Glu Mobile Inc
Q2 2019 Earnings Call Transcript

Published:

  • Operator:
    Good afternoon, ladies and gentlemen, and welcome to the Q2 2019 Glu Mobile Earnings Conference Call. At this time, all participants are in 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 conference call is being recorded.I would now like to turn the conference over to your host, Harman Singh, Vice President, Finance and Investor Relations. You may begin, sir.
  • Harman Singh:
    Thank you, operator. Good afternoon, everyone, and thank you for joining us on Glu Mobile’s second quarter 2019 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 our GAAP results, and we encourage investors to consider all measures before making any investment decisions. For complete information regarding our non-GAAP financial information, the most directly comparable GAAP measures and 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 otherwise stated below, we will discuss results on a GAAP basis and refer you to changes in deferred revenue, the deferred cost of revenue and the non-GAAP operating expenses totals 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 with that, I’d like to turn the call over to Nick.
  • Nick Earl:
    Thanks, Harman. Hello, everyone, and thank you for joining us today for Glu’s second quarter 2019 earnings call. I’ll provide an overview of the quarter’s highlights and our game development progress and Eric will then discuss the quarter’s financial results and our guidance in more detail.We reported solid financial results in the second quarter that we’re in line with our expectations. We produced our largest bookings quarter ever of $101.9 million with strong profitability on an adjusted EBITDA basis and a second consecutive quarter of GAAP profitability. We launched two new titles, WWE Universe and Diner DASH Adventures have made significant progress in developing our pipeline of potential growth games.We also made several strategic decisions that will reduce our full year of 2019 guidance, but will strengthen our position to generate improved results in 2020. Specifically, the strong performance we have seen from Diner DASH Adventures increases our confidence it will be a growth game. Therefore, we will continue to support that expected growth this higher levels of UA investment.WWE has not yet reached the target metrics we anticipated. We continue to work on enhancing the game to improve its KPIs to a level that warrants scaled UA spend. We are making meaningful progress on Disney Sorcerer’s Arena. However, we have updated its launch to Q1 2020 to give the team more time to perfect the game. That said, we will launch the game earlier if the KPIs indicate that is ready for worldwide launch.And looking at the second quarter results, our three growth games collectively grew 12% year-over-year Design Home group bookings 11% year-over-year to $42.3 million representing the seventh straight quarter of double-digit growth on a year-over-year basis. We introduced new meta features that include additional homes and house progression, new social layers and internationalization and select European markets.As we look to the second half of the year, we expect growth to be driven by increased meta expansion, additional social features, internationalization and ecommerce, which has rolled out in limited beta in the second quarter. As a quarter progress, we also saw improvement in the UA landscape with lower CPIs and higher quality installs.Covet Fashion, which just celebrated six-year anniversary grew 11% year-over-year to $14.4 million. This growth was driven by its most successful summer series launch ever, a new merchandising strategies including prop shop, popular new feature that allows players to style their models with a wide range of accessories.Our Tap Sports Baseball franchise increased bookings 15% year-over-year to a record $28.1 million in a seasonally strong quarter. We saw increased conversion and monetization due to enhance advance and merchandise and reflecting the expertise and strong execution of the team.WWE Universe, which launched on May 28 present most authentic WWE experience in mobile today allowing players to build and train green rosters do battle against other wrestlers.As we do with all our live titles, we are continuing to introduce new features and enhance live ops to maximize a game is potential. Our plan with WWE is to continue shifting our UA investment dollars to higher ROI opportunities as we update the game. Diner DASH Adventures launched successfully on June 20. This title is a re-imagination of our DASH IP for the modern age of casual mobile games, utilizing a proven core mechanic, we know our fans love.With the addition of an extremely deep decorative and customization meta game that we’ll continue to expand it evolve over time. Diner Dash Adventures is produce strong retention, conversion and monetization and we believe it will be a growth game. That’s the wholly own Glu IP providing higher margins flow through stacking another growth game, which has been our state of strategy since 2017, there’s