Glu Mobile (GLUU) Q2 2020 Earnings Call Transcript

Glu Mobile (GLUU)
Q2 2020 Earnings Call
Aug 04, 2020, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the second-quarter 2020 Glu Mobile earnings call. [Operator instructions] Please be advised today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker, Harman Singh. Please go ahead.

Harman Singh -- Vice President, Finance and Investor Relations

Thank you, operator. Good afternoon, everyone, and thank you for joining us on Glu Mobile's second-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 factors are described more fully in our documents filed with the SEC, specifically the most recent reports on Form 10-K and 10-Q.

During this call, we will present both GAAP and non-GAAP financial measures. The non-GAAP financial measures are not intended to be considered in isolation from, a substitute for or superior to our GAAP results; and we encourage investors to consider all measures before making an investment decision. For complete information regarding our non-GAAP financial information, the most directly comparable GAAP measures and a quantitative reconciliation of those figures, please refer to the supplemental presentation accompanying today's earnings call that can be accessed via our investor website, www.glu.com/investors. As a reminder, consistent with our financial presentation and for all of 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 the 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'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 files are now accessible on the website. We encourage you to follow along with the slides during this conference call.

And with that, I would like to turn the call over to Nick.

Nick Earl -- President and Chief Executive Officer

Thanks, Harman. Good afternoon, everyone, and thanks for joining. On today's call, I will provide highlights of our strong second-quarter results and an update on our game development progress and growth strategy. Eric will then go into more detail on our financial results and outlook for 2020.

The second-quarter financial results were the best in Glu's history. Bookings grew nearly 80% year over year to $182 million, easily beating our upwardly revised guidance. This exceptional growth was driven by great execution of live ops and continued shelter-in-place mandates, leading to record quarterly bookings in all 3 of our growth games. We also benefited from the continued resurgence of Kim Kardashian: Hollywood and the first full quarter of Disney Sorcerer's Arena.

Our bottom line flow-through was much better than expected even while making significant investments in user acquisition for future growth. Our strategy is clear. We are focused on creating nurturing and acquiring potential growth games that can stack bookings, scale and increase margin over time. Our objective is to continue driving strong growth game performance, developing a robust pipeline of new titles and strategically layering on accretive acquisitions.

Our successful capital raise in June significantly expands the universe of potential acquisition opportunities and puts us in a great position to add to our organic growth this year and into the future. Looking at our live title performance for the second quarter. Design Home grew 47% year over year and crossed a milestone with over $0.5 billion in lifetime bookings. The quarter's outperformance was driven by the team's phenomenal live ops execution, particularly of record-performing series in each month of the quarter.

Covet Fashion increased bookings by 67% year over year and launched the summer season along with several other successful live ops events. Despite the delay in the MLB season, Tap Sports Baseball grew 20% over last year, continuing to show an amazing ability to stack bookings year after year. The strong performance was driven by robust event scheduling, daily MVP leaderboards and the addition of world rankings. We also continued to develop opportunities with cross-platform play -- connected play by extending Tap Sports Baseball and Design Home to the PC web browser.

This initiative is consistent with our strategy to expand our audience, increase accessibility and deepen connections with our players. Our latest launch, Disney Sorcerer's Arena, generated over $22 million in bookings and, while still early, is showing signs of growth game potential. In the quarter, we saw success from our live ops built around Disney/Pixar IP, which helped to drive engagement and monetization. Last quarter, we discussed two titles, Kim Kardashian: Hollywood and Diner DASH Adventures, that have the potential to transition to growth game status.

In the second quarter, Kim grew 300% year over year grew over 300% year over year and reported its highest-bookings quarter since the first quarter of 2015, showing the payoff in investing in live ops and the incredible resiliency of this title. Given the softness in elder retention we have seen to date in beta with Originals, we've decided to reallocate resources to Kim Kardashian: Hollywood, which offers a more compelling growth opportunity. Diner DASH Adventures also had a strong quarter, growing bookings 55% from the first quarter based on an updated core loop and an enhanced programmable monthly event calendar. As we have discussed on previous calls, our intention is to build umbrella brands that maintain and expand our leadership position in lifestyle and sports.

In the lifestyle category, Design Home and Covet Fashion are proven leaders; and we believe we can leverage our expertise and add to this lead with Crowdstar's P3, which continues to show promise in close beta. Over the last two years, we have globally launched 3 Glu-developed games, two of which have the potential to drive long-term growth and profitability. We also recognize that the bar is much higher in today's competitive mobile market, where success is defined by differentiation and very deep feature sets to keep players entertained and engaged for years. As work continues on Deer Hunter World, we have decided to extend development into 2021 to allow the team to add a much more robust player-versus-player experience that is fully connected to the core loop for the first time in the franchise history.

