Glu Mobile Inc
Q3 2019 Earnings Call Transcript

Published: 7 Nov 2019

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the Glu Mobile Third Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.I would now like to turn the conference over to your host, Mr. Harman Singh, Vice President of Finance and Investor Relations. Please go ahead.

[Harman Singh:]

Thank you, operator. Good afternoon, everyone, and thank you for joining us on Glu Mobile’s third 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 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 with that, I like to turn the call over to Nick.

[Nick Earl:]

Thanks, Harman. Hello, everyone and thank you for joining us today for Glu’s third quarter 2019 earnings call. I will provide an overview of the quarter’s record results and highlights as well as our game development progress. Eric will then discuss the quarter’s financial results and our guidance in more detail.Glu reported better than expected third quarter results of 20% year-over-year bookings growth driven by double digit increases in all three of our growth games. The flow through from the top line outperformance led to a higher than anticipated profitability on an adjusted EBITDA basis demonstrating the scale of our business. We also made steady progress in our development pipeline, particularly with Disney Sorcerer’s Arena, which is on track to launch in Q1 of 2020. The strong third quarter performance supports our improved outlook for 2019 and increases the confidence we have in our growth as we head into 2020.Turning to our live titles. Design Home grew 10% year-over-year to a record $45.2 million and peaked at number three in games on the U.S. iPhone charts. The title’s continued strong performance, it was headlined by stronger ARPDAU, driven by expanded live-ops including monthly furniture partners, series extension and merchandising. We also enhanced the title with new features including ceiling lamps as well as coastal and townhomes in the recently added metagame.Covet Fashion also generated record quarterly bookings growing nearly 28% year-over-year to $17.2 million. Several new elements were added to the game including expanded trend setters program and season merchandising and exciting fall launch campaign called unravel the mystery. Furthermore, a full quarter of Prop Shop with the inclusion of additional limited time merchandise and endgame challenges help drive the strong performance including its best single day ever in it’s six years of operation.Third quarter results for both Design Home and Covet Fashion also benefited from a more favorable UA environment versus the first half of the year. It’s more rational spending back has allowed us to improve the returns under UA investments with lower CPIs and higher quality users for both titles. We saw exceptionally strong bookings from our Tap Sports Baseball franchise, which grew 22% year-over-year to a record $30.1 million in the quarter, recently surpassing a $0.25 billion in lifetime bookings.The game climbed the ranks to a peak of number eight in games on the U.S. iPhone charts in Q3. The strong result was driven by new content advance that were tied to the third annual MLB players weekend as well as the studio’s live ops expertise that keeps this title fresh and engaging. Diner Dash Adventures produce strong results in its first full quarter since launched in late June with bookings of $14.7 million. The gameplay and original Glu IP are resonating well with our users as evidenced by strong engagement, retention and monetization. While still at a very early stage in the typical mobile life cycle, we believe Diner Dash Adventures will be a meaningful contributor to Glu’s success in 2020 and beyond.Moving to our near-term pipeline, Disney Sorcerer’s Arena remains in beta in several territories and has made strong progress. Later this quarter we are set to release a pivotal update driven enhancements the team has made to the games combat system as well as other key improvements. We will look to go live in Canada shortly after this release as the team continues to polish tune and improve the experience. We remain on track and are looking forward to a global launch in late Q1 2020.Originals continues to make solid headway. This game is developed by – is being developed by our Toronto studio, the creators of Kim Kardashian

[Eric Ludwig:]

