Q3 2019 Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the Glu Mobile third quarter 2018 earnings Conference call. At this time full participants are in listen only mode. Later I wasn't talking question answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero.
On your Touchtone telephone as a reminder, this conference call is being recorded I would now like to turn the conference over to your host Mr. Harman Senior Vice President Finance and Investor Relations. Please go ahead.
Thank you operator, good afternoon, everyone and thank you for joining us on Glu Mobile third quarter 2019 earnings conference call on the call today, our 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 in 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 a mistake. 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 could differ materially from those into 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 FCC. It's typically the most recent reports on forms 10-K intend to do.
During this call we will present, both GAAP and non-GAAP financial measures a non-GAAP financial measures are not intended to be considered in isolation from he 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 most directly comparable GAAP measures any quantitative reconciliation of those figures. Please refer to the supplemental presentation accompanying todays earnings call that can be accessed by our investor website, Www Dot Glu dot com forward slash investors.
As a reminder, consistent with our financial presentation and for all the information aside from bookings, whereas otherwise stated below we will discuss results on a GAAP basis, and that's why you to changes in deferred revenue.
<unk> cost of revenue and non-GAAP operating expense 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 viewed in prior quarters. We're also providing a supplementary excel file on our IR website to more easily eight in this reconciliation with the Powerpoint and that sell file our 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 Thanks.
Thanks, Arent Hello, everyone and thank you for joining us today for Blues third quarter 2019 earnings call I'll 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 in our guidance in more detail.
We've reported better than expected third quarter results of 20% year over year bookings growth driven by double digit increases and all three of our growth games the flow through from the top one outperformance led to a higher than anticipated profitability on an adjusted EBITDA basis, demonstrating the scale of our business. We also made steady progress on our development pipeline, particularly.
With Disney Sourcers Arena, which is on track to launch in Q1 of 2020.
The strong third quarter perform supports our improved outlook for 2019 and increases the competence, we haven't our growth as we head into 2020.
Turning to our life titles design, Hong grew 10% year over year to a record 45.2 million.
Peaked at number three and games on the U.S. iPhone charts. The titles continued strong performance was headlined by stronger art, though.
Driven by expanded lie bops, including monthly furniture partners series extension merchandising. We also enhance the title with new features including seemed like labs as well as close on Townhome turned the recently added met a game.
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.
End of season merchandising unexciting fall launch campaign called unravel the Ministry.
Furthermore, a full quarter propshop with the inclusion of additional limited time merchandise and endgame challenges helped drive the strong performance, including its best single day ever and its six years of operation.
Third quarter results for both design home and covet fashion also benefited from a more favorable you a environment versus the first half of the year, it's more rational spending backdrop allowed us to improve the returns on are you a investments with lower cpis and higher quality users for both titles.
You 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 quarter billion dollars and lifetime bookings the game climbed the ranks to a peak of number eight and games on the U.S. iPhone charge in Q3 strong result was driven by new.
Content advance that were tied to the third annual MLB players weekend as well as the studios lie bops expertise that keeps his title fresh and engaging.
[laughter] diner Dash Adventures produced strong results in its first full quarter since launching in late June with bookings at 14.7 million. The game play and original idea resonating well with our users as evidenced by strong engagement retention monetization, but still at a very early stage and in the typical mobile lifecycle, we believe diner Dash adventures will be.
A meaningful contributor to Glu success, and 2020 and beyond.
Moving to our near term pipeline Disney Sourcers Arena remains in beta in several territories and it's made strong progress later this quarter. We are set to release a pivotal update driven by enhancements. The team has made to the games combat system as well other key improvements.
We will look to go live in Canada. Shortly after this releases the team continues to polished tuned an approved the experience we remain on track and I'm 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 sturdy other credit as it can potash in Hollywood originals is an interactive narrative game, which is a popular genre. That's proven to be very successful mobile sector look for this title to launch in mid 2020.
The Glu sports team continues to focus on developed on the development of Deer Hunter next.
Which remains on track for release in the second half from 2020, we're very excited about this games potential given the notable brand proven core mechanic and the addition of a deep elder game and social features from the test from the studio behind Tap Sports baseball.
The games development velocity is accelerating as it now has additional resources from a Devry W. E title, which has been moved to our India live Ops studio Deer. Hunter next is also original IP and will provide high marginal flow through at scale.
They progress on two additional new titles that we spoke about in last quarter's call first games in the Glu is in the sports genre, which is a fast growing well established category mobile. This title comes out of the Apple higher we made earlier this year well the small Orlando based game studio. We're optimistic about this games potential believed that can help drive us towards.