We continue to see immense potential with this IP and want to ensure this game has the best chance to lead in its category for many years as we have experienced with Design Home and Tap Sports Baseball. We believe that adding depth like social, competitive game play will allow for this. As a reminder: Our guidance philosophy is to exclude any contribution from new titles until the quarter after they are launched. Given the record performance so far in 2020, we expect to show strong year-over-year growth without the benefit of any new launches in the balance of the year.

We are accelerating our investment into our Crowdstar lifestyle gaming brand by focusing on three key areas: product, services and network. On product, we tested a P3 prototype in market, seeing encouraging early retention. The team is now working toward a beta launch targeting the end of this fiscal year. On services, we relaunched our e-commerce initiative into a 20,000-person beta and are seeing compelling metrics.

If these positive indicators continue to hold, we will launch a U.S. e-commerce store in the fourth quarter. On network, we have been actively investing in additional drivers for installs, including WebGL and a hyper-casual games initiative that have the potential to become a user acquisition network to drive users into our lifestyle suite of Design Home, Covet Fashion and the forthcoming P3. Given the evolution of potential changes to the UA ecosystem across the industry, we believe it is critical for us to invest in expanding our user base.

We have very strong momentum with the Crowdstar studio and are excited to drive more depth and extensions with this brand. Lastly, I want to touch on our M&A focus and strategy. The Glu team has a proven track record of identifying exceptional studios and games. Our three growth games, along with Diner DASH and Kim, were all developed out of our acquisitions.

We have successfully scaled each of those titles due to our live ops expertise and robust central infrastructure. We are looking across the mobile spectrum of early stage to established studios that would be the right fit from a cultural and financial perspective. The recent capital raise allows us to expand the size and range of potential opportunities we can now pursue and puts us in a position to acquire a transformative asset. In summary, we reported the best quarter in Glu's history while investing in the business to support long-term growth.

We saw continued opportunity from shelter-in-place mandates, which we believe has created a long-term lift in the business. In the first half of the year, we're able to build a larger user base with higher engagement across the portfolio. Looking ahead, we think the pieces are in place to continue to show strong year-over-year growth in our core business while developing new titles that will meaningfully contribute to strong performance next year and beyond. We have also added firepower to pursue growth opportunities through M&A, which is an important part of our overall long-term growth strategy.

We believe we are in excellent position to scale our business by stacking bookings, driving margin expansion and increasing shareholder value. I will now turn it over to Eric, who will go into more details on our financial results and our outlook. Eric?

Eric Ludwig -- Chief Operating Officer and Chief Financial Officer

Thanks, Nick. And good afternoon to everyone on the call. I will provide an update on how we are managing our business during the COVID-19 pandemic, review our phenomenal second quarter financial results and then walk through our plans and guidance for the second half and full year 2020. Regarding the COVID-19 pandemic.

These continue to be unprecedented times. And thus far, we have been effectively managing in a work-from-home environment, as evidenced by our strong first half results and the successful launches of Tap Sports Baseball 2020 and Disney Sorcerer's Arena. Over the last 4.5 months, we have recruited, hired and effectively onboarded dozens of new hires all remotely and without any in-person interactions. I am very proud of our Glu employee base for having navigated us through a great quarter in a challenging environment.

In the second quarter, we significantly exceeded our bookings and bottom line compared to the increased guidance we provided on May 28. Revenue was $133.3 million. Bookings reached an all-time quarterly record of $182 million, a 79% increase over last year's second quarter. The stronger-than-expected performance was driven by a continuation of strong player engagement, increased organic installs and our significant investment in user acquisition in light of the favorable CPI environment.

Royalty-free Glu IP titles generated 57% of bookings. This is a quarter-over-quarter reduction due to the launches of Disney Sorcerer's Arena, Tap Sports Baseball 2020 as well as the resurgence of Kim Kardashian: Hollywood. Ad bookings were $16.4 million or 9% of total bookings, representing a 27% year-over-year increase. Our three growth games grew 41.5% year over year and contributed 66% of total bookings.

