Q4 2019 Earnings Call
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Ladies and gentlemen, thank you for standing by welcome to the Q4 2019 Glu Mobile earnings Conference call.
This time, all participants are in listen only mode.
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I'd now like to hand, the conference over to your speaker today, Mr. I'm, saying Vice President Finance. Thank you. Please go ahead.
Thank you operator, good afternoon, everyone and thank you for joining us on Glu Mobile is fourth 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 in the future financial performance.
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 FCC 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 investment decision.
Well complete information regarding our non-GAAP financial information the 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 via our investor website, Www dot glue 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 I'm afraid of changes in deferred revenue the deferred cost of revenue and non-GAAP operating expenses totals in our financial tables.
This data will provide a GAAP to non-GAAP reconciliation to the quarter's financial results based on the same methodology. We've used in prior quarters. We're also providing a supplementary XL filed on our IR website to more easily aid in this reconciliation both the Powerpoint and XL file are now accessible on the website. We encourage you to follow.
Along with the slides during this earnings conference call and with that I'd like to turn the call over to Nick.
Thanks, Aaron Hello, everyone and thank you for joining us today precludes fourth quarter and full year 2019 earnings call.
Provide an overview and highlights of our results as well as our game development progress parents will that Eric will then discuss our financial results and guidance more detail.
We went to 2019 on a high note, beating top and Bottomline financial expectations for both the fourth quarter and full year strong performance was driven by the second second second consecutive quarter of record bookings from design home and covet fashion and the best fourth quarter and tap sports baseball history overall year over year bookings were up 10% for.
Both the fourth quarter and full year, reflecting the continued strengthen our three gross games and the addition of diner Dash Adventures.
We reached record adjusted EBITDA profitability for the full year and record GAAP profitability, a major milestone for the company. This financial outperformance combined with a significant progress in our pipeline supports our confidence in 2020 and beyond.
Into her life titles design home delivered another record quarter with 46.6 million in bookings a 6% year over year increase. This games continued strength was driven by a combination of event driven live ops and the addition of deeper Mehta features including the launch of the midcentury modern and mountain homes.
Covet fashion also delivered another record quarter was 17.7 million in bookings up 19% from last year's comparable quarter.
The strong growth was driven by our successful winter season launched improved Propshop monetization and the addition of new merchandising through Mega bundles coveted grew 24% for the full year demonstrating the team's ability to stack bookings of a title that has now finishing its seventh year.
Tap sports baseball recorded its best fourth quarter and the titles history with bookings of 19.4 million driven by its most robust live ops off season effort.
This performance capped off the franchise is highest bookings year, well timed the 21% growth over 2018.
Looking ahead, we are sets or at least TSB 20 on March 17, we're excited to announce global territory expansion to over 100 additional countries as well as Aaron Judge is a new cover athlete.
You features will include a new homerun Derby mode, and the addition of all 30 MLB stadiums.
Our most recent loss diner Dash adventures had bookings of 8.8 million in the fourth quarter, while still in an early stage the gameplay and original IP are resonating well with users and believe this title will be a meaningful contributor in 2020.
Moving to our pipeline and last year's third quarter, we made a strategic decision to move the worldwide launch of Disney Sorcerers Arena to the first quarter 2020 December 13th we released a major beta update to the Canadian market with a significant changes to turn based mechanic turned based core mechanic would expanded character roster.
As in an enhanced cinematic experience. We're pleased to report that the additional development time has yielded the intended results with notable improvements in both retention ad monetization.
Excited by the recent data progress and remain on track for a global launch in late March a.
Originals are interacting story platform entered beta in Canada, a January twentyth with encouraging early results, but rather studio continue to refine the speed and quality of content production, while directing creative efforts towards content that is resonating with our audience. We continue to plan on a mid 2020 global launch for originals.
Our new Dear our new Deer Hunter game entered beta in the Philippines on December 13th and our seven year history of owning this IP. This franchise has launched two successful titles, reflecting its engaging gameplay and large number of organic downloads.