one more reason why we’re excited about 2020.Looking ahead, we are extremely bullish about our strong development pipeline. First an update on Disney. Our creative team is making considerable progress on Disney Sorcerer’s Arena and we are encouraged by the positive trends we have seen in the most recent update. This includes new features like club wars, refresh challenges, enhanced social features, streamlined new user flow and a more balanced economy.We have made steady progress in the same improves KPIs. We believe the game needs additional polishing before worldwide release to maximize the opportunity of launching a top tier growth game. We also continued development on three previously announced original IP titles in our pipeline. This includes the next generation of our Deer Hunter franchise launching in 2020, which combines an iconic blue IP with deep meta, social game plan, event driven live ops.Additionally, we have made solid progress on development of our narrative game originals as well as our next Crowdstar title. Finally, we made a small but strategic aqua hire to our Glu sports studio. We recently welcomed a talented Orlando based team that we believe is a great cultural fit. We see the sports genre as a growing area in mobile gaming and believe the Glu is well-positioned, take advantage of this opportunity for their category knowledge, experience, and proven performance.This team will work under the Glu sports brand to advance a prototype with the full support of our central infrastructure. We believe this process is repeatable and we will continue to look for nimble high quality teams that share our passion for making great games. We are excited to add the Orlando team to our Glu sports brand, which includes WWE Universe and the Tap Sports Baseball and Deer Hunter franchises.In summer, we had a good first half of 2019 with increased profitability on an adjusted EBITDA basis and significant free cash flow generation driven by solid year-over-year bookings growth. Most importantly, we launched Diner DASH Adventures, the first game developed under our new prototyping strategy and are exciting that is exhibiting the early indicators of a growth game.While I am disappointed that we are lowering our guidance this year, I believe that taking the extra time to get our games right sets us up for continued growth and is strongly aligned with long-term shareholder value. We believe we will enter 2020 in a stronger position than we entered 2019. We expect our existing growth games will continue to grow next year as we will have meaningfully updated the meta game in Design Home installed key new features in Covet Fashion and strengthen our Glu sports portfolio.Diner DASH Adventures will contribute a full year of bookings in 2020 and we believe the launches of Disney Sorcerer’s Arena and our new version of Deer Hunter will add two significant growth games to our portfolio. This sets us up for robust 2020 with stacking bookings and positions us for a significantly improved financial results.Eric will now provide specific details on our financials and outlook.
  • Eric Ludwig:
    Great. Thank you, Nick, and good afternoon to everyone on the call. I will provide a closer look at our financial results for the second quarter and then go through guidance for both the third and fourth quarters in detail, which will roll up to our full year 2019 guidance.Let’s first look at our Q2 results where we delivered record bookings, GAAP net income and strong adjusted EBITDA profitability. Revenue is $95.5 million, a 6% increase over the comparable quarter last year. Bookings reached an all time high of $101.9 million, a 3% increase over last year second quarter, 64% of bookings came from royalty-free Glu IP titles and bookings from ads were $12.9 million or 13% of total bookings. And we’re reported $2.5 million in net income. This is the second consecutive quarter of GAAP profitability. The year-over-year bookings growth was led by our three growth games, which grew 12% and contributed 83% of total bookings.On a year-over-year basis, Design Home bookings increased 11% to $42.3 million. The Tap Sports Baseball franchise was up 15% to $28.1 million and Covet Fashion grew 11% to $14.4 million. WWE Universe launched on May 28 and generated $1.8 million in the quarter. And Diner DASH Adventures which launched in late June contributed $1.5 million over 10 days.On the expense side, adjusted platform commissions were $26.7 million. Adjusted royalties were $7.3 million, with hosting costs at $1.8 million. UA and marketing spend was $30.1 million compared to $25.3 million last year. On a year-over-year basis for the second quarter, UA and marketing as a percent of bookings increased from 25% to 30% as a result of the two new title launches.I want to provide an update on the CPI pressures we discussed on our last earnings call. For Design Home and Covet Fashion CPIs peak in April and since then we have seen declines each month. Our full year guidance assumes user acquisition ROI levels, we remain steady the current levels, for both of these growth