And looking at our growth games on a year-over-year basis: Design Home hit a new quarterly record of $62.3 million, representing 47.4% growth. Covet Fashion reported its biggest quarter ever, growing 66.8% to $24.1 million. The Tap Sports Baseball franchise increased 19.8% to $33.6 million, an all-time quarterly record despite the delay to the start of the MLB season. In regards to our three potential growth games, Disney Sorcerer's Arena, which launched in late Q1, had bookings of $22.1 million.

Kim Kardashian: Hollywood continued its strong momentum and recorded bookings of $20.1 million, representing its highest bookings quarter in five years and 320% growth year over year. And Diner DASH Adventures was up 54.7% from the first quarter with $11.6 million in bookings. Underpinning these great results was a significant increase in our daily active user base and an increase in our monetization. On a year-over-year basis, our daily active user base grew 17% from 3.2 million to 3.8 million.

This reflects the addition of Disney Sorcerer's Arena coupled with an overall increase in users from our ramped UA campaigns and organic discovery from shelter in place. In tandem with the increase in users in the second quarter, we also saw our monetization improve dramatically, as evidenced by our average bookings per daily active user increasing 51% year-over-year to $0.53. Breaking this monetization growth into two subcomponents: Our three growth games, plus Disney and Diner DASH, as a group grew monetization 33% year over year to $0.61 per daily active user. Our catalog titles as a whole saw tremendous growth in monetization in the second quarter, increasing 107% year-over-year to $0.29 per daily active user due to Kim Kardashian: Hollywood which leveraged the game merchandising and live ops.

On the expense side, adjusted platform commissions were $49.6 million. Adjusted royalties were $14 million, and hosting costs were $2.1 million. UA and marketing spend was $57 million or 31.3% of bookings compared to the $30.1 million in last year's second quarter. Operating expenses excluding UA and marketing were $35.9 million compared with $28 million last year.

On a GAAP basis, the net loss was $8.6 million due mainly to the fact that the increased bookings will be recognized over six months on average, while the significant ramp in UA costs were expensed as incurred during the second quarter. We had a cash balance of $283.1 million at the end of the quarter, which includes the $151.8 million of net proceeds from our capital raise in June.And looking at the third quarter, we expect bookings in the range of $130 million to $135 million, representing a 10% increase at the midpoint over last year's third quarter. Our bookings guidance for the third and fourth quarters remains significantly higher than the implied guidance for second half of 2020 that we provided in February pre shelter in place. Additionally, on a year-over-year basis, our bookings guidance is higher than our prior quarterly record from the third quarter of 2019.

Now on a quarter-over-quarter basis, we are expecting a reduction in bookings across most of our titles due to the record results we saw in the second quarter. Specifically, we expect Design Home and Covet Fashion Q3 and Q4 bookings to be down, as compared to the second quarter numbers, but at record levels when excluding the all-time-high second-quarter results. Tap Sports Baseball 2020 bookings will be flat to slightly down, as compared to the second quarter. Kim Kardashian: Hollywood and Diner DASH Adventures bookings should be comfortably above their first quarter numbers and down from the second quarter.

And Disney Sorcerer's Arena's bookings will be down from Q2 as we transition this title from Phase 1 to Phase 2 on its expected pathway to profitability, as we are dialing back UA spend to focus on break-even margins as a stand-alone title. But overall, our DAU and our MAU in the third quarter should be higher than the first quarter of 2020 pre shelter-in-place mandates as well as higher than Q3 of 2019. This reflects the long-term benefits of growing our user base in the record second quarter. As it relates to investments and profitability, I want to provide some context on how we are modeling the third and fourth quarters.

In late March and April, we leaned heavily into the substantial decrease in CPIs and ramped UA spend. We also saw a significant number of organic downloads and increased user engagement and monetization during the second quarter. We substantially outperformed on the bottom line in the second quarter from our May earnings call guidance and the updated mid-quarter guidance due to the high marginal flow-through on that top line beat. The second quarter top line outperformance has a flow-through effect to the second half of 2020, as the increased DAU base continued to play in May.

We are increasing our bookings guidance for the second half of 2020 by $21 million or almost 9% from $238.5 million to $259.5 million for the second half of the year. I would point out that our second half of 2020 UA guidance was originally given back in February before shelter in place started. With the lower CPIs in July that we are seeing, as compared to January and February, we are maintaining our implied EBITDA guidance for the full year and flowing through the Q2 beat to fund additional UA in Q3 and Q4. We expect that the incremental UA will be ROI positive over a 12- to 24-month time horizon, as we have leaned into the start of the MLB season in July, coupled with what we believe to be favorable ROI opportunities we are seeing in our growth games and our potential growth games.