Our Glu sports studio is building this title for the live ops, an elder game Euro by the initial beta period will focus on stability in retention, we will add social and deep Mehta to drive monetization in the coming months. We're excited about this titles potential and anticipate a global launch in the second half of the year.
Our social fishing game also entered bid in the Philippines in early January and we're pleased with its initial performance. The teams creative experienced an ability to quickly integrate with glues infrastructure I've been a driving forces behind the strong progress we've made in developing the style in a relatively short period of time.
Next I'd like to touch into growth opportunities for 2020.
First we will be increasing our focus on M&A to complement our existing portfolio in growth game strategy, who has a strong track record of not only finding talented teams and studios, but also nurturing new titles with the critical resources, an expert expertise necessary to achieve accelerated growth profitability.
Secondly, as the gaming landscape continues to involve we're focused on opportunities that will broaden their audience and deepen connections with our players through cross platform connected play to that end, we are exploring the extension of to keep blue franchises design on tap sports baseball to the browser, we see multiple potential benefits from expanding.
Our platform footprint and look forward to providing updates on this initiative in the coming quarters.
2019 has been a strong year for glu highlighted by record bookings in our three growth games, the highest adjusted EBITDA profitability in our history and record GAAP profitability.
This past year, Mark Blues third straight year of double digit year over year bookings growth proving that the company's foundation is strong and we believed that we.
Have a sustainable operating model for long term growth and profitability, we expect 2020 to be a transformational year for the company as we look to continue to grow our core business and stack additional bookings from our new title launches I'll now turn it over to Eric who will provide details on our financials and outlook.
Thanks, Nick and good afternoon, everyone in the call I will provide a closer look at our financial results for the fourth quarter and full year 2019.
I will walk through our guidance for the first quarter and full year 2020.
In Q4, we delivered strong top and bottom line results that beat our guidance as Nick noted. These results were led by record bookings from design home and covet fashion as well as the best fourth quarter results and tap sports baseball history going.
Going into the details of the quarter revenue was $112.9 million.
Bookings were 108.4 million up 10% over last year's fourth quarter.
Royalty free Glu IP titles generated 73% of bookings.
Add bookings were 12.4 million were 11% total bookings.
GAAP basis, we generated an all time record net income of $10.8 million or earnings of seven cents per diluted share.
Growth games grew 10% over last years comparable quarter contributed 77% to total bookings.
Design home grew 6% to $46.6 million, a tap sports baseball franchise grew 13% to 19.4 million and covet fashion was up 19% to $17.7 million.
Production adventure generated $8.8 million in bookings in the fourth quarter.
This was due to the planned reduction in you ate spend from Q3 to Q4 due to seasonally higher cpis and the holiday quarter that we had guided both back in August in November.
Diner Dash adventures transition from having a negative studio margin in the third quarter, two a slight profit in the fourth quarter.
As a new title launches, we generally expected profit lifecycle to go through four phases with the goal that ultimately becoming a scale profitable growth came within 12 to 24 months.
The first phase.
The first quarter two following global release, where we leaned heavily into spending on launch you way. Although you weigh spending is expected to be ROI positive over the life of the users. We acquired the bookings generated in this phase are not enough to offset oldest studio costs, including your way.
Thus in this first phase a title has a negative studio margin. This is what occurred with diner dash in the third quarter.
And the second phase, we're focused on new titles, becoming adjusted EBITDA breakeven, where bookings cover all studio costs, including your way.
This space, we can last one to three quarters and diner dash hit this milestone in the fourth quarter.
The third phase is where the title of scaling bookings and we are optimizing USA live ops and events a title in this third phase is expected to be halfway between adjusted EBITDA breakeven on all studio cost and the long term studio margin targets that we expect from our growth games.
Within 12 to 24 months from launch our goal is for our growth games to hit phase four where they are meeting our internal studio margin targets for the size of bookings they are generating.