Thanks, Nick, and good afternoon to everyone on the call. I will provide a closer look at our financial results for the third quarter, walk through our guidance for fourth quarter and full year 2019, and then provide some preliminary commentary on our 2020 outlook.In Q3, we delivered strong top and bottom line results that soundly beat our guidance. We hit a new quarterly record for bookings, led by double-digit year-over-year growth in our three growth games. Going through the details, revenue was $107.1 million. Bookings reached an all-time high of $120.4 million, growing 20% over last year’s third quarter.The last two quarters have marked the two highest bookings quarters in Glu’s 18 year history. Royalty free Glu IP titles generated 69% of bookings and ad bookings were $13.2 million or 11% of total bookings. The record bookings were led by strong performance in our three growth games, each of which had their largest bookings quarter ever.Growth games grew 17% over last year’s comparable quarter and contributed 77% total bookings. Year-over-year, Design Home bookings grew 10% to $45.2 million. The Tap Sports Baseball franchise increased 22% to $30.1 million. Covet Fashion grew 28% year-over-year to $17.2 million. And Diner Dash Adventures delivered $14.7 million in bookings, its first full quarter being live.On the expense side, adjusted platform commissions were $32.1 million. Adjusted royalties were $7.2 million and hosting costs for $2 million. UA and marketing spend, as guided, was $40.2 million or 33.4% of bookings. This compares to $24.2 million in last year’s third quarter and $30.1 million for this year second quarter. As we guide into you in the last earnings call, we increase UA to support the early success of Diner Dash Adventures.Our UA investment in this title, as expected scaled down from July to October and we are now at a relatively steady state of spend. Operating expenses excluding UA and marketing were $30.7 million, compared with $30 million in last year’s comparable quarter. And we ended the third quarter with a cash balance of $102.4 million and generated $2 million in free cash flow.We were maintaining the fourth quarter guidance we provided on last quarters’ call. We expect bookings in the range of $101.5 million to $103.5 million, representing a slight increase over last year’s fourth quarter at the midpoint. From Q3 to Q4, we anticipate a sequential step down primarily due to expected Tap Sports Baseball seasonality.We believe that Diner Dash Adventures has the telltale signs of a long term success as evidenced by strong retention, engagement and monetization. And we have normalized our UA spend on Diner Dash Adventures in the fourth quarter to support our efforts towards making this title into a growth game in 2020. As a result, we expect Diner Dash Adventures bookings to be approximately $10 million in line with our original Q4 guidance for this title.Excluding expected declines in Tap Sports Baseball and Diner Dash Adventures, bookings are expected to be relatively flat from Q3 to Q4. On the expense side and at the midpoint of bookings guidance, we expect adjusted platform commissions of $27.2 million, adjusted royalties of $5 million and hosting costs of $1.6 million.UA cost will be approximately $23.9 million, reflecting our dialed back UA spend on Diner Dash Adventures and Tap Sports Baseball as well as reflecting our expectations that CPIs will generally increase in November and December as we compete for Thanksgiving, Black Friday and Christmas consumer eyeballs. All other adjusted operating expenses are forecasted to be $33.1 million.Profitability on an adjusted EBITDA base is expected to show significant sequential increase to the lower UA spend. A detailed outlook is provided in the IR deck and news release on the fourth quarter for financial modeling purposes. For the full year 2019, we are adding the $9.4 million third quarter of bookings to be at the midpoint to the full year guidance, which is now at $416.4 million to $418.4 million, representing 8.5% growth over 2018 at the midpoint.We anticipate that growth games will increase 15% year-over-year and catalog games will decline 42% compared to 2018. On the expense side of the midpoint of bookings guidance, we expect adjusted platform commissions of $110 million, adjusted royalties of $25.5 million and hosting costs of $6.9 million UA costs will be approximately $117.2 million and all other adjusted operating expenses are forecasted to be $122.3 million.We expect to be GAAP profitable for the full year of 2019. We ended September with $102.4 million in cash and anticipate ending the year with approximately $115 million, this equates to approximately $19 million of free cash flow for the full year.Before turning to our preliminary comments on our 2020 outlook, I want to first reiterate the guidance methodology that we introduced in last quarter’s call. Our guidance represents only bookings from games that are live and we’ll exclude forecasted bookings and variable expenses of platform fees, royalties, UA spend and variable compensation on new titles, specifically Disney Sorcerer’s Arena, Originals and Deer Hunter Next.We will include forecasted bookings and variable costs from these games in our guidance to quarter following the global launch. We believe that this new guidance philosophy will provide a higher quality view on the forecast and will reduce the exposure to the timing of global launches and forecast variability.For fiscal 2020, we expect the following from our currently live titles, high single-digit percentage increases on a year-over-year basis from our three growth games, plus a full year of contribution from Diner Dash Adventures. This expected growth should more than offset and anticipated decline in our catalog titles. This will result in an overall year-over-year growth rate in the low single-digit range, excluding new titles.Excluding bookings and variable costs from new titles, we expect adjusted EBITDA for 2020 to be relatively in line in absolute dollars with the full year 2019 guidance levels. I would highlight that studio headcount costs for new titles have already been included in our operating expenses in our adjusted EBITDA outlook. And in 2020, this total is over $24 million of expense in our core business guidance.Our three growth games are performing at scale and provide significant margin flow through overall as well as on a marginal dollar basis. We believe that Disney Sorcerer’s Arena and Deer Hunter Next could become scaled growth games, which contribute meaningfully to our long term margins.New titles generally have adjusted EBITDA losses until they scaled to appropriate levels. Thus, 2020 new titles as a standalone group will contribute modestly to 2020 adjusted EBITDA. Given the expected timing and margin characteristics of our 2020 launches, we anticipate a low single-digit adjusted EBITDA loss in absolute dollars in the first half of 2020, when factoring in new titles and we believe that the adjusted EBITDA will grow significantly throughout the second half of the year, as titles – as new titles scale. We expect to exit 2020 with adjusted EBITDA margins of at least 15% inclusive of new titles.In summary, as we enter 2020, we expect our core business to provide top line growth, while investing over $24 million annually on new title developments, all the while continuing meaningful adjusted EBITDA profitability. These investments in new titles as well as potential acquisitions and acquihires provide us the future potential growth games to stack on top of our growing core business.To the extent, new titles are able to hit scale, we will see significant flow through the drive margins toward our long term targets. We look forward to providing a formal guidance for 2020 on our fourth quarter and 2019 full year call in February.We’ll now open the call for questions. Operator?