We still expect to achieve adjusted EBITDA margins in the fourth quarter that are within our target range of at least 15%. On the expense side and at the midpoint of our bookings guidance, we expect adjusted platform commissions of $36.3 million, adjusted royalties of $9.2 million and hosting costs of $2.2 million. UA costs will be approximately $37.4 million, up approximately $10 million from our prior implied guidance, as I just discussed, reflecting our investment in TSB 2020 as well as our other growth games and potential growth games. And all other adjusted operating expenses are expected to be $39 million.

This results in an expected quarter-over-quarter reduction on the bottom line due to the lower bookings and increased UA spend.For the full year of 2020, we expect bookings in the range of $538 million to $548 million. At the midpoint, this would represent a 28.3% increase over last year's bookings. We have added the second quarter beat of $14.5 million at the high end of the guidance and raised the full year by $21 million, reflecting our increased confidence in the back half of 2020. On the expense side for the full year of 2020, at the midpoint of our bookings guidance, we expect adjusted platform commissions of $147.7 million, adjusted royalties of $36.4 million and hosting costs of $7.9 million.

UA costs will be approximately $151 million, reflecting 27.8% of bookings. All other adjusted operating expenses are forecasted to be $151.8 million. Our UA guidance has increased in both the third and fourth quarters but with spending in the third quarter expected to be greater than the fourth quarter. This will result in profitability decreasing from the second to third quarter but then increasing from the third to the fourth quarter.

I want to now discuss our free cash flow. Generally, last quarter's EBITDA is converted 90% into free cash flow in the following quarter, as we are a capex-light business with $2 million to $4 million of annual capex. For 2020, we expect to generate approximately $40 million in free cash flow and end the year with approximately $325 million in cash and no debt. I am extremely pleased with our outstanding performance in the second quarter as well as the increased outlook for the third and fourth quarters.

The strategic investments we made in the first half of 2020 with increased UA to acquire a larger user base will benefit us in the second half of 2020 and beyond. Additionally, the increased average bookings per daily active user is reflective of an environment where consumers have more time for gaming and, we believe, will provide for higher lifetime values and more predictable profitability. As I look to the second half of 2020 and beyond, I am very excited on our progress toward stacking bookings and profits from our three growth games via our continued investment in live operations and competitive social game play. We continue to believe that Disney Sorcerer's Arena, Diner DASH Adventures and Kim Kardashian: Hollywood are potential growth games.

In 2021, we also have a robust new title road map to add on top of this growing core business. With our recent fund raise, we are focusing on acquiring games, teams and studios that can fold into our Glu studio footprint as we provide capital, infrastructure and know-how to nurture and grow their top and bottom lines. We believe the 15%-plus adjusted EBITDA margins we expect to realize in the fourth quarter is a good baseline in quarters where we are not in Phase 1 of the new titles being launched and reflects our scaled core business. It's too early to provide a specific 2021 bookings growth figure, but we believe that we will be set up to grow at or higher than the Western mobile market.

I look forward to making strong progress on our long-term targets as we seek to scale the business this year and into 2021. I will now turn the call over to the operator for questions. Operator?

Questions & Answers:

Operator

Thank you. [Operator instructions] And our first question comes from Eric Sheridan of UBS. Your line is open.

Eric Sheridan -- UBS -- Analyst

Thanks so much. Two, if I can. Just one, on the game pushing out to '21, I just want to understand what you saw there that you wanted some time on the development side to sort of take your time, get the game right; and how you think that positions the game into '21. Just wanted a little bit more clarity there.

And second, on the user acquisition front, just want to make sure we're clear on the messaging. Do you expect the same ROIs you were seeing this year, or still very constructive ROIs but obviously not as low as CPI environment that you found earlier in the year? And how do some of the changes Apple are making in the back part of the year with iOS 14 maybe factor in to the user acquisition?

Nick Earl -- President and Chief Executive Officer

Eric, good to have you onboard. Yes, I'll take the first one, and then Eric can do the second. I'll probably add some thoughts. So yes.

So Deer Hunter World, we've been developing that game for a little over a year, almost two years now; and have been making strong success. We've also been really investing into the PvP, which has really not been a part of the experience over its many-year history. The more we spent on that, the more time we spent on that, the more we saw it, the more we realized that we really want to build it out and really flesh it out. And given that we just exist and live and, I guess, play in such a competitive market, we really want to come out with the game at launch with full features, tremendous depth and really a very played-out or mature social or social competitive part of the elder game, which is the PVP.