Category leadership, and an umbrella brand opportunity. The strategic addition to Glu is a good indication of our current M&A model.
We intend to continue to add more great teams as evidenced by the success. We've had good crowdstar, we believe that partnering with agile and innovative teams allow us to leverage our studio and central infrastructure, which could yield significant revenue scale in a cost efficient matter.
The second title is a lifestyle game being developed by our Crowdstar studio made progress on this tile during the quarter and are bullish on the opportunity to create another winter given our significant category leadership and the lifestyles genre.
In summary, our record third quarter results in a steady progress you've made in our near term game launches reinforce our belief that we are well position heading into next year. The first half from 2900, certainly had some challenges, but it's proven to be a tremendous warranty experience for the glu team.
As you look at the third quarter results. We are extremely encouraged by our ability to deliver record bookings from our growth games strike early results from diner Dash adventures in its first full quarter and make steady progress on games and development. These accomplishments reflects successful execution of our strategy, which is built on a creative culture led by experienced teams focused on.
Developing additional growth games that have the potential to generate sustainable bookings growth.
So I meant it gives us confidence that 2020 will be a transformational year as we expect the core light business to continue to grow with meaningful potential upside from or three anticipated launches in the year, Eric will now provide specific details on our financials and outlook. Thanks, Nick and good afternoon, everyone in the call I will provide a closer look at.
Thanks for the third quarter walk through our guidance for the 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 goes the details revenue was 107.1 million bookings reached an all time high of 120.4 million dollar.
There's growing 20% over last year's third quarter. The last two quarters of Mark the two highest bookings quarters in glues 18 year history.
Well I don't see free Glu IP titles generated 69% of bookings and add bookings were 13.2 million or 11% of total bookings.
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% to 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.
But in 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 life.
On the expense side adjusted platform conditions were 32.1 million adjusted royalties were 7.2 million and hosting cost for 2 million.
You weigh in 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 years second quarter as we guided towards the last earnings call. We increase you way to support the early success of diner Dash Adventures How're you.
Reinvestment in this title as expected scaled down from July to October and we're now at a relatively steady state of spend.
Operating expenses, excluding you a marketing were 30.7 million compared with 30 million in last year's comparable quarter.
And we ended the third quarter, a cash balance of 102.4 million and generated $2 billion in free cash flow.
We are maintaining the fourth quarter guidance, we provided on last quarter's 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 adventurous has the telltale signs of a long term success as evidenced by strong retention engagement and monetization and we have normalized sorry, you weigh spend on diner Dash adventures in the fourth quarter 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 inline with our original Q4 guidance for this title.
Excluding expected declines and tap sports baseball and diner Dash adventures bookings are expected to be relatively flat from Q3 Q4.
The expense side at the midpoint of bookings guidance, we expect adjusted plan for commissions or 27.2 billion adjusted royalties of 5 million and hosting cost of 1.6 million.
You a cost will be approximately $23.9 million, reflecting our dialed back you weigh 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 a significant sequential increase due to lower you ate 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 29 team, we are adding the 9.4 million dollar third quarter bookings beat 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 increased 15% year over year and catalog games will declined 42% compared to 2018.
On the expense side at the midpoint of bookings guidance, we expect adjusted plan for commissions of 110 million adjusted royalties of 25.5 million.
Hosting costs of 6.9 million.
You a cost 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 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 in 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 last quarter's call. Our guidance represents only bookings from games that are alive and will exclude forecasted bookings and variable expenses of platform fees royalties, you a spend and variable compensation on.
New titles, specifically Disney Sorcerers Arena originals and Deer Hunter next we will include forecasted bookings and variable costs from these games in our guidance the quarter. Following their 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.
Mobile launches and forecast variability.
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 an anticipated.
Decline in our catalog titles. This will result in overall year over year growth rate in a low single digit range, excluding new titles.
Excluding bookings and variable cost 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 head count costs for new titles have already been included in our operating expenses in our adjusted EBITDA outlook and in 2020 this totals over $24 million of expense inner core business guidance.
Our three growth games are performing at scale and provide significant margin flow through overall as well as in a marginal dollar basis.
We believe that Disney Sorcerers Arena, and Deer, Hunter next could become scaled growth games, which contribute meaningfully to our long term margins.
New titles generally habit EBIT have adjusted EBITDA losses until they scale 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 adjusted EBITDA will grow significantly throughout the second half of the year as titles as new title 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 unethical hires provides us the future potential growth games, a stacked 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.