[Operator:]

Your first question comes from the line of Doug Creutz with Cowen. Your line is open.

[Doug Creutz:]

Hey, thank you. I think at one point, the title that Crowdstar is working on was you expected it to come in 2020. And now it sounds like that’s probably not the case. Can you kind of elaborate on what’s going on there? Is it just, you’re at a point now? Or you think it’s going to be a little longer? And then can you talk a little bit about how you expect marketing spend for the company to evolve into 2021 – to 2021? Thanks.

[Nick Earl:]

Yes, hi, Doug. I’ll do the first one and Eric can take the second one. Yes. So P3 three timing is – we’re uncertain right now. And I think, subject to our view that we just do not want to commit to anything until we have something in beta and largely through beta even into the worldwide launch. We’re just taking a more of a conservative view on timing for that. We’ve got a really strong pipeline that we have committed to for 2020. So there’s just no need to try to artificially force P3 into that timing. Even though, yes, we had referred to it as a potential to make late 2020.So I think given the strength of our pipeline in 2020 as we sit here today and given that, we’re really going to be shooting for something spectacular with the third game from Crowdstar. We think the prudent thing is just to not attach a date to it right now. But as we get into next year, we’ll certainly give more details on how that’s progressing. And what the general timeline looks like.

[Eric Ludwig:]

Yes. And Doug on the UA spend and marketing spend, it was looking at a period of time when titles are fully rolled out. We spend about 22% to 25% of bookings on user acquisition. Then when you’ve got a launch period, we typically in the first three to six months of a new title will be leaning more heavily into spend. It’s still ROI positive spending. However, it’s just not enough to cover the revenue as the revenue stacks. And we typically see in that three to six month window of launch CPIs are typically lower. So it makes sense for us to lean heavier into that. So around new titles we do that spend but kind of into 2021 except for maybe a new title launch, you expect to see 22% to 25% kind of normalized UA spend.

[Doug Creutz:]

Okay, thank you.

[Operator:]

Your next question comes from the line of Jeff Cohen with Stephens. Your line is open.

[Jeff Cohen:]

Hey guys, I just had a question on the margin guidance for next year. Am I correct in understanding that you’re guiding margin is down for the core business before accounting for the new game spend and revenue?

[Eric Ludwig:]

No, not at all. What we’ve got it is that the margins will be flat on a year-over-year basis in absolute dollars. And I think we have top line growing low single digits, call it kind of 2%-ish at the midpoint and with flat EBITDA. But that includes all of the headcount costs for all of the new titles. So we’ve got about $24 million of 2020 investments that are being expensed in that core business guidance. And that is what fueling our release slate for 2020.And then the new title is only variable revenue and variable costs. So the variable costs are the platform commissions, royalties for Disney, no royalties for Originals nor for Deer Hunter, user acquisition, and some variable compensation. So everything in the new title bucket is variable. All of the people cost for the new title investment is in the core business, which is essentially flat. So we’re growing the top line a little bit and having flat EBITDA on the bottom line for the core business.