So on balance, we just felt that while we could get it out this year, it was just better to take a few more months; really invest in that side of the game; and with those extra few months, potentially allow us to have this game be a serious contributor for many years. So that was the thinking there.

Eric Ludwig -- Chief Operating Officer and Chief Financial Officer

Yes. And Eric, on the UA front. So we saw fantastic CPIs in late March, April; and they started to go up from those bottoms in May and June and in July. However, in July, we're still seeing CPIs that are below the January and February time horizons.

And the only time we gave guidance for the back half of the year was back in February. We increased guidance in the month of May. And then our mid-quarter guidance on May 28, we really touched the second quarter. And so we really had not touched UA in a post shelter-in-place environment, and so really this updated guidance really reflects the lower CPIs we're seeing.

And yes, the ROIs were fantastic in April, slightly less fantastic in May and was fantastic in June, but they are still at elevated levels from January, February and prior to last year. So we just believe that this is the right thing to be doing, to be building that user base. We effectively were able to beat EBITDA in the second quarter and have funded that EBITDA by maintaining the overall guidance for the year by funding that into the third and fourth quarters with increasing our UA.

Nick Earl -- President and Chief Executive Officer

Yes. I'll just add one thought on the upcoming imminent changes with iOS 14. So we view that as pretty serious. However, we do think it's a potential opportunity.

We have our entire UA and marketing team looking at this very, very closely; working on technology process, our org structure, anything that will give us an opportunity to take this change and come out stronger on the other side. We do feel that it is probably something that will benefit more scaled publishers and developers in the marketplace given that we have the opportunity to kind of really throw some technology at it, but it's still very early in terms of exactly what it means. We're just taking it seriously. And we believe we'll be ready on the other side to be as effective, if not more, on the UA.

Eric Sheridan -- UBS -- Analyst

Great. Thanks so much for the color and the whole as well and safe with the team.

Nick Earl -- President and Chief Executive Officer

Thanks Eric.

Eric Sheridan -- UBS -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Doug Creutz with Cowen. Your line is open.

Doug Creutz -- Cowen and Company -- Analyst

Yes. Just to get a clarification. You talked about 15% EBITDA margins being the baseline as your business matures. Just to be clear: We should think of that as a floor and not necessarily the EBITDA margin you expect, correct?

Eric Ludwig -- Chief Operating Officer and Chief Financial Officer

That is correct, yes, a floor. And what I said was it's a floor kind of in quarters when we are not launching a title; or are kind of in that Phase 1, where I talked about kind of the first three to five or six months of launch when we kind of forward spend, kind of getting escape velocity. Once we get into the break-even Phase 2, then if we have titles in that stage, I would expect us to be at that 15% floor. But yes, that's a floor number, for sure.

Doug Creutz -- Cowen and Company -- Analyst

Yes. OK. And then if I can ask one more. You mentioned you're moving resources from Originals to Kim.

Should I take that to mean that Originals is now out of the pipeline? Or are you just moving part of the team over?

Nick Earl -- President and Chief Executive Officer

Yes. It's we haven't made a final decision on that. We will make that shortly. We just looked at how Originals is doing.

It does very well with the early part of the game, but the elder KPIs are just still not there. We've got such an extraordinary opportunity with Kim. And as you know, they're both developed in the same studio in Toronto, so we just felt the right thing to do was to move resources from Originals to Kim, where we've had significant growth over the last few quarters, especially in Q2, just given that there's just such a stronger return there. We'll make a final decision on Originals shortly and we'll be certain to update, but as you know, it's not in our numbers for the year.

Doug Creutz -- Cowen and Company -- Analyst

OK. Thank you.

Nick Earl -- President and Chief Executive Officer

All right. Thanks Doug.

Operator

Thank you. Our next question comes from Tyler Parker with KeyBanc Capital Market. Your line is open.

Ashley Owens -- KeyBanc Capital Markets -- Analyst

Hi guys. This is Ashley on for Tyler. Just a couple questions. So first, given the MLB season started just a few weeks ago, is there any update you can give us as to what you're seeing with engagement in Tap Sports Baseball since it started? Or how is it tracking compared to the same time last year? And then also, are there any learnings from the cohorts of new and relapsed users that you guys have gained since March? Are they acting similarly to old cohorts? Or is there anything to note there?