Ladies and gentlemen, if you have a question at this time. Please press the star and then the number one key on your Touchstone telephone. If your question has been answered you wish to remove yourself from the Q. Please press the pound.
[noise]. Your first question comes from the light crudes with Cowen Your line is open.
Hey, Thank you.
I think of one point the title that Crowdstar is working on.
Expected it to come in 2020 and now it sounds like that's probably not the case.
Can you kind of elaborate on a on what's going on there is it's if you're at a point now or do you think it's going to be a little longer.
And then can you talk a little bit about how you expect a marketing spend so the company to evolve into 21 2021. Thanks.
Yes, Hi, Doug I'll do the first one on air can take the second one yes, so it's a p. three timing.
Is.
Uncertain right now and I think subject to our view that we just did not want to commit to anything until we have something in beta and largely through beta even into worldwide launch. We were 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 forced pvthree into that timing, even though we had referred to it as a potential to make late 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 would the third game from Crowdstar. We think the prudent thing is just not attach a data, but right now, but as we as we get into next year, we'll certainly give more details on how that's progressing and what that the general timeline looks like yeah, Doug on the on the highway spending marketing spend looking at age.
During the time when titles are fully rolled out we spend about 20% to 25% of bookings on user acquisition, then when you've got a a launch period. We typically in the first three to six months or the 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 around new titles, we do that spend but kind of in the 2021, except for maybe a new a new title launch let specs as each.
20% to 25% kind of normalized you weigh spend.
Okay. Thank you.
Thanks.
Your next question comes from the line.
So with Stephens Your line is open.
Hi, guys had a question on the margin guidance for next year or am I, correct and understanding that you're guiding margin down for the core business.
Before accounting for the new game spend and revenues.
No not at all what we've guided is that the the margins will be flat on a year over year basis in absolute dollars and I think we have topline growing low single digits telecom tied to percentish at the midpoint.
And with flat EBITDA, but that includes all of the head count cost for all of the new title. So we've got about $24 million up 2020 investments that are being expensed in that core business guidance.
And that is what's fueling our release slate for 2020, and then the new titles is only variable revenue and variable cost. So the variable cost of the platform commissions are royalties for Disney no royalties for originals, nor for deer Hunter.
User acquisition and some variable compensation so everything in a new title bucket is variable all the people costs for the new title investment is in the core business, which is essentially flat summer growth, we're growing the top line, a little bit and having flat EBITDA the bottom line for the core business.
Okay.
And then I guess, just a follow up.
My math is right. It looks like you are calculated cost for install increased pretty significantly in the quarter.
Give an update on maybe what you're seeing out there and the competitive environment kind of your title any pressure this quarter.
Yes. Good question there Jeff So what we saw this we've talked a bit about the the you a headwinds from just some color February to June around the lifestyle games and apps that largely dissipated in the quarter in this quarter and where we were finding those titles being back at normalized CPI levels and we.
Had healthy spend at healthy installs, what we saw in the third quarter was really the launch of diner dash and probably why you're seeing poverty. The cost of effective use are going up is the the ratio of organics to paid.
As it was lower than say, what we were realizing a year in two years ago. So I think you're looking at total installs divided by the UAE spend and that's why it went up as 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 in two years ago.
I was just getting harder to get more organics and that's the reason for that price filling up and Jeff. It's Nick I'll just have one comment to Ericsson that is that we did see higher quality users come into our funnels for mark for our top three games and I think that was based on some evolution in are you a capabilities, but also.
Just on improved environment. The good thing about that is that that plays out over the long term as these these new players come in and spanned and engage and retain over over the long run. So overall very good news on that front.
Got it thank you.
Thanks, Jeff picture.
Your next question comes from the line of Darren Aftahi.
Your line is open.
Hey, this is going after Derek thanks for taking my questions and I appreciate some of the color on guidance. Both this year next year first on Disney just given sort of the dynamics have changed with the timeline over the past probably six months or so would you say that.
A lot more confidence 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.
Yes, Hi, Alan 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 we've certainly I think improves our ability to.
Make recall on when a game is ready and willing ready to talk specifically about dates I think thats kind of got better internally I also think that that we learned a lot about what were looking for four again to be ready specifically indicate the eyes and one of the key areas around that is ensuring that.
We have a de one retention that is high because that really especially great indicator of the funds factor in the engagement in the core mechanic. So I think with a game like Ww, where we didn't quite get there. We're realizing that this is absolutely crucial and Fortunately we're seeing positive.
You know progression and 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 in making sure that is gonna be as engaging is 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 what will be better at.
Add guiding date, and ER and bookings you know potential for all of these games.