[Jeff Cohen:]

Okay. And then I guess just as a follow-up, if my math is right? It looks like your calculated cost per install increased pretty significantly in the quarter. Could you just give an update on maybe what you’re seeing out there in the competitive environment and if any of your title is facing new pressure this quarter?

[Eric Ludwig:]

Yes. Good question there Jeff. So what we saw – so we had talked a bit about the UA headwinds from, you can call it February to June around the lifestyle, games and apps, that’s largely dissipated in the quarter – in this quarter. And when we were finding those titles being back at normalized CPI levels and we’ve had healthy spend and help the installs. What we saw in the third quarter was really the launch of Diner Dash. And probably why you’re seeing, probably the cost of effective user going up is the ratio of organics to paid was lower than say, what we were realizing a year and two years ago. So I think you’re looking at total installs divided by the UA spend and that’s why it went up, because we had a pretty significant increase in spend around the Diner Dash launch. It was all ROI positive spending. But the organic mix versus a year ago and two years ago is getting harder to get more organics. And that’s the reason for that price going up.

[Nick Earl:]

Yes. And Jeff, it’s Nick. I’ll just have one comment to Eric’s and that is that we did see higher quality users come into our funnels from our – for our top three games. And I think that was based on some evolution in our UA capabilities but also just on an improved environment. The good thing about that is that that plays out over the long term as these new players come in and spend and engage and retain over the long run. So overall, very good news on that front.

[Jeff Cohen:]

Got it. Thanks guys.

[Operator:]

Your next question comes from the line up Darren Aftahi with ROTH Capital Partners. Your line is open.

[Dillon Heslin:]

Hey, this is Dillon on for Darren. Thanks for taking my questions and I appreciate some of the color on guidance both this year and next year. First on Disney, just given sort of the dynamics that have changed with the timeline over the past probably six months or so, would you say, that you’re a lot more confident in your process for deciding when to launch new games? And what sort of metrics you need to see internally before those go into beta in key countries?

[Nick Earl:]

Yes. Hey, Dillon. Yes, I mean, I think, as we’ve gone through this process of delaying Disney and trying to learn as much as we can from it. We’ve certainly, I think improved our ability to make a call on when a game is ready and when we’re ready to talk specifically about dates. So I think that’s kind of got better internally. I also think that we learned a lot about what we’re looking for a game to be ready, specifically the KPIs. And one of the key areas around that is ensuring that we have D1 retention that is high because that really is such a great indicator of the fun factor and the engagement in the core mechanic.So I think with game like WWE, why we didn’t quite get there. We’re realizing that this is absolutely crucial. And fortunately, we’re seeing positive progression in all of these games for next year around that core mechanic. It’s something that we spent a lot of time on the Disney game and the teams at hard at work and making sure that’s going to be as engaging as fun and compelling as can be. So I think as we sit here, we feel good about Q1 for Disney. We feel good – better about the process and certainly with our new guidance philosophy, I think, we’ll be better at a guiding date and bookings potential for all of these games.

[Dillon Heslin:]

Got it. Thank you. And then on the 4Q guidance or fiscal year with most of the raise essentially being the 3Q beat. On the games that you haven’t talked about, like TSB seasonality and then some of the lower UA spend on DDA. Is there anything you’re seeing in some of those older catalog games or the two other growth games Design Home and Covet Fashion that’s either better or a little different quarter-on-quarter?

[Nick Earl:]

Yes. It was certainly in the third quarter. We had record bookings for all three of our growth games. They all grew over double digits year-over-year, all had quarter-over-quarter increases as all-in records. That was on the backs of multiple things happening within each of those three titles. Then with the embedded guidance, for Q4 the drop in baseball seasonality and Diner Dash coming back to a smaller level, which was what we guided you originally due to lower spend. Then the remaining of the business is largely flat is growth from Design Home and Covet offset by decreases in the catalog. So that interplay continues and when we expect our catalog will continue to decline into 2020 as expected. It just given that these titles are our older non-live ops, non-adventure driven titles and – by the end of next year, the catalog will be called as meaningless less than 5% of overall bookings in 2020.

[Dillon Heslin:]

Okay. Got it. Thank you. And then I guess one more if I may. Was Design Home, I think we talked about in the past a lot of localization in AR and VR implementation. Is any of that live yet? Or are you have made any progress there and when do you expect sort of those features to get rolled out throughout the game?