Eric Ludwig -- Chief Operating Officer and Chief Financial Officer

Yes, great. Ashley, thanks for those questions. So yes, on MLB, we have seen an uptick in organic downloads since the season launched back kind of July 25-ish time frame, as well as engagement and monetization. So it's been a good outcome.

It's probably a little too early to see, given some of the COVID-19 that's kind of ravaging some of the teams, as to whether the season will be a full season, a full partial season. Or it'll be a partial-partial season. So I would be a little cautious on that being too over my skis on the numbers. That's why I said that Q3 would be kind of flat to slightly down just on the backs of what we're seeing with the Marlin organization and some of the games being canceled with the teams being overrun with COVID.

In regards to kind of the cohorts, we talked about in my prepared remarks about how monetization and DAU, our engagement are up significantly in the second quarter. So we obviously saw cohorts that were behaving a lot alike but spending even more with shelter in place. I would expect in the third quarter that the engagement and monetization will go down from those record second quarter's. The way I would think about the second quarter is we did two things.

We outperformed our core business just organically; and then we had a COVID bump, a COVID shelter-in-place bump, on top of that. I will view Q2 as kind of an anomalistic quarter. It did help us build a really big user base that we are able to parlay into Q3, Q4 and into 2020. So it's not a new base camp.

The year-over-year comps in a year from now will be hard because it was such an anomalistic quarter, but the way I think about it is we forward spend on UA with a low CPI environment to build a big user base and that was a strategic defense that we did to leverage that time horizon.

Nick Earl -- President and Chief Executive Officer

Yes. And I'll just add a couple more thoughts on TSB because it's pretty extraordinary that this game in its sixth year is growing as much as it has given that there has not been a season till just recently. Regardless of whether that the season really flourishes or just doesn't really take hold, what's amazing is just that the VIP and the spenders are all way up from where they've been in the past. So every time and every year we sort of feel like we've hit the ceiling, it continues to surprise us, so much so that this year we saw 20% growth over last year, Q2 to Q2, based on the backs of these VIPs and the spenders.

So it's really a testament to just how deep this game is, how strong the live ops team is and what they run even in absence of real day-to-day games. So regardless of what happens for the rest of the season, we still think we're in really good shape and very grateful to have that in our portfolio.

Ashley Owens -- KeyBanc Capital Markets -- Analyst

Awesome. Thanks guys.

Nick Earl -- President and Chief Executive Officer

Thank you.

Operator

And our next question comes from the line of Matthew Thornton with Truist Securities. Your line is open.

Matt Thornton -- Truist Securities -- Analyst

Hey Nick, Eric, maybe a quick question and two quick follow-ups, if I could. My first question, I think you touched on Deer Hunter and you touched on P3, but you didn't touch on Tap Fishing. So I'm just curious to ask a question maybe relative to what your thoughts were. I believe you can help me out.

And then just two sort of clarifications: Deer Hunter being pushed like a couple months in 2021. It sounds like it hasn't changed from our long-term outlook in terms of opportunity. I just want to make sure that, that is in fact the case. And then certainly with IDFA, and it's coming in, in September, thinking about kind of [inaudible] are you thinking that is a headwind? Are you thinking that's neutral? Is it too early to tell? I just want to know the right message there.

Thanks guys.

Nick Earl -- President and Chief Executive Officer

Yes. Hey Matt, it was a little difficult to hear you, so hopefully, I got all of the questions. But I'll talk a little bit about the pipeline and then we'll talk a little bit about IDFA, and hopefully, we'll cover what you asked. So yes, Deer Hunter World, we are very bullish on it.

Also, as we get kind of further into the where we are in the cycle in the industry, we just realized it's just harder and harder to launch a game that is going to be in the top 20, top 50, even top 100. Any advantage you can bring as part of the experience, we feel like we should really pay honor to and flesh out. And that's what we've seen with PvP. So we want to take a little more time just to get that right.

There has been a very kind of minor PvP feature set in Deer Hunter '18, but it's never really been connected to the core loop. And it's never really been fleshed out in either asynchronous or synchronous mode, especially as part of kind of the socio-competitive layer that we just believe is so important in all games and especially sports games and like this outdoor game. So our view is that we have as big, if not bigger, opportunity going forward. We just want to move it out, move it a few months and just signal that now so the team gets the extra time to work on really deepening that feature as well as others that are going into the elder game and continued refinement of the core loop and the core mechanic.