Got it. Thank you and then on the Fourq guidance for fiscal year with most of the raised essentially being Threeq you beat.
On the games that you haven't talked about like TSB seasonality and then some of the lower you I spend on T.D.A. is there anything you're seeing and some of those older catalog games or the two other girls games design Holden covet fashion, that's either better or a little different quarter.
Around quarter.
Yes. It was certainly in the third quarter, we had record bookings for all three of our growth games are they all grew over double digits year over year, all had quarter over quarter increases in all hit records and that was on the back. So there are multiple things happening within each of those three titles them with the embedded guidance.
For for 20 Q4, the 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 a then the remaining of the business wrote largely flat is growth from design home and coverage offset by decreases in the catalog.
That interplay continues.
We expect our catalog will continue to decline into 2020 as expected.
And just given that these titles are our older non live ops Nona debenture been titles and by the end of next year. The catalog will be called a meaningless less than 5% of overall bookings in 2020.
<unk>.
[laughter].
Got it. Thank you and then I guess, one more if I may Peter.
Well design home I think we've talked about passing a lot of looks like mission and they are in 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 to get rolled out throughout the game.
Yes. It is we've talked a lot about in the previous calls this the main focus for the team other than obviously running the game every single day of the week is around the met again that that has yielded really positive results and we're seeing a really positive impact on engagement and retention as well as monetization.
Nation.
Team has worked tirelessly on.
Building. This out we've just launched two new homes I talked about in the further conquer the earlier comments and we're seeing really positive results from that so that's really where most of the focus has been a as I've have talked on the past where we're also looking at internationalization specifically in Europe . So that's that's a unit definitely work in progress and stuff.
I think thats coming together same with E Commerce site I would say that's still in motion in a work in progress at this point.
But very pleased to say that the medic game, which you guys. We've talked about a lot and these these caused last couple of years is is that the the pace that really drives the elder experience and really drives that retention and that engagement in the fun factor for the players have been in for days weeks and months that has come together really nice.
Lastly, we have excellent feedback from our fans they love it and it's something that we can keep build keep building on and we'll we'll be doing that including adding quite a bit of social features over the coming months in years.
Great. Thanks, guys.
Alright. Thanks.
Your next question comes from the line of Mikey with the Benchmark Company. Your line is open.
Hey, Nick Eric Thanks for taking my question Congrats on a strong quarter Q3.
Thank you I'm just curious on your 20 guide makes sense given that you're not including.
Any new game sort of consistent type approach guiding your lack service business. When you look at a consensus there's a fairly wide.
Range around booking.
Mutation and EBITDA.
Could you tell if a consensus view was still including a new games in their expectation.
Yeah. So I think of the seven analysts that cover us three including you Mike do not include new games I believe the other for do include them. So there is a a bit of a separation and part of this call and shortly after calls will be kind of highlighting.
Having our guidance, reflecting nothing from new titles, and then working to either get consensus excluded or.
At least breakout the the new title components within embedded in the guidance.
Okay, no that's unfortunate because a strong quarter.
Guy that makes sense I use stock looks like it's trading down because missed consensus you for 20, which is.
Not the right comparison, if you've got that positive bias on new games, that's clearly not your guidance. So hopefully people will figure that out, but it's just a coin with your stock off like this.
Second question for me on MLP.
Up 22% year over year.
Sequentially showing strength in the quarter could you sort of I mean, nothing unusual to see that sort of strength can you just sort of give us some little bit more color here whats happening with this game, obviously very important.
For you and your 20 DRAM looks like it's really got some momentum here.
Yeah, It definitely does and a year 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 little bit about MLB MLB players weekend that turned out to be very popular. We also have this this this new thing called the field pass.
We should think of it is a nonrecurring subscription you'd have to continually opt in but it really drive strong revenue in really strong value for for the little more heavily invested players. So that was a big one.
We saw very much a seamless transition from the previous.
2018, skewing to 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.
Played a game so we just haven't very well oiled machine.
In this in this.
Company with this team and.
They just keep showing us that there was growth in NTSB. So we're very happy with it we're excited to build out our sports sports category for us and grow that and try to really build an umbrella brand over time, so definitely definitely good news for 2019 and beyond.
Good.
Not deer Hunter when is that game going Oh, Geo lock and when do you expect it to release and can you remind us.
The downloads from this franchise monies from a franchise likes to date.
How do you think about you a spend against the title like this when obviously had some market awareness already.
Yeah. So first off we we've said second half of 2024 for Deer Hunter I'll going live globally. It's obviously then before that you'll you'll have a going into alpha and beta and then then successes or updates to the beta version.