In all four phases I just described when I refer to studio margin I'm talking about all bookings and costs associated with the game on the cost side. This includes Apple and Google fees royalties for licensed products hosting costs as well as our studio head count and accrued bonus cost plus allocated overhead and all product marketing and you.
Spend.
Larger titles, such as design home and tap sports baseball have hires higher studio margins in kind of fashion due to the booking scale and marginal flow through.
In comparing studio margins to Glu overall margins, the only items excluded our sales and marketing headcount costs allocated gionee and some central tech headcount costs.
Kim Kardashian has been solid bookings of $8.2 million in the fourth quarter. This was an 80% quarter over quarter increase we ramped you any this quarter due to the high ROI, yielding users we are able to acquire with the launch of the new seasonal keeping up with the kardashians on TV.
On the expense side adjusted planting conditions were $28.7 million adjusted royalties were 5.9 million and hosting cost for 1.9 million.
You weigh in marketing spend was 24.7 million or 22.8% of bookings. This compares to 23.4 million in last year's fourth quarter and $40.2 million for this years third quarter.
Operating expenses, excluding you weigh marketing were 33.4 million compared to 29.8 million last year's comparable quarter.
Turning to the full year 2019 revenue was a record $411.4 million.
Bookings reached an all time high of 423.3 million growing 10% over 2018.
Royalty free who IP titles generated 70% of bookings.
Bookings were $50.7 million or 12% of total bookings.
GAAP basis, we generated a net income of $8.9 billion, our largest GAAP profit ever on a GAAP basis net income for 2018 was six cents per diluted share for the full year 2019.
Gross bookings grew 16% on a year over year basis, and contributed 79% to total bookings year over year design home bookings grew 12% to 176.3 million a tap sports baseball franchise increased 21% to 90.9 million and covet fashion grew 24% to 66.
Point 1 million.
On the expense side adjusted plot from commissions were $111.5 million adjusted royalties were 26.4 million and hosting cost for 7.2 million.
You mean marketing spend was 118 million or 27.9% of bookings. This comparison 95.1 million last year.
Operating expenses, excluding you lay in marketing or 122.6 million compared with 117.3 million last year.
We ended the year with a cash balance of 127.1 million and generated $29.9 million to free cash flow for the year.
In the fourth quarter, we receive for monthly payments from Apple versus a typical quarter a three monthly payments. This happens every few years, where apple pay for 13 months in one year and 11 months in the following year.
The effective pulling into 2019, an extra $13 million an accounts receivable that typically would have been collected in January of 2020.
Free cash flow for the first quarter 2020 will be negative due to this timing of receiving only two monthly payments from Apple coupled with the payment of our annual bonuses in February.
As we discussed last quarter, our bookings guidance philosophy is to exclude any contribution from new title launches until the quarter after subtitles launched.
For the full year 2020 guidance.
We expect bookings from our core business in the range of 423 million to $433 million, representing a low single digit increase over 20 nineteens actual results of the midpoint.
To provide a bit more color on the bookings guidance. The key components comprising this core business bookings guidance are as follows our three growth games design at home the tap sports baseball franchise, and covet fashion are expected to grow high single digits on a percentage basis year over year.
Diner Dash adventures level full year of contribution in 2020.
And our catalog will decrease approximately $30 million on a year over year basis.
The combination of these will result in a bookings range of $423 million to $433 million.
Our 433 million dollar high end guidance excludes any contribution from new titles, including Disney originals and Deer Hunter next for the sake clarity. We will include bookings for Dizzy in our guidance for the first time on our May earnings call.
On the expense side at the midpoint of our bookings guidance, we expect adjusted plot from conditions of $112.6 million adjusted royalties of 25.7 million and hosting costs of 7.3 million.
You weigh costs will be approximately $109.6 million.
Lucky 25.6% of you weigh spend as a percentage of our core business bookings.
All other adjusted operating expenses are forecasted to be $136.2 million.
In terms of profitability for the full year 2020, I wanted to reiterate the guidance that we laid out last quarter, specifically, excluding bookings and variable costs from new titles, we expect adjusted EBITDA for 2020 to be flat at the high the guidance in absolute dollars with the full year 2019 actual results.