So lots happening there, but we feel great about that for '21 and beyond. In terms of fishing, also same story, lots of work going into creating depth there. We feel really good about the mechanic, which has gone through a lot of changes over the last few months, but we've finally settled on the core loop and the core mechanic there. So now the focus is really around social, meta and PvP; very much on track for next year.

We're not going to give tighter time frame than that, but we feel really good about what its future looks like. And then P3, another one that we feel good about; and that really is standing on the on the shoulders of giants with Covet and Design Home. It's learned a lot. And we think that this is a really good fit that sits right alongside as a vertical to those two but squarely in this lifestyle type of genre or category.

And we think this is going to be a big pillar to the Crowdstar strategy and Crowdstar brand. So excited about what that shows us next year. And then switching to IDFA. Yes, I think it's too early to know whether it's going to be a net gain or setback.

Or is it neutral? I think, from our perspective, we think across the industry, it may be a real challenge at the macro level, but I think for companies that are scaled, that have good tech and really understand the depth of user acquisition this may be an opportunity. We don't know for sure, but we think may be an opportunity to really refine our user acquisition and marketing process. We are going to spend more effort in traditional marketing which we've been doing for the last year, especially around Disney, branding and such. So we think that's an offset.

We think the hyper-casuals suite of games that we're building and potentially bringing to market in the Crowdstar world could be a good offset there and could really help us in aggregating and building installs. So yes, we feel like there's probably going to be a brave new world as we get into next year, but we are taking it very seriously. We've got a lot of cycles against it. And we do think that this, hopefully, will be a net positive for us if we navigate it well over the next three, six months.

Operator

[Operator instructions] And our next question comes from Drew Crum with Stifel.

Drew Crum -- Stifel Financial Corp. -- Analyst

OK. So Eric, at the end of your prepared remarks, you made a comment that the company is set up to grow at or above the Western mobile market. Can you just clarify? Does that include new games you intend to launch next year? Does that include any acquisitions? And as it relates to M&A, Nick, I think you said that you're looking at early stage opportunities. What is your tolerance for dilution on something that you purchased?

Eric Ludwig -- Chief Operating Officer and Chief Financial Officer

Sure. I'll answer the first part, and then Nick can answer the M&A part. So that includes core business and new titles, does not include M&A.

Nick Earl -- President and Chief Executive Officer

Yes. And on the M&A question. So we were initially -- and we've talked about this a lot over the last few calls, about how we were kind of, I would say, more focused on the low end of the market. Given the capital raise of $152 million in June, it's really opened up the door for us to look at the much higher end of the range.

So something that really could be transformative. We look back at Crowdstar. And even though that wasn't a hefty price tag, it was absolutely and profoundly transformative for the company, incredibly accretive and just such a great fit for us. So there may not be another Crowdstar out there, but we're certainly looking for it or something that's close.

And now we feel like we can shop both at the lower, middle and now and for the first time at the high end of the range. In terms of dilution, I don't really have a number I can give you, but I think anything we do will either be accretive out of the gate or very, very accretive longer term if it's something that we're going to have to invest and build using our central infrastructure and our knowledge and know-how as well as any sort of efficiencies and synergies we can drive with other studios. So time will tell as we get closer to signing a deal, but we've got a lot of activity, a lot of energy going into this. And hopefully, we'll have something, not too soon, that we can talk about.

Drew Cum -- Stifel Financial Corp. -- Analyst

Great. Thanks guys.

Nick Earl -- President and Chief Executive Officer

Thanks. Good luck.

Operator

And our next question comes from Matthew Cost with Morgan Stanley. Your line is open.

Matt Cost -- Morgan Stanley -- Analyst

Hi guys. Thanks for taking the question. I'm just wondering now that you're a couple months into the renegotiated license behind Kim Kardashian. How has that changed your experience with that game? And do you think that there is like a real change in terms of like the growth opportunity and sort of what you can do with that game now that you can net out the user acquisition expenses? Thanks.

Nick Earl -- President and Chief Executive Officer

Yes. Hi Matt. Yes. So this was a deal, for those who didn't hear last time, that we did earlier in the year that allowed us to net out marketing costs before we paid royalties.

And we all felt that this was a much better strategy to really get behind and grow the title. It turned out to be perfect timing because, as we got into Q2 with shelter-in-place mandates, it allowed us to spend much more liberally and thoughtfully with much greater return. So it's one of the reasons why we've seen such enormous growth in that franchise. And yes, I would point to the deal as being absolutely crucial and an integral reason as to why we've been able to invest.

