect to turn that game in sort of your -- to add it to your goals catalog at the time? Or is this just sort of like momentarily?
Yes. Hi Franco, it's Nick. That's certainly intention and I would even say, given the tremendous momentum we've 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 and 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 a doubling down on the investments going into the game.
So given the extra content, new systems, features, continue to fine tune the experience, we feel like this as 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.
And then one on Disney. Obviously launch -- it's off to a good start. But I guess what are you seeing in terms of retention 385, [indiscernible] now, since you've launched it?
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 saying engagement, retention, monetization, conversion right across the board, our KPIs were 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, where 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, is just ahead of the 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 and Phase 2 and 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.
Alright, that's it from me. Thank you.
And your next question comes from the line of Matthew Thornton from SunTrust.
Hey, guys. Thanks for taking the question. A couple if I could. I guess, when we think about where revenue could land for the year versus the guide. And 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 you have to get 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 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 here? 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. And then I've got one follow-up.
Yes. Sure, Matt. So, our guide is very conservative, I would say for the second-half of the year. I think the implied guidance is about 120-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 my prepared remarks is really largely under the expectations that our UA will dial back, because we've seen this great CPI environments 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 in both in Q2 and beyond.
Secondly, you did rightly point out that the baseball season. So, I've got -- and 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 the season. So, a season would be helpful on CPIs. We certainly believe that the season would be helpful on organics, and then obviously would be helpful in the topline.
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 overall increased to the guide up to $500 million, but I took out $10 million because of lack of a baseball season.
And then lastly, you rightly point 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 probably the five or six 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, given very confident in that, given the very, very strong April that we had to-date and the very, very strong seven days of May so far today as well. So, that’s kind of how we give this guidance.
And then maybe two part follow-up there on Tap Sports Baseball. Is there anything that you're seeing today in the data that give that informs that decision to take the $10 million out, or are you seeing that kind of slowing as the would be season kind of progresses?
And then secondarily, I know you use 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. Thanks again guys.
Sure. Yes, thanks for that. So, the 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 and Friday and 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 the abundance of caution given we just don't know what's happening in the environment.
And then in terms of baseball part, 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 a baseball is a double in the $90 million to a $100 million range. Covet Fashion is a high-single at $70-ish million. And then, 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 one. So, I would say out of the gate right now, my guidance of Disney at $40 million for three quarters of a year, that is a very solid single. I would like to believe that in a year from now, and this is a forward-looking statement with just guesstimation, with a full year under our belt along with monetization improvements in live operations and events, hopefully Disney a year from now is on a track of maybe it's very high-single, it could be approaching double category.
Diner DASH, last year did about $25 million for half year. This year it's in the probably $30 million plus. We did $7.5 million in Q1. And I mentioned that’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 Debbie Ferly [ph] in the, single category. And Kim Kardashian has in the past been even higher than that, four, five, six years ago. So what I’d really say is, our strategy has been to stack our bookings from our three growth games that have been growing year-on-year-on-year. And now we believe we have three potential additional titles. Many that people had 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 six months in a year from now.
Great. Thanks guys. I'll jump back in the queue.
And your next question comes from the line of Darren Aftahi from Roth Capital Partner.
Hey, its Dylan on for Darren. Thanks for taking my questions. 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 such as big of a season per se aspect to it?
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 the season. And secondly, it's just got such a massive and broad following not only in the U.S. but worldwide. So we like that, 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 the game that has a simple, but you know, but really enjoyable and engaging core mechanic with a very, very deep elder game that is built around an RPG style structure. So there is 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 state. 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 that trajectory.
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 older players. Are they monetizing at similar rates as well? Or were you talking more towards engagement?
Yes. So Dylan, this is Eric. So, kind of bifurcating players that are non-spenders 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 prior playing cohorts. We have seen several of our titles, Diner Dash in particular Design Home in particular. Over the last month and a half we've seen actually increased monetization. We chalk 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 to cold.
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 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 two or three events a day for five minutes each event, that's not going to be a huge difference for them. And we think that once they are paying that they're already now engaged in liking that game.
Thank you. And last one from me. On the potential soft launch this summer of the cross platform games, what exactly does that entail? Would you market it at all or would it just be released to your existing players and sort of push towards them?
The different soft launch certainly implies that we're not marketing. We're going to be putting it out there and making sure that it fits and it's complimentary to the mobile version. Even though, it has a different audience potential, we want to make sure that it is fully complimentary to the mobile games and that it is fully stable and it's enhancing, the ecosystem that we've created for those two audiences in those two games. But we will not really be market 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.
Great. That's it for me. Thank you.
And your next question comes from the line of Drew Crum from Stifel.
Good afternoon. Eric, the second-half adjusted margin is implied in the 17% to 18% range if my math is right. Understanding that doesn't include the launch of two 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?
Yes. So obviously, Drew, you know your math. So my guidance was that Q4 would be at least 15% plus. Yes, you're right when you back into the math it is a higher number than 15%. So, obviously we've talked about two titles launching in the back-half of the year. Our guidance is already included the launch budgets for those titles. So, my EBITDA guidance reflects that.
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?
Yes, so I mean pretty much like -- I think it looks a lot like Diner DASH last year. I've used the term escape philosophy like the first quarter, the first month or two at launch, we spent more on UA than we do any other time. Usually, because CPIs are lower. We had the benefit of launching two new games at the lowest CPI environment we've seen in probably two years. So, I think that was very helpful for us and because of that, we leaned even further into 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 cost, 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.