I would highlight that studio head count costs for new titles have already been included in our operating expenses in our adjusted EBITDA outlook at in 2020, this totals over $24 million of expense in our core business adjusted EBITDA 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 disease, Sourcers arena, and deer, Hunter next could overtime become scaled growth games, which contribute meaningfully to our long term margins.
When looking at the new titles in 2020, and excluding the headcount costs, which are already expense in the core business for adjusted EBITDA guidance for purposes. We expect the first half of 2020 for new titles will be adjusted EBITDA losses, while the second half of 2020 will be adjusted EBITDA profitable.
Thus, we expect that 2020, new titles as a standalone group and for variable costs will be approximately adjusted EBITDA breakeven for the year.
Given the expected timing and margin characteristics of our 2020 launches when combining the core business with new titles, we anticipate a low single digits adjusted EBITDA loss in absolute dollars in the first half in 2020, and we believe that adjusted EBITDA will grow significantly throughout the second half of the year as new title scale.
And we expect to exit 2020, with adjusted EBITDA margins of at least 15% in the fourth quarter inclusive of new titles.
For the first quarter of 2020, low expects its existing core business to generate bookings in the range of 93 million to 95 million, representing a 1.5% increase over last year's first quarter at the midpoint as a reminder, this excludes any bookings from Disney in the first quarter.
On the expense side at the midpoint of bookings guidance, we expect adjusted platform commissions at $25 million adjusted royalties of 5.1 million and hosting costs of 1.8 million.
You any cost will be approximately $30.9 million I would point out that this you weigh guidance for the first quarter includes our launch you weigh assumptions for disease sources arena for modeling purposes, but our guidance has no bookings contribution for disease.
All other adjusted operating expenses are forecasted to be $33.9 million.
In summary.
We ended 2019 with record revenue bookings net income and adjusted EBITDA. We are excited about the recent improvements on busy.
On retention and monetization and look forward to providing meaningful updates on the next earnings call regarding this title as well as a 2020 version of Task Force Baseball.
We'll now open the call for questions operator.
Thank you as a reminder to ask a question you will need to press star one on your touched on telephone to withdraw your question press the pound key.
Please standby will be compiled the Q and a roster.
Our first question comes from Mike Hickey with the Benchmark Company. Your line is how open.
No.
Congrats guys on quarter strong year.
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Curious on your M&A commentary, Nick I think that.
But you can say.
In recent history, and so curious sort of your your thoughts there and perhaps.
Being more aggressive M&A, what you're saying in the market what resources, you're putting departing deals.
And what sort of deals were looking for thank you.
Yes, Thanks, Mike.
So we've really been focusing the last couple of three years on building the internals studio infrastructure and making sure that we can get that up to speed and we've got the foundation under Neath that to be able to create growth games. We think we are in a good place now and obviously this year is a big test for our.
Creative and Executional abilities, but we really want to kick this year off also with spending more time and energy and bandwidth on the opportunity to find other studios via M&A and.
These would be anywhere from.
The act will hire is like we just did with our fishing team right up to larger ones that we've done in the past like crowds star is a good track record of integrating and leveraging the infrastructure, but on the creative side on the on the on the analytics the analytics as well as you weigh et cetera. So we just think we're well positioned for it now we could be.
Got the bandwidth to be able to.
Expand our focus across internal and acquisition opportunity and we just think this is a real great great growth proposition for us going forward. So we'll see how things play out we've got more focus from our head of corporate as who is going to be spending more time. In this then he was able to in the past and.
I think it is just a.
Great opportunity out there in the marketplace for off for buyers like us. So we'll go after certain and see how plays out.
Thanks, Mike last question for me.
Perhaps sports baseball seems like every quarter, you got an upside here.
I guess, you see more insight into where the strength is coming from I think about wanting and then you're going to leave the.
In Q1 that earlier than normal get a chance to compare it felt like maybe.
