Glu Mobile Inc
Q1 2020 Earnings Call Transcript

Published:

  • Operator:
    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.
  • Harman Singh:
    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.
  • Nick Earl:
    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
  • Eric Ludwig:
    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
  • Eric Ludwig:
    Michelle?
  • Nick Earl:
    Operator?
  • Operator:
    [Operator Instructions] And your line is open. Franco Grendan.
  • 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?
  • Eric Ludwig:
    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.
  • Franco Grendan:
    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?
  • Nick Earl:
    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.
  • Franco Grendan:
    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?
  • Nick Earl:
    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.
  • Franco Grendan:
    Alright, that's it from me. Thank you.
  • Nick Earl:
    Thanks Franco.
  • Operator:
    And your next question comes from the line of Matthew Thornton from SunTrust.
  • Nick Earl:
    Hi, Matt.
  • Matthew Thornton:
    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.
  • Nick Earl:
    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.
  • Matthew Thornton:
    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.
  • Eric Ludwig:
    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.
  • Matthew Thornton:
    Great. Thanks guys. I'll jump back in the queue.
  • Nick Earl:
    Thanks Matt.
  • Operator:
    And your next question comes from the line of Darren Aftahi from Roth Capital Partner.
  • Nick Earl:
    Hey, Dylan.
  • Unidentified Analyst:
    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?
  • Nick Earl:
    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.
  • Unidentified Analyst:
    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?
  • Eric Ludwig:
    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.
  • Unidentified Analyst:
    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?
  • Nick Earl:
    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.
  • Unidentified Analyst:
    Great. That's it for me. Thank you.
  • Operator:
    And your next question comes from the line of Drew Crum from Stifel.
  • Drew Crum:
    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?
  • Eric Ludwig:
    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.
  • Drew Crum:
    Okay. And then separately you guys talked about the organic downloads for Disney Sorcerer’s Arena being solid. Can you talk about your plans for investment on UA for that game?
  • Eric Ludwig:
    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.
  • Nick Earl:
    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.
  • Drew Crum:
    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.
  • Eric Ludwig:
    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.
  • Drew Crum:
    Okay, thanks, guys.
  • Nick Earl:
    Alright. Thanks Drew.
  • Operator:
    Thank you. And your next question comes from the line of Matthew Cost from Morgan Stanley.
  • Matthew Cost:
    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?
  • Eric Ludwig:
    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.
  • Nick Earl:
    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.
  • Matthew Cost:
    Great. Thanks guys.
  • Nick Earl:
    Alright, thanks Matt.
  • Operator:
    And your next question comes from the line of Mike Hickey from Benchmark Company.
  • Mike Hickey:
    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?
  • Nick Earl:
    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.
  • Mike Hickey:
    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?
  • Nick Earl:
    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.
  • Mike Hickey:
    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?
  • Nick Earl:
    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.
  • Mike Hickey:
    Great, thanks guys. Best of luck.
  • Nick Earl:
    All right. Thanks Mike. Good to talk to you.
  • Operator:
    And your next question comes from the line of Doug Creutz with Cowen.
  • Doug Creutz:
    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?
  • Eric Ludwig:
    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.
  • Doug Creutz:
    Okay, thanks.
  • Operator:
    And your last question comes from the line of Jeff Cohen from Stephens Inc.
  • Jeff Cohen:
    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.
  • Nick Earl:
    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?
  • Jeff Cohen:
    Just around how that LTVs and CPI has trended in the portfolio?
  • Nick Earl:
    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.
  • Jeff Cohen:
    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?
  • Nick Earl:
    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.
  • Jeff Cohen:
    Understood. Yes, that makes sense. Thanks, guys.
  • Nick Earl:
    Yes. All right, Jeff. Good to talk to you.
  • Operator:
    Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Goodbye.