[Nick Earl:]

Yes. As we’ve talked a lot about in the previous calls, the main focus for the team other than obviously running the game every single day of the week is around the meta game. That has yielded really positive results and we’re seeing a really positive impact on engagement and retention as well as monetization. The team has worked tirelessly on building this out. We’ve just launched two new homes I talked about in the further – the earlier comments and we are seeing really positive results from that. So that’s really where most of the focus has been as I’ve have talked about in the past where we’re also looking at internationalization specifically in Europe.So that’s a definitely a work in progress and something that’s coming together, same with e-commerce. I would say, that’s still in motion and a work in progress at this point. But very pleased to say that the meta game, which as we’ve talked about a lot in these calls last couple of years is that the pace that really drives the elder experience and really drives that retention and that engagement and the fun factor for the players who have been in for days, weeks and months. That has come together really nicely. You have excellent feedback from our fans. They love it and it’s something that we can keep building on and we’ll be doing that, including adding quite a bit of social features over the coming months and years.

[Dillon Heslin:]

Great. Thanks guys.

[Nick Earl:]

Thanks.

[Operator:]

Your next question comes from the line of Mike Hickey with The Benchmark Company. Your line is open.

[Mike Hickey:]

Hey Nick and Eric, thanks for taking my questions. Congrats on a strong quarter Q3. Just curious on your 2020 guide, make sense given that you’re not including, any new games since sort of consistent with how you’ve approached guiding your live service business. When you look at consensus, there’s a fairly wide range around bookings expectations and EBITDA. Could you tell if consensus view was still including, new games and their expectations?

[Eric Ludwig:]

Yes. So, I think of the seven analysts that cover us three, including you, Mike, do not include new games. I believe the other four do include them. So that there is a bit of a separation. And part of this call and on the after calls we’ll be kind of highlighting having our guidance reflecting nothing from new titles and then working to either get consensus to exclude it or at least break out the new title components with embedded in the guidance.

[Mike Hickey:]

Okay. Yes, it’s unfortunate because the strong quarter, there’s a guide that makes sense. Your stock looks like it’s trading down just because miss consensus for 2020, which is not the right comparison. If you’ve got that positive bias on new games, it’s clearly not your guidance. So hopefully people will figure that out. But it is disappoint if your stock off like this. Second question for me on the MLB up 22% year-over-year and sequentially showing strength in the quarter. Could you – I mean, that’s unusual to see this sort of strength here. Can you just sort of give us some – a little bit more color here in what’s happening for this game? Obviously very important for you and your 2020 view. It looks like it’s really got some momentum here.

[Eric Ludwig:]

Yes, it definitely does. And every year we wonder if there’s more growth in this game and every year there is. And certainly that’s what happened in 2019. The key factors driving that, I talked a little bit about the MLB players weekend that turned out to be very popular. We also have this new thing called a field pass, which think of it as a nonrecurring subscription. You have to continually opt-in, but it really drives strong revenue and really strong value for the more heavily invested players. So that was a big one.We saw a very much seamless transition from the previous 2018 skew into 2019. That really helped a lot for this game. Live operations just get better every quarter, every year. It’s just an incredibly talented team and they’re incredibly engaged with the fans who play the game. So we just have a very well old machine in this company with this team. And they just keep showing us that, there’s growth in TSP. So we’re very happy with it. We’re excited to build out our sports category for us and grow that and try to really build an umbrella brand over time. So definitely good news for 2019 and beyond.

[Mike Hickey:]

Good. And then Deer Hunter, when is that game going geo-lock. And when do you expect it to release and can you remind us the downloads from this franchise, monies from the franchise live to date. How do you think the UA spend against a title like this that obviously has some market awareness already?

[Eric Ludwig:]

Yes. So, first off, we’ve said second half of 2024 for Deer Hunter going live globally. So obviously then before that, you’ll have it going into alpha and beta and then success updates to the beta version. And the last two skews combined of Deer Hunter have done over 0.25 billion downloads and in excess of $100 million of revenue. I would say, those were two skews that were zero live ops, zero social zero, zero events, zero real elder game whatsoever. And so the amount of money we were making per user was I think less than $0.10 ARPDAU.If you look at the back of our IR chart today, our three growth games this last quarter just grew 10% quarter-over-quarter to $0.50 ARPDAU. So what I would certainly expect is, as the Baseball team and the Baseball Studio is taking their lessons learned on deep meta, gun [indiscernible] ever upgradability of both guns and dogs and gear as well as adding events and hunting clubs, et cetera. We anticipate that this title will hopefully still get a lot of the organic download ability and appeal that this brand has had with a proven core mechanic that this brand has coupled with social and upgradability and a deep metagame and elder game. We think this can be one of our really scaled growth games in 2020 and beyond when we execute this.