Normally.
Yes, maybe.
From two two and the ones.
Thank you.
Yes, we listen we're continually surprised.
Positively surprised at how well this franchise performs it's really a testament to the strength of that team and their capability on the live ops front. There also been adding more systems and features in the elder game, which which really drives monetization and engagement. We think the experience is far superior than what it was a couple of years.
Years ago, and what's really exciting is that there's a lot going into the game for 2020.
That I think is going to continue to drive to grow. So so we're definitely bullish on this game and then the second part of the questions about the launch say yeah, we're going to launch this in March 17th which is early the we normally do we've got to obviously another launch the Disney So we're trying to space them out a little bit, but they'll they'll both be in that latter part of March.
And we've obviously got a lot of execution to do here with two two big launches, but we think we're prepared for it and definitely looking forward to the 2020 versus a baseball.
Hi, Thanks best of luck.
Thanks, Mike.
Thank you. Our next question comes from Matthew cost with Morgan Stanley. Your line is now open.
Hi, guys congrats on the quarter.
If you could two from if you could if you could just go over your philosophy in terms of category mix, Obviously, you know, you're making a big push into RPG and strategy with with.
Disney Sourcers Arena coming later this quarter what are your thoughts in terms of Alliqua allocating resources to different teams or obviously your your expanded focused on M&A in terms of broadening away from lifestyle in sports and pushing into those other categories and then if you could just a quick update on on the Crowdstar title and sort of how you see it layering in.
Design home and then covet fashion. Thank you.
Sure I'll take both of those and air can jump in if he's got done any comments. So yes from a category perspective, we're not purposely setting out to integrate or go after sectors or categories. In particular, I think were more driven by the intent and the kind of the creative interest at the teams have.
And the team that's on the RPG game on Disney that this is really there are we in their wheelhouse and somebody they are very interested in and when they came on board, we gave them pretty much a blank canvas on which to figure out what they wanted to do and they really wanted to go after this space. So it's a little less purposeful then.
What it may seem I think we're looking at the opportunity to go after both fee on the two on what we call umbrella brands and that really is the female lifestyle side and that's that's really the crowdstar games.
And then on the other pretty much the other side of the coin the more mail sports now doors games, and that's obviously baseball, but also dear deer Hunter and fishing. So I look at it from those as being the kind of the big opportunities for us than I think we'll go definitely continue to go deep on and then we'll add this RPG and see how this does for us.
Yes.
And figure out where that takes is going forward and then the second question was I think on Pete on what we call pay three which is the third game from from Crowdstar, We're not talking a lot about it just yet we just wanted to make sure that our investors view. It was in motion, we will be getting that into a debate at sometime soon but we were going to definitely take our time and get.
This one right, there's just a massive opportunity with with a third we believe with this third crowdstar game it'll feel like the other the other two but it is in a different vertical and that's what will that we'll leave it at that for now and have lot more to say for that over the course of about 2020.
Great. Thank you.
Thanks Matthew.
Thank you very much or next question comes from Darren Aftahi with Roth Capital Partners. Your line is now open.
Hey, guys afternoon. Thanks, taking my questions three if I may so on your 2020 growth drivers.
I think Eric you had said the growth gains high single digits I'm, just kind of curious.
One with design.
To pop Sports Baseball I think thinking said 100, new.
Countries can you kind of give us a sense can look like design home only grew I want to say, 6% fourth quarter remember sort of correct, what's kind of a cadence between those three games.
Question to others were era.
I think Q1, the implied EBITDA it looks like a little bit of a loss is that driven mostly by.
Slide Disney you lay spend and then three maybe for Nick.
Now with Disney and data for a while Canada, maybe a 45 days or less from from formal launch like what are you kind of thoughts going about thank you.
Yes, what lots on pachter Guaran, some let me first off and on the three growth games. So as we said in the past that our games have sometimes the seasonality. So baseball as always we talked about how seasonality. So in the first quarter, we always see degradation from the third to fourth to first quarter for baseball and then it comes Roaring back.