games. While CPIs have improved since April, they remain modestly higher than 2018 levels.Operating expenses excluding $30.1 million of UA and marketing costs or $28 million down $1.5 million on a year-over-year basis. And our GAAP net income was $2.5 million or $0.02 per share.Turning to our expectations for the back half of 2019, there are several factors that are contributing to our guidance revisions. First, we only expect a modest contribution from WWE. As I stated in early June at the Baird Conference, this title was not exhibiting sufficient LTV to justify scaled spend on UA. As a result, we significantly reduced our spend. Our guidance for this title has been reduced to the current bookings run rate for the balance of the year.We will continue to evaluate new product updates and we’ll resume investing on user acquisition, if and when the KPIs improve to enable ROI positive spend. Second, we are moving all bookings for our Disney title, due to the new launch timing of Q1 2020.Third, we’re seeing a steeper reduction in bookings from our catalog games. Games which have limited live ops and no events or UA spend. We’re seeing players and dollars migrate to the larger games including our own growth games and away from older declining catalog titles. This accelerated decline is essentially pulling in from next year a degradation that was expected to occur.And finally, we’ve shifted and increased our UA spend on Diner DASH Adventures giving the compelling growth opportunity, which has resulted an increase in booking guidance for this title.Now let me provide a more detailed look at our guidance for the second half of the year. We expect bookings to grow year-over-year in the third and fourth quarters, with the sequential increase in Q3 due to the strength of Diner DASH Adventures. With respect to profitability due to our strategic UA investment in Q3 to support Diner DASH Adventures, we expect to deliver a low single digit adjusted EBITDA profit in the third quarter.This UA investment is similar to the successful strategy we implemented for Design Home starting in May of 2017, when we took advantage of a great window of positive ROI spend, which drove Design Home to record bookings. Adjusted EBITDA in the fourth quarter on a sequential basis is expected to rebound significantly due to lower UA spend, resulting from the holiday competitive season. UA for the fourth quarter in absolute dollars, we’ll look more closely like that of the first quarter of 2019.For the third quarter guidance, we expect bookings in the range of $110 million to $112 million, a 10% increase of the mid point on a year-over-year basis. This will be a new all time record quarter by a significant margin. On the expense side and at the midpoint of bookings guidance, we expect adjusted commissions of $29.6 million, adjusted royalties of $6.7 million and hosting costs of $1.6 million.UA cost will be approximately $7.1 million higher in the third quarter, as compared to the second quarter due to our ramp on Diner DASH Adventures and as such, UA and marketing costs will be 33% of bookings. All other adjusted operating expenses are forecasted to be $32.5 million.For the fourth quarter, we expect bookings in the range of $101.5 million to $103.5 million, a slight increase over last year’s fourth quarter at the midpoint. From Q3 to Q4, we anticipate a sequential step down due to expected Tap Sports Baseball seasonality. Excluding Tap Sports Baseball, bookings are expected to be flat from Q3 to Q4. We provided a detailed outlook in the IR deck and press release on the fourth quarter guidance for modeling purposes.For the full year 2019, our revised bookings guidance is in the range of $406 million to $410 million, representing 6% year-over-year growth at the midpoint. This updated guidance is a $42 million reduction at the midpoints. I want to provide a detail bridge from last quarters full midpoint guidance of $450 million down to $408 million today. We are forecasting a $6 million increase over prior assumptions from Diner DASH Adventures, due to its strong performance and our heavy investment in UA during the third and fourth quarters.We are reducing our bookings guidance that combined $33 million from WWE and Disney. WWE is being lowered to its current bookings run rate, while Disney is being moved out of the year completely for guidance purposes. We are also not forecasting any bookings from titles and development or beta. And last, $15 million of the guidance reduction as a result of our catalog titles declining. We’ve always expected our catalog of older titles, mainly Kim Kardashian
  • Operator:
    [Operator Instructions] Our first question comes from the line of Drew Crum from Stifel. Your line is open.
  • Drew Crum:
    Good afternoon. So I think with 1Q earnings, you reduced expectations for growth games by $10 million plus ironically, but you are assuming if the time that the pressures you are seeing on UA would continue to the balance of the year. It sounds like that’s the beta to some degree, why no change in the bookings guidance for the growth titles?