[Mike Hickey:]

Good. Last question. What’s your mix between domestic, international monies and how do you think about – international is under index for you. How do you think about growing that piece of your business? I think you have some stuff with Design Home. I’m just sort of curious how you sort draw on that piece. Thank you.

[Nick Earl:]

Yes. Great question. Yes, so we are pretty under index about 15% of our revenue coming from non-North America. And when you look at our three growth games plus Diner Dash this last quarter that was 90% of our total bookings. And those three – those four skews really are leaning towards the North American audience. So as I look to the future and look at our roadmap for the future, I would say, Disney and Deer Hunter, should index above it’s pay grade so to speak in terms of rest of the world mix shift. So I would anticipate a year from now, we are not the same mix shift in terms of our North America. I think it will be more diversified internationally as well as some of the international work that we’re doing within Design Home as well. So I think we will be expanding and it’s one of our big top focuses.

[Mike Hickey:]

All right. Thanks guys. Best of luck.

[Nick Earl:]

Thanks, Mike.

[Operator:]

Your last question comes from the line of Franco Granda with D.A. Davidson. Your line is open.

[Franco Granda:]

Hi guys. Congratulations on the strong quarter and thanks for letting me ask a few questions. So with you moving WWE to India, to India live ops studio, how expensive is it to keep that game running right now, given the licensing behind it and as opposed to just scrapping it and relocating resources?

[Eric Ludwig:]

Yes. Franco, good question. Right now the title is doing about $3 million or $4 million annualized run rate. So call it $1 million a quarter roughly as we enter into the fourth quarter. The number of people that we will be spinning up in India is going to be a relatively small dev team. Call it less than 10 people. So the salary cost in India for 10 people is relatively small, certainly compared to the full team that we had in San Mateo. And then the licensing costs are obviously – it’s a variable charge, so there’s no fixed cost in terms of licensing. It’s just a double digit percentage of whatever revenue we have. So by being able to ship that title to India, even at the current levels, it will be profitable. We’re not spending any money on user acquisition. So it’s add our studio target margins that we focus our studios on, even with no user acquisition with a team in India.

[Franco Granda:]

Okay, sounds good. Thank you for the color. And then going back to previous question regarding the CPI. I think organic installs to become more challenging versus paid moving forward.

[Eric Ludwig:]

Yes. We certainly have seen – both us as well as the industry have seen kind of install compression on the organic side. I think as we are modeling our numbers into the future, we’re certainly looking at that backdrop and looking at trend line and modeling in timed trend line as well. I think that’s the prudent thing for us to be doing. And that’s kind of how we’re getting to the numbers we’re getting to.

[Franco Granda:]

Okay, sounds good. And then the last one, obviously, people more sort of compares WWE with Disney. So in the soft launch right now, what sort of target audience – what type of audience you are testing the game?

[Nick Earl:]

Yes. This is Nick. The Disney game we think is very different situation than WWE. And we’ll always have to wait until we launch a worldwide for the world to see. But as we sit here, we’ve got a very high degree of confidence in the game coming together. We’re very confident about the launch happening in Q1 of 2020. Lots of changes that have happened in this period that where we’ve shifted the launch date. Most notably on the combat system, but also on social and a lot of the live operation tools and features that are so key for a success long-term.So the thing that we’re really focused on, and probably the key reason why I moved to that was to make sure that early mid retention was strong, specifically day seven is a number that we look at. So we’ll be watching it very closely as we release the 8.0, which is the version that’ll be out later this month that carries with it a lot of these big changes that I talked about in my earlier comments. And then from that point we’ll be polishing and tuning, right up until the launch date. And then we’ll see how it does worldwide. But, we feel good about it. We think it’s a very different situation for WWE and we certainly look forward to some evidence of that once we do the live.

[Franco Granda:]

All right. Excellent. Thanks for your time.

[Nick Earl:]

Thanks, Franco.

[Operator:]

And there are no further questions at this time. Everyone, this concludes today’s teleconference call. You may now disconnect.