With growth in the second quarter, and then we typically plateaus in the third quarter.
As Nick talked about in his prepared remarks, there is a ton going into this new baseball version everything from us doing a better job, bringing over the 2019 users into the 2020 version. We're also unlocking more user acquisition dollars by looking at to kind of a cross year multiplier in terms of ROI that we've done some analysis.
We've done coupled with unlocking a lot more countries, which we never had access to as well as having having a new stadiums in the home under be some I think baseball. We think those are the opportunity for growth drivers I think the year over year and the quarter over quarter growth will look the same as it has in the past years as you see in the IR deck, we've had a great seven.
You are running growth that this title and this is the academy of what we call on growth game on talking about design home, Yes, we had kind of a year over year, 6% growth.
These titles gets a plateau and then grow again in platinum and grow again, we've talked about that base camp philosophy before I.
I think we we had kind of that base camp in the first half of this year around some new ways pressure. So that was more externally generated plateauing and then we had growth in the back half to be very clear record growth. Both in the third quarter and then again record growth in the fourth quarter.
So I think we're looking at deepening more met at Mehta, I'm as well as other monetization targets for design home Covet fashion has has a just a phenomenal year growing 20% plus on a year over year basis on the back of Propshop and a lot of monetization techniques. So I think you know, we then hopefully conservative in our guidance that the three growth teams.
Collectively will grow high single digits that was one of our guidance was last November about 2020, and we've only been largely unchanged from what we said there to now and hopefully hopefully that prove conservative then going into Q1 on the EBITDA loss.
It's a small guidance for adjusted EBITDA loss about about a million to have dollar EBITDA loss really largely from a couple of reasons. One we have that seasonal downtrend in terms of bookings from Q4 to Q1 on baseball and that takes it is an overall reduction on the quarter to quarter bookings.
Secondly, we also do see a pretty golden buying window opportunity. We've talked about this term before typically in January early February.
With the hangover that retailers will have in spending in the holiday seasons, we see cpis come down from that November December levels into January so we lean heavy into that and then thirdly, yes definitely saw that so in my guidance talked about.
I am including in that guidance zero revenue or bookings from Disney, but I do at my launch marketing, both my product marketing spend as I've I've used the term escape velocity spend as well as the the week plus of you weigh spend that we have for the quarter as well so that's what's driving that guidance.
On a on a quarter to quarter down based on EBITDA and then the other notable as DLC over to Nick you actually I'll, just one comment before it gets a Disney as we go through the year and start to stack bookings, we do expect an acceleration both on top and bottom line and the expectations that we will exit 2020 with about 50% margins may.
Maybe a bit higher so it does pick up as we go through the year. So Disney you asked about yes. This was really interesting for US is we made that decision last year to move it out and the intent was to do a reboot of the core fighting mechanic, which we've done the very good news at least as well at least what we're seeing in the K.
Hi, guys Encana is that it is improved dramatically and retention engagement monetization, which is really nice to see so that is really coming together, we feel like did the.
The time that we took will be well worth it by the Tommy launch it but I.
Yes, new fighting mechanic.
So really a new core loop and core mechanics.
Expanded characterized stir it which is much more systematic in nature. So you really show off to heroic nature of the characters and really building out the social and live operations continue to tune the economy and get this game haulers for release at the at the end of the quarter. So so far so good we're not talking about.
KBR is just yet.
Talk more detail once once we get through the launch, but we're very happy with the way things are going we definitely have a challenge on installs that is not unique to blue of course as industry wide. We think we've got good execution plan, there, but I feel like the game unit.
Nomics are solid.
And and trending in the right direction.
We're just going to have to make sure we figure out how to get installs and a lot of that is going to be in.
Employing our strong you eight capabilities going after kind of the marketing side on the brand side and then of course.
Leaning into the strength of the the Disney brands.
Great. Thanks, guys.
Thanks Aaron.
Thank you. Our next question comes from mass Jordan with Suntrust. Your line is now open.