  • Eric Ludwig:
    Yes, so Drew, back in February, we had given guidance of $420 million, which was the combination of our core business of both growth games and our catalog. And then we added $20 million in February, largely due to Diner DASH, so roughly about $15 million from Diner DASH, and about $5 million from WWE. We then came into the May earnings call and did a reduction on the core business, mainly from the UA headwinds and the pay per engagement ban that we saw an apple, that shook out high-single digit – high-double digit teams of bookings on the core business.And then we added $30 million of bookings for the combination of WWE and Disney. We thought that WWE was looking good. Coming into that earnings call, I mean Disney, we had the anticipated August launch. And then now, as I mentioned on the call, we’re going from 450 and we’ve got a reduction on the catalog, which is part of the core business, but the core business is coming down from the catalog due to this kind of acceleration that we saw. And then we’ve obviously pushed out Disney and reduced for WWE to the current run rates.
  • Drew Crum:
    Okay, okay. Fair enough. And then some basic question on the Disney, Pixar game for Nick. Do you believe the 1Q release date is enough time?
  • Nick Earl:
    Yes, Drew, obviously we’ve debated this long and hard over the last couple of weeks as we talked about the potential move to Q1. We are seeing really good things happening in the game, but it is a massive, massive, and deep economy, very, very deep meta game. And there just is more polished work. We don’t believe there is fundamental changes. Therefore we are confident we can make that day.And as mentioned, if things really go well and that the KPIs continue to improve at the right, we’re saying, there’s a chance we will launch there. So we just don’t want to commit to that, which is why we’re saying Q1. We just released a big update with 5.0 not included club wars, which is a very social feature of PVP. We’ve got an improved home screen, lots of changes to the challenges, new sofa features, a lot more balanced economy. The next update, which we call 6.0 will have some merchandising improvements and some account rebalancing and making sure the club system works really well, few improvements to the battle formations and such.But these are all things that we think we’ve got our hands around and will lead us to the Q1 launch. So, yes, bottom line is that we feel good about that. We just don’t want to have it in this year and given kind of misleading guidance, when we’re trying to create something this for the long-term.
  • Eric Ludwig:
    Yes. And Drew, this is a quick follow-up to your question, part of this WWE challenge, we’ve now adjusted our philosophy around new titles and included them in guidance. So kind of the bit of a whipsaw that we saw this year going up in May and then now down, if we had this philosophy this year would not have happened at all and these would be insulated. So to have less guidance volatility and more forecast precision, until we launched new title in the future, our guidance will not include new titles.
  • Drew Crum:
    Okay. Thanks, guys.
  • Nick Earl:
    All right. Thanks, Drew.
  • Operator:
    Our next question comes from the line of Doug Creutz from Cowen. Your line is open.
  • Doug Creutz:
    Yes. You guys have given a lot of numbers in the call. So first if I just, I think I can do some math here. It sounds like you have now Diner DASH in your guidance for $21 million and WWE for $2 million. Is that right?
  • Eric Ludwig:
    That’s correct. Yes.
  • Doug Creutz:
    Okay. When you guys gave guidance a quarter ago, presumably you already seen some of the degradation in the catalog, but you didn’t call it out then. Did something changed in the last three months? Or is this just a case of at the time you felt like with Disney coming that you could offset weakness there and now you don’t and I need to call it out. Can you give a little more color and sort of the step through in the guidance process there?
  • Eric Ludwig:
    Yes, sure. I mean, yes, we certainly, if you go back to Q1 2018 to Q2 2018, our catalog didn’t take a big step function down. And then it kind of flattened out for Q2, Q3 and Q4. This year, we saw that down and as we’ve been getting to kind of July, we’ve seen kind of continued trends. So we’re not really expecting that the catalog was going to have a flat basis from Q2 to Q3 to Q4, dissimilar from last year. That’s kind of point number one.And point number two, certainly when we had competence a quarter ago about WWE, we certainly thought we had some offsetting components with these new titles. So I think as we – as WWE came out of the gates and did not have the LTV and what we saw in beta did not become reality in the live launch, we got surprise there. And so that was kind of a pretty big surprise. And that obviously offset some of this weakness, so we’re seeing elsewhere.
  • Doug Creutz:
    Okay. Thank you.
  • Operator:
    Our next question comes from the line of Mike Hickey from the Benchmark Company. Your line is open.
  • Eric Ludwig:
    Mike, we can’t hear you.