Hey, Drew, it's Nick, I'll just add a couple things on Disney. The game is really all about live ops and live events. It responds incredibly well, to what the team's 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 that 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 brand as well as Pixar. And most importantly, we have a strong co-marketing that is coming once shelter-in-place lifts and we can really start to execute.
Okay. One last one from me. What is implied in your bookings guidance with respect to add bookings in 2Q? And are you assuming some recovery in the second-half? Thanks.
Yes. I mean, we're right at about 11% for the rest of the year. We were at 13% in Q1 and Q2 of last year, 11% right now in Q1. And given some of the strength in app purchases that we've seen in Q2, we don't want to get over our skis and 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 there more interstitial and banner ad situation.
Okay, thanks, guys.
Alright. Thanks Drew.
Thank you. And your next question comes from the line of Matthew Cost from Morgan Stanley.
Hey, guys, thanks for taking the question. Hope you're well. So, you mentioned in the prepared remarks about and 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 with 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 farther down into the 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 four Diner DASH? And just in Layman's Terms how we should think about how that should impact the way that people play the game and spend money?
Perfect. Great, two questions. I'll take the first one and Nick will follow-up on the second one on Diner DASH. So, in terms of are they paying players playing and paying differently, whether they we demo 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 seven days to start spending money in the game, Payers start to play and pay within the first session or two. And so I would say that we're still seeing folks that were organically getting to download the game or folks who are paying for in this week looking a lot like the ones from three, four or five weeks ago.
Yes. 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 base. In other words a lot of contents got to be release 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 game of basketball, you’ve got two hopes and a ball, but you can just play a game over and over and over for years and year.
We are trying to move to systems base 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 our revenue and 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're starting to see tremendous improvements to the KPIs in the game. And we've seen this with other games like Design Home and plenty of others as they transitioned from pure content to a mixture of content and systems.
Great. Thanks guys.
Alright, thanks Matt.
And your next question comes from the line of Mike Hickey from Benchmark Company.
Hey, Nick, Eric, hope you guys are good. Nick you sounded a little bit more confident on maybe getting some deals done 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, what you're seeing that is sort of maybe elevating your confidence to update here?
Yes, I think there's two 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 potentially looking for a home.
And given that, 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. I think it's definitely time for us to expand the 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 [ph] 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 see games that really going to grow over the years that you really nurture.
We've got strong umbrella brand in the 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.
It seems like historically, you guys have sort of been value buyers. I mean, you've definitely twice these assets extremely opportunistically, at least in my view. Are valuations in line with that philosophy? Are you seeing distressed asset? Or are you just willing to sort of pay up for something that you can have confidence, can be a growth game?
Yes. 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 comb through and find the assets that we think not only are a good structural and cultural fit that 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'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 they come into play in terms of valuations.
Last question from me. I’m just thoughtful maybe to clean up the Kim narrative a little bit. Were you planning on resigning her? Or was it sort of her business or your game with her inflected in sort of remotivated, resigned her? I’m just sort of curious if you could just walk us through that. And also wondering how motivated she is to be a part of that success, because, originally when she came on board, she was very, very active? And of course, overtime 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 how many year contract?
Yes. This was something that we've been talking about for the last few years. We've been very focused on the three growth games. So, I think there was a period where we weren't quite as focused on what the future look 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 five, six 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, where we had tremendous energy and conviction to go and extend the deal and just spent a lot of time working through a deal though, it makes 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's going to be a big part of this. And it’s a tremendous opportunity to continue to expand that game.
We are frankly amazed 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.
Great, thanks guys. Best of luck.
All right. Thanks Mike. Good to talk to you.
And your next question comes from the line of Doug Creutz with Cowen.
Hey, thanks. Historically, your portfolio has trended very much to the U.S. as you mentioned in the call. What do you think with Disney? Have you been able to break out that a bit and get more geographic penetration in other regions? Are there other opportunities there you see any color you can give that would be great?
Yes. Sure. Doug, this is Eric. 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 it's the probably the biggest country outside of North America that we're seeing is Japan. So, that's very encouraging. We're very, very pleased that 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 leading into that by doing paid user acquisition in Japan and Korea, as well as other countries. So, yes, we like the outcome so far, still got a long way to go.
And your last question comes from the line of Jeff Cohen from Stephens Inc.
Hey, Nick, Eric, thanks for taking the question. I hope you guys are doing well. 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 are down 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? Thanks.
Yes, sure. 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 pause 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?
Just around how that LTVs and CPI has trended in the portfolio?
Yes. 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 to UA spends 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 to really take advantage of this favorable spend opportunity. And some of that monetization improvement the LTV side is probably from 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 of all 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 was really one that you know the two new [indiscernible] launches. That's for baseball, which I mentioned was up 23% year-over-year, so far to-date this quarter and Disney.
Got it, really impressive on the baseball numbers. And then if I could squeeze one more in quickly. Nick, I think you mentioned that you'd be stepping up spend on Disney when shelter-in-place ends. I guess is there any reason why it would make sense to wait given CPIs would obviously presumably be worse than it, so why wait?
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 are rely on having consumers physically back and 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.
Understood. Yes, that makes sense. Thanks, guys.
Yes. All right, Jeff. Good to talk to you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Goodbye.