Hey, good afternoon, guys I joined a little bit late so I apologize if any of these have been been asked.
Maybe for starters you taught you talk a little bit about the EBITDA linearly throughout the year, starting obviously the small loss in one couponing. My question is how do we think about Twoq should once you got to be peak loss should we think about twoq you as similar to to one Q and then ramping into the back half of your any any color there would be.
Would be would be helpful. And then just secondly on the on the fishing game. It would seem to me that the endgame economy is is an opportunity there is probably very similar to.
The deer Hunter and my question is the game mechanic.
That dramatically different any any color there and could this game conceivably kind of pulled into into 2020, given kind of familiarity and the fact that it's already kind of.
Entering beta any color there thanks guys.
I'll take the first one Madden and turn over the next on the fishing topic. So in terms of EBITDA.
The what we talked about was the first half.
Collusive of new titles will be a slight.
Single digit loss after the two quarters combined so I think the midpoint guidance for Q ones about 1.5, so it's going to be something a little bit bigger than that but not massively begin that in the second quarter and that will really because we'll have a full quarter of call. It phase one spending on Dizzy I'm talking about these stages so Matt.
You may have missed it my in my script I talked about four phases above a launch from new title Phase one is where we're spending a lot even though its arlon positive Miller for spending with Cpis being low. So Q Q2 will be a full quarter a phase one spending on Disney and that will drive.
More and more EBITDA in the first quarter. We will also have died tap sports baseball, which comes out of the gate Rip Roaring typically on by April 1st Amin, just trying to think that title will be kind of offsetting probably properly Halfords baseball is profitable out of the gate literally on the first day, even though we are spending so it's a little bit different baseball call isn't it.
Seventh year, it's already very mature at phase four but does those two things are going on in the second quarter.
But then our Q3 in Q4 is where basically all the EBITDA on comes in and it's kind of out of the gate pretty big in Q3 and saw a bigger in Q4, but the combination of the small loss in the first half and the profit in the back half equals at the high into guidance the full year 2019 adjusted EBITDA.
Let me just put up on the on the Tucker.
Yes, so fishing, it's I think it's little too early to comment on launch timing, it's possible that it can make 20, but we want to give it it's due course and make sure that we really create something thats an during a long term.
In terms of the structure of design and game play it has elements of both deer, Hunter and tap sports baseball and as part of that studio growth. So that that's kind of makes sense that it would be that way the little more like deer Hunter is you've got a very compelling core mechanic that.
Is both enjoyable, but simple and then a very deep elder game that is built around social and upgrading and really in RPG style.
Elder game so.
I'll leave it at that for now we'll be talking about this more over the course of the year and.
We should be sharing updates as we go ahead, but we really like the way the studio operates they're incredibly agile Dave appeared very well with our creative infrastructure as well as the analytics and and the other other offerings that we've got as a as a as a scaled company and.
They are great cultural fit so so far so good with this group and very excited about the title and like I said will be talk a lot more about it as as we get through the year.
Great. Thanks, guys.
Thanks, Matt and thanks, Matt.
Thank you. Our next question comes from Franco Grenda with D.A. Davidson. Your line is now open.
Hi, guys get up and congrats on the results and thank you for letting me ask a couple of question.
So the first relies on the sports side of things I know you kind of talked about at the first question.
But right now you have MLB, leading the charge and you're adding 300 untapped fishing, you think that the sports category will.
Eventually get to the point, where it could rival and lifestyle again.
Yes, I do I think it certainly has the potential the lifestyle business for us is definitely bigger now, but we've got potentially two games.
That are coming in this year and next year that really can move the needle on sports I really love. The fact that we've got the balance of the females female.
Side of the business into more of the mail side of the business and it gives us tremendous diversity as we think about how we market our games.
In terms of spending or you weigh dollars, but I also love. The fact that we're driving these two umbrella brands that really could be bigger over the coming years and very meaningful for the company. So hard to know exactly what the absolute numbers are going to be relative to lifestyle, we take them both.