  • Mike Hickey:
    Well, yes. You hear me okay, apologies.
  • Eric Ludwig:
    Now we got the line.
  • Mike Hickey:
    So I had unmuted on there. Thanks for taking my questions. Covet Fashion good year-over-year growth looks likes a points, we had showed a little weakness obviously, you seem to be competent here, this continue to be a growth. Can you just explain, maybe I missed it in prepare remarks, though why you’re seeing a little sequential weakness in Covet Fashion. And then can you on an individual game basis guide Q3 expectations sequential basis for Design Home, Covet Fashion, and Baseball, and Baseball was flat that performed very well in Q3 last year. Just sort of curious how Q3 can take shape and why we saw sequential decline in Covet Fashion.
  • Eric Ludwig:
    Yes, sure. Mike, yes, so Covet Fashion in Q2 is typically, we see the summer slowdown from mothers going, having kids back to the – from the holidays and vacation. So we typically see that. That’s kind of number one. And number two, we had a partnership with Disney for the Disney princesses throughout the last nine or so months. And that came to an end as well. So I think those combinations is why Covet Fashion kind of came down from a very, very strong Q1. And actually a record Q1, record quarterly bookings; and three record high days in Q1 really on the backs of three very, very strong Disney performances. And then in Q2, we came off of that.And then in terms of our Q2 to Q3 bookings, it’s really coming on the backs of obviously Diner DASH growing. We’ve got a tiny amount of growth from Design Home and flatness really from Covet. And then Baseball, we’ll take a slight down tick as it typically does from Q2 to Q3. That’s kind of the rounding out of the entire forecast.
  • Mike Hickey:
    Okay. So that’s helpful. And then on – you made a little acquisition that’s interesting. Curious how big that team is, if it came at the new IT and I guess more importantly how you think about sort of building out sports piece, which is sounds like you want to do so, curious what’s looking at booking and when?
  • Nick Earl:
    Yes, we’re not going to give really any specific color on the timing or the sport that they’re going after – obviously it’s going to be in the outdoor/sports arena. That’s why they’re plugging into that group. We’re very bullish on the possibilities of building in a greater diversity and breadth in the sports/outdoor area. We think we can drive towards really building a brand this meaningful given how successful Tap Sports Baseball has been in the space.And we found a team that we were introduced to that just really fits us culturally and logistically. So we aqua hire them. They do not come with an IP per se, but they’ve got an idea that they’re going to be developing out. It’s a very small team. So it’s very cost effective right now. But they’re working – doing rapid iteration on this idea and they will plug nicely into our sports group and leverage the infrastructure centrally in order to really accelerate that, that prototype. We’ll then take a look at it.If we feel great about it, we’ll fund it more and continue with it. But we really like these guys are very talented, very experienced. Like I said, they’re great cultural connect with Glu. And we’re just extremely bullish about this sector for Glu and the future and we think this is a really great ad for us.
  • Mike Hickey:
    Cool. Thanks, Nick. Last question from me, obviously Deer Hunter, I mean 28 – I think you may have said that you might start testing in 2019, if I remember correctly. So curious, I guess how that game is taking shape. And also wondering, I mean, obviously Deer Hunter has been a massive success in terms of downloads and monetization, but it’s never really proven out to be a growth game. So curious sort of what you’re doing with that game to make it consistently perform over the years.
  • Nick Earl:
    Yes. You’re absolutely right. In the last call, we talked about getting us in debate at the end of this year, that’s still the intent. Of course, as we’ve learned, we need to be somewhat malleable around and flexible around dates, but right now, it is on track for that and on track for launch next year. We’re not going to say anything more on timing.But yes, we feel really good about this and you’re absolutely right about the fact that it is not proven out to be a growth game. And we believe that because it’s never had a meta game attached to it. It’s been a great core mechanic and a core loop that that works incredibly well and provides a really wide funnel for users to come in. And that’s one of the reasons why it’s had such an enormous downloads over the years.We’re trying to take that and combine it with this depth that the Baseball studio, the Glu sports group really has a deep understanding of kind of merge those together and create a meaningful growth game. And we think this has potential to be a top tier growth game for us and something that’s really meaningful inside the marketplace, because it has all those attributes, really wide funnel. It’s got a great brand name. It’s got a proven core load that people love. We’re improving kind of the look and feel of it and really adding a deep, deep RPG meta game, an elder game that is really the component that’s going to drive the LTV.We combine that with what we believe will be a reasonable to low CPIs and we take we’ve got a winner. So lots of execution to do, we’ve got a great team working on it. We feel good about the progress, feel good about the timing right now. And as we get closer, we’ll definitely be giving more color and more detail on how it’s come together.