And the last two skews combined deer Hunter.
Have done over a quarter billion downloads.
And in excess of $100 million of revenue that would say that that was it those were two skews that were zero live ops zero social zero events.
Zero real elder game whatsoever, and so the the amount of money, we're making up per user was I think a less than 10 cents ARPDAU. If you'll look at the back of our IR charge today, our three growth games. This last quarter, just grew 10% quarter over quarter to 50 cent ARPDAU, So what I would certainly.
In fact as as the baseball team and the baseball studio is taking their lessons learned on deep Mehta.
Got it John John shows and and.
Ever Upgradability of a both guns and dogs and in gear.
As well as adding adding events the hunting clubs et cetera, we anticipate that this title will hopefully still gets a lot of the organic down what appeared download ability and appeal that this brand has had a with a proven core mechanic that does this brand has coupled with social and Upgradability at a deep met a game and elder game.
We think this can be one of our really scaled growth games in 2020 and beyond.
When we execute this.
Good.
Last question what's your.
The mix between domestic.
International money.
How do you think about.
No.
International is under index for you.
How do you think about growing that piece of your business. I think you have some himself with his line all but I'm sort of curious.
Absolutely so talking about Peter Thank you.
Yep, Yeah, great great questions. Yes, so we are pretty hundred at about 15% of our revenue coming from non North America and when you look at our ARX, our three growth games, plus diner dash 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 road map for the future really I would say Disney and Deer Hunter I should the index.
But above its pay grade so to speak in terms of the rest of world mix shifts so I, but it's I would anticipate a year from now we are not to say mix shift in terms of our North America, I think it'll be more diversified internationally as well as some of somebody international work that we're we're doing within design home as well. So I think we will be expanding.
And this one of our big top focuses.
All right. Thanks, guys best of luck.
It's Mike.
Your last question comes from the line of Franco Brenda.
And your line is open.
Hi, guys congratulations on the strong quarter and thanks for letting me ask if your question.
Sure.
So with your moving double actively to India, three and a lot about the studio.
How expensive visit the keep that came running right now.
Given the licensing behind that and I suppose to just scrapping it and reallocating resources.
Yes, good question.
Right right now the titles doing about.
A three or $4 million annualized run rate so call. It a million dollars a quarter roughly as we enter into the fourth quarter and the number of people that we will be spinning up in India is going to be a relatively small Devon senior call at less than 10 people I'm. So the other salary costs in India for 10 people is relative.
Really small certainly compared to the full team that we had an in San Mateo and then the licensing costs are obviously, it's a it's a variable charge. So there's no fixed costs in terms of licensing it's just a double digit percentage or whatever revenue, we have so by by being able to ship that title to India, even at the current levels it will be profitable.
No we're not spending any money on user acquisition. So it's it's ads you know our studio target margins that we focus our studios on even even with no user acquisition with the team in India.
Okay sounds good I think it for the color and then and then going back to previous question regarding the Cpis.
I'm expecting organic dance, though too.
More challenging versus paid moving forward.
Yes, we certainly have seen both office as well as the industry I've seen.
Well kind of install a compression on the organic side and yeah, I think as we're modeling our numbers into the future. We're certainly looking at that backdrop and looking at trend line and modeling in kind of trend line as well I think that's the the prudent thing for us to be doing and that's kind of where we're getting the numbers.
We're getting to.
Okay, Okay, and then the last one.
Obviously people are more sort of compare that.
But the thing so you know and the soft launch right now what sort of.
Target audience or what what type of on if it's definitely game.
Yes, so yeah. This is Nick.
The Disney game. We think is is very different situation Weve Ww way and we'll always have to wait until we launch a worldwide for the world to see but will as as we sit here. We've got a very high degree of confidence in the gain coming together, we're very confident about the launch happening in.
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 lot of that live operation tools and features that are so key for a success long term so the.
The thing that we're really focused on.
That we and one probably the key reason why moved out was to make sure that that that early mid retention was was strong specifically day seven is a number that we look at so we'll be watching that very closely as we released the eight dot all which is the the version that will be out later this month the carries with it a lot of these these big change.
Does that I talked about in my earlier comments and then the from that point will be polishing and tuning you know right right up until the launch date and then we'll we'll see how does worldwide but.
We feel good about it we think it's very different situation Ww way and we certainly look forward to some some evidence of that once once we do a once we do a lot.
I thought the first time.
Thanks America.
And there are no further costs at this time everyone. This concludes today's teleconference call you may now disconnect.
[noise] Goodbye.
[noise].
[noise].