Equally important and we view them that way and feel like there is tremendous opportunity to build these umbrella brands. So we'll see how the games goes we add more and we will be talking more about the more the high level brands as well as the individual games as we go forward and frankly, if I can add there and how.
He is a little bit of sports analogy here, we've been talking over the last six months is a couple other settings to pull the webcasts and events.
Using baseball parlance in terms of where our game said singles doubles, all the way to Grand slams.
And the industry has grand slams on called Grand Slam, but three quarter billion dollars a year or more of revenue. There's about five to 10 of these titles. We don't have any of those the margins are incredible on they persistent pertains on sustain for long time home runs on color a quarter billion a year to three quarters of linear there's there's multi handfuls of these titles multi doesn't handfuls.
These titles.
That are out there and we don't have any of those and the margins. Those titles are also phenomenal then I would call a triple being what design home is try to triple being 150 million to a quarter billion dollars a year and growing.
And design home has very very good studio margins I've talked a lot about studio margins.
In the mid Thirtys without allocations of SDMA costs.
And in baseball.
The double call a double a 75 million $250 million Interestingly. Our baseball title has has margins of a triple even with the license fees. The MLB because it seems small and we've been able to reacquire users year over year over year. So it's in that mid Thirtys studio margins as well.
And then a single color. Thank you again, that's $25 billion to $75 billion a year on that we've got covet fashion. This at the height of that range diner dash is at the lower into that range and so as I think about the sports category that were in Nick has said in the past he feels that deer hunter as a category and game odd could.
I would be as big if not bigger than baseball.
Fishing is also a title that looks like other games out there that are in the sports category. So kind of answer to answering that question, what one I want to make sure I addressed the singles doubles triples analogy because we've never done this on a call and it's going to be something we'll talk about in the future I think it really also ties back to the four phases of profitability, we get too, but yes, we're very excited about the sports.
Category and think it can be what will be one that's growing for us in the years to come.
Yes. Thank you for the color Thats really helpful. And then one more if I may.
It's exciting to see that you're sort of maximizing the growth from the from the growth games by bringing them to PC.
You are a wide. These it's true that define how I'm in MLB game.
And then as a potential for more to join later on.
Yes.
We are those are two is our biggest games actually our two biggest game. So just kind of makes sense to to look at extending those they've got big audiences, they've got really engaged audiences and they both will benefit tremendously for being on the the Pete the PC lay out if you think about a PC screen versus a mobile screen, there's a lot of information.
And that needs to be delivered over mobile screen that can be better delivered on PC. So we just think they're just perfect fits the teams have the.
The capability in the bandwidth to explore these platforms. So really those are kind of the two key reasons and and if this works that we start to get some early signals from this being a positive move we'll certainly look at other other options inside the portfolio as well as the new games that we're bringing out but right. Now we think these are that the best.
Candidates and we'll we'll have to see how this all plays out. This is this is a new business for us.
So it's what will be treading carefully as we get into it.
Great. Thank you.
Alright, Thanks, Greg.
Thank you and our next question comes from Jeff Cohen with Stephens. Your line is now open.
Hey, guys. Thanks for taking the question.
I'm not mistaken I think the Kim Kardashian license agreement.
Fairly soon given that game is still producing pretty significant revenue.
I can you talk maybe about whether it is a plan to renew the contract or how you think about sunsetting again.
Yes ill start in there to jump in so we have 18 months lesson that contract and and we are incredibly happy with the way, it's going no comments, yet on what snacks or what happens after 18 months, we absolutely will update.
All investors and the street when that when the time is right, but we love working with her and her team. We respect respect the way they go about their business and this audiences and highly engaged one you saw by their results in Q4, just how much they actually love this experience so.
It is going well it continues to go well, what we will update as we as we get towards any changes with regards to the contract great. Thanks Nick.
Thanks, Jeff.
Thank you and I'm showing no further questions in the queue at this time, ladies and gentlemen, Thank you for your participation on today's conference. This does conclude your program you may now disconnect.
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