  • Mike Hickey:
    Awesome. All right. Thanks, Nick.
  • Nick Earl:
    All right. Thanks, Mike.
  • Operator:
    Next question comes from the line of Jeff Cohen from Stephens. Your line is open.
  • Jeff Cohen:
    Hey guys, thanks for taking my question. I just wanted to dig in a bit more on the decision to push Disney. How do you give investors comfort that they’re not going to see a repeat of what’s happened with WWE where kind of, it looks ready in soft launch and then it isn’t. Have maybe you or the Mike Olson team ever worked on games in the past that have been significantly delayed and then come out to be successful?
  • Nick Earl:
    Yes. Great, great question. I’d say the number one reason why we are delaying it is specifically, so we don’t have a situation like we have a WWE, where we had some really good numbers, but it really wasn’t at a scaled audience and then we fell short. And while we have, like, hope and confidence at the WWE team can recover and it’s incredibly talented group. So we feel like there’s a path there for WWE. We want to be absolutely sure before we really launch Disney, because this is a game that’s going to have tremendous marketing support across the board, not just on device, but lots of other marketing support.So we really want to make sure it’s right and we believe giving ourselves this extra time is the prudent and smart move and definitely the calculated move to increase the chances of delivering, again, what we view as a top tier growth game, that mean, Deer Hunter are the two that we feel that can really be at the top of the Glu charts. The team, to answer your question has worked on games that are delayed. I would say that pretty much everyone in the industry has worked on delayed games. I’ve been a part of many. It’s unfortunately a natural part of the process. And while we don’t take light of it, we take this very seriously and are certainly disappointed that we had to move it out of the year.Our view, Jeff, is that by moving it out, we’ve increase the chances of creating something that’s going to be around for multiple years. And that’s really what we’re after. So our view is, we’ll take the short term pain and we will work through this and we’ll work through on our processes and the way we communicate new games development in order to increase the odds of creating more growth games that stack on top of our original three and now hopefully DDA, Diner DASH Adventures.So we create a more diverse broad pool of growth games, which is just really healthy for Glu going forward. So bottom line is just – we just think it’s a smart long-term move despite the pain for us and for investors in short term.
  • Jeff Cohen:
    Thanks, Nick. And then I guess for a follow-up, can you just touch on, how much Diner DASH is cannibalizing your existing DASH games and maybe how much of that is affecting the catalog weakness?
  • Eric Ludwig:
    Yes, Jeff, it’s a good question. I mean, there certainly is some diner – some cannibalization from Cooking DASH and Ramsay DASH, but we did pull off UA spend. So it was a combination of some cannibalization and we just chose not to invest in UA in the three months leading up to the launch. So that didn’t have users that we needed to port over. The metrics and the monetization and conversion on Diner DASH Adventures is head and shoulders above what we saw in either of those other two titles. And obviously, Ramsay DASH has a royalty on that as well. So it did not make sense for us to spend on UA to then try to transfer those users over, we kind of let the pump get primes in anticipation for the Diner DASH Adventures’ global launch.
  • Jeff Cohen:
    Great. Thanks, Eric.
  • Operator:
    Last question comes from the line of Darren Aftahi from Roth Capital. Your line is open.
  • Dillon Heslin:
    Hi, this is Dillon on for Darren. Thanks for taking my question. First of all, I appreciate some of the color on guidance and the puts and takes of what’s going on there. But on some of the growth games, you still seeing some solid growth across those core three games. Are you able to sort of quantify, how big of an impact some of those recent metagame updates have had on Design Home and sort of what your expectations are that can keep Design Home at these growth rates or better going forward?