I think that, without doubt, we would have had growth regardless of inking the new deal, but it certainly give us a lot of opportunity to really spend more. And yes, we just feel very bullish about this title going forward. We've got more resources on it. We've got more UA that we can spend around.

We've got a much more interesting yield curve that we look at on a daily basis. The game itself has got new customization features going on; new merchandising; a much deeper elder game that's being built out over time, especially with systems as well as content. And with the sixth anniversary event we just had in June, there's just a lot of momentum around the title. So we're very happy to have it in the mix.

Eric Ludwig -- Chief Operating Officer and Chief Financial Officer

Yes. And Matt, when you just look at the effective royalty rate on the overall portfolio. So we had, in the second quarter, 43% of our revenue came from licensed IP, including baseball, Disney and Kim Kardashian. And that was an effective royalty rate of 17.9%, which was down quarter to quarter from 21.4%.

So that really reflects, even though it's a much higher dollars for royalties, the effective royalty rate went down by 350 basis points on the overall bucket of licensed titles.

Matt Cost -- Morgan Stanley -- Analyst

Great. Thank you.

Operator

Thank you. And our next question comes from Darren Aftahi with ROTH Capital. Your line is open.

Darren Aftahi -- ROTH Capital Partners -- Analyst

Hey guys. Thanks for taking my questions. Two, if I may. Nick, you mentioned an e-commerce store, something about launching in the fourth quarter.

I'm just kind of curious with the pull forward with e-commerce in general probably several years. You've talked in the past about e-commerce in Design Home. I'm kind of curious how that strategy kind of fits in there. And then on M&A, just in light of what's going on in the second quarter with just kind of the rise of the app store, popularity of games and people spending more time with their phones, what type of games, if you look around, kind of fit the model for what you think Glu can effectively take in house and then scale on an M&A basis? Thanks.

Nick Earl -- President and Chief Executive Officer

Yes, sure, Darren. Hey there. So yes, the e-commerce in Design. It's been an interesting journey for us.

We initiated something about 1.5 years ago. And I know we talked a lot about it in the calls over 2019, maybe even at the end of 2018, but the first effort just didn't really pan out for a variety of reasons. However, we had enough good feedback and enough good KPIs to make us feel like there was absolutely something there, especially keeping in mind the Design Home is more than a game. It's a really gamified lifestyle experience where shopping is not only in the core loop but it's just really kind of built into the fabric of the experience.

And so we persevered. We've changed partners. And now we feel like we're in a much better place in terms of how this is being built out and the logistics, all of the logistics work. It's also positive in that the experience of buying something ties into the core loop because you get game currency when you buy something.

And we are very close to launching this in the U.S. We've got a small beta going on right now and continue to get really important KPIs and data and results that allow us to fine-tune the experience, but if it continues the way it is, then the intention will be to launch in the fourth quarter for U.S. only, and then we'll look at other territories as that kind of plays out. And then with regards to the M&A question.

Yes, it's something that we talk about a lot. Are we purposely going after a type of game, a sector or a category genre? The answer is not really. There's a few that we're going to stay away from. We just don't have the expertise.

So I would say that social casino would be a good example of that, but we're really open minded about anything that looks interesting; that's a good logistical fit; that comes with a team that's a good cultural fit for us, which is incredibly important. And like I said earlier on another answer, that is either accretive out of the gate or very accretive long term. And that can take the form of many genres and many types of games and many sizes of companies. So really the landscape is open for us and we're just really looking for something that's a good fit for the portfolio.

And given that we have a wide portfolio, we think we're capable of bringing anything in the mix.

Darren Aftahi -- ROTH Capital Partners -- Analyst

Thank you.

Nick Earl -- President and Chief Executive Officer

Thanks Darren.

Operator

[Operator signoff]

Duration: 45 minutes

Call participants:

Harman Singh -- Vice President, Finance and Investor Relations

Nick Earl -- President and Chief Executive Officer

Eric Ludwig -- Chief Operating Officer and Chief Financial Officer

Eric Sheridan -- UBS -- Analyst

Doug Creutz -- Cowen and Company -- Analyst

Ashley Owens -- KeyBanc Capital Markets -- Analyst

Matt Thornton -- Truist Securities -- Analyst

Drew Crum -- Stifel Financial Corp. -- Analyst

Drew Cum -- Stifel Financial Corp. -- Analyst

Matt Cost -- Morgan Stanley -- Analyst

Darren Aftahi -- ROTH Capital Partners -- Analyst

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