  • Nick Earl:
    Yes, I’ll take that. So Design Home has – as you know, has been our largest growth game, it’s been a real mover for us and while we had experience some flatness last quarter that we talked about with the UA landscape. We’re starting to see improvement there. So that just kind of covers, what the kind of user acquisition side is like. In terms of the game itself, lots of things going on. That was kind of take longer than you want, but that’s because it’s tremendous complexity and depth going in to these features and systems that the team is working on every day. Key things are the internationalization.So we’ve felt that Design Home just punches below its weight class compared to its peers in Europe and we think we’ve just got a real opportunity to create localized content in live ops and events and user acquisition targeting in select European markets and then we’ll roll out from there.So that’s going on, of course, we are continuing to add to the meta. We’ve got new homes going in. A talent house, which I believe is the four house going in as part of the metagame is. We’ll be in shortly adding replayability around the goal system, so a lots of happening in the metagame. And honestly, this is just going to go on for years, I mean, we’re just in the early innings of what we’re doing in terms of the depth and what the team’s doing.And then social systems, which is probably a little more of a 2020 driver, but we’re excited about the opportunity to create more social connect for the many players, who are playing this game. So bottom line with Design Home is that we’re starting to see an improvement in the user acquisition landscape and we are definitely seeing a team that is really coming together with regards to a deeply in the metagame and taking this to new marketplaces and building in social over time. So we’re very bullish on this. It’s been growing every quarter and we believe that’s the very much the future of Design Home.
  • Dillon Heslin:
    Great. Thank you. And then on Diner DASH Adventures, I think you mentioned you added $6 million in incremental bookings for that game in – here in the second half. Is that based on sort of how strong the game has been relative to expectations for the first, I guess, month and a half that’s been out? Or are you seeing those trends continue in here in 3Q for the first month. Just sort of what’s giving you that confidence there?
  • Eric Ludwig:
    Yes, Dillon. We added $6 million for the back half from our guidance from $15 million to $21 million. And that was really based on the strength that we’ve seen calling from June 20, all the way through to yesterday. And that’s why we’ve also been investing on user acquisition at a higher level. And I would point out that, we’ve seen something like this before back in May of 2017, we decided to consciously ramp up UA spend on Design Home. And that really paid off getting that title to a whole another base camp and new level of growth. And that’s what our expectation here. We really believe that Diner DASH Adventures has the potential to become a fourth growth game for us in the 2020 and we want to really stack the deck in our favor by doing everything we can as early as possible. And that’s what we’re doing right now in the third quarter.
  • Dillon Heslin:
    Got it, thank you. And then last one for me. On some of the UA changes with your ability to – I’m just sort of wondering, how quickly in flexible are you with that UA spend? Just giving some of the dynamics I’ve gone on over the past two quarters and sort of what’s the lag time between if you see one of these games outperforming or underperforming and how quickly you can sort of reallocate that spend?
  • Eric Ludwig:
    Yes. Well, it’s almost immediate. The good thing about user acquisition here at Glu is everything is 100% variable. And the things we look for are one, what are the current CPIs, the cost per installs on the cost side, and we’re evaluating every day, every week, as we spend this level of spend and as we ramp it up. What does that curve look like of the CPI, as spend goes upwards, goes down. That’s number one. And the number two, we’re constantly looking at each titles, day one and day seven, we call it RPI revenue per install. And when you’ve got games that have been live for a long time, you’ll look at the day one to day 365, the day seven to 365 to kind of extrapolation as a how the titles actually do in reality.And so as we look at fresh users in day one and day seven, what’s the revenue looking like? Are the revenues on this cohort this week trending up or down versus last week versus last month versus last year? And based on that data, we reallocate budgets on a weekly basis. So we may go into the quarter with a fixed number of budget dollars, but every single week we are reallocating that based on last weeks and last months CPI trends, RPI trends, et cetera.
  • Dillon Heslin:
    Thank you.
  • Nick Earl:
    Thanks, Dillon.
  • Eric Ludwig:
    Thanks, Dillon.
  • Operator:
    I would now like to turn the call back to Nick Earl, Company’s CEO.
  • Nick Earl:
    Great. Thank you, operator. Thanks everyone for joining us and we’ll talk to you next quarter. Thank you.
  • Operator:
    This concludes today’s conference. Thank you for your participation. Have a wonderful day. You may all disconnect.