Glu Mobile Inc (NASDAQ: GLUU) Q4 2019 Earnings Conference Call
February 05, 2020
Corporate 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
Analysts:
Mike Hickey — Benchmark Company — Analyst
Matthew Cost — Morgan Stanley — Analyst
Darren Aftahi — Roth Capital Partners — Analyst
Matt Thornton — SunTrust — Analyst
Franco Granda — DA Davidson — Analyst
Jeff Cohen — Stephens — Analyst
Presentation:
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2019 Glu Mobile Earnings Conference Call. [Operator Instructions]
I would now like to hand the conference over to your speaker today, Mr. Harman Singh, Vice President of Finance. Thank you. 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 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 and the future financial performance of the Company. Any forward-looking statements that we make today are based on assumptions that the Company believes to be reasonable as of this date. We undertake no obligation to update these statements as a result of future events. We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statements in the press release and during this conference call. These risk factors are described more fully in our documents filed with the SEC, specifically the most recent reports on forms 10-K and 10-Q.
During this call, we will present both GAAP and non-GAAP financial measures. The non-GAAP financial measures are not intended to be considered in isolation from, a substitute for or superior to GAAP results, and we encourage investors to consider all measures before making an investment decision. For complete information regarding our non-GAAP financial information, the most directly comparable GAAP measures and a quantitative reconciliation of those figures, please refer to the supplemental presentation accompanying today’s earnings call that can be accessed via our investor website www.glu.com/investors.
As a reminder, consistent with our financial presentation and for all the information aside from bookings whereas otherwise stated below, we will discuss results on a GAAP basis and refer you to changes in deferred revenue, the deferred cost of revenue, and non-GAAP operating expenses totals in our financial tables. This data will provide a GAAP to non-GAAP reconciliation of the quarter’s financial results based on the same methodology we’ve used in prior quarters.
We are also providing a supplementary Excel file on our IR website to more easily aid in this reconciliation. Both the PowerPoint and Excel file are now accessible on the website. We encourage you to follow along with the slides during this earnings conference call.
And with that, I’d like to turn the call over to Nick.
Nick Earl — President and Chief Executive Officer
Thanks, Harman. Hello, everyone, and thank you for joining us today for Glu’s fourth quarter and full-year 2019 earnings call. I will provide an overview and highlights of our results as well as our game development progress. Eric will then discuss our financial results and guidance in more detail.
We’ve ended 2019 on a high note, beating top and bottom line financial expectations for both the fourth quarter and full year. A strong performance was driven by the second consecutive quarter of record bookings from Design Home and Covet Fashion and the best fourth quarter in Tap Sports Baseball’s history.
Overall, year-over-year bookings were up 10% for both the fourth quarter and the full year, reflecting the continued strength in our three growth 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 the significant progress in our pipeline supports our confidence in 2020 and beyond.
Turning to our live titles. Design Home delivered another record quarter with $46.6 million in bookings, a 6% year-over-year increase. This game’s continued strength was driven by a combination of event-driven live ops and the addition of deeper meta features, including the launch of the mid-Mid-Century Modern and Mountain Homes.
Covet Fashion also delivered another record quarter with $17.7 million in bookings, up 19% from last year’s comparable quarter. The strong growth was driven by our successful winter season launch, improved prop shop monetization, and the addition of new merchandising through mega bundles. Covet grew 24% for the full year, demonstrating the team’s ability to stack bookings of a title that is now finishing its seventh year.
Tap Sports Baseball recorded its best fourth quarter in the title’s history, with bookings of $19.4 million, driven by its most robust live ops off-season effort. This performance capped off the franchise’s highest bookings year of all time with 21% growth over 2018. Looking ahead, we are set to release TSB’20 on March 17. We are excited to announce global territory expansion to over 100 additional countries as well as Aaron Judge is the new cover athlete. New features will include a new homerun derby mode, and the addition of all 30 MLB stadiums.
Our most recent launch, Diner DASH Adventures, had bookings of $8.8 million in the fourth quarter. While still in an early stage, the gameplay and original Glu IP are resonating well with users, and we believe this title will be a meaningful contributor in 2020.
Moving to our pipeline. In last year’s third quarter, we made a strategic decision to move the worldwide launch of Disney Sorcerer’s Arena to the first quarter of 2020. On December 13th, we released a major beta update to the Canadian market with a significant change to turn-based mechanic — turn-based core mechanic with expanded care to rosters and 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 and monetization. We are excited by the recent beta progress and remain on track for a global launch in late March.
Originals, our interactive story platform, entered beta in Canada on January 20th, with encouraging early results. The Toronto studio continues 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 Deer Hunter game entered beta in the Philippines on December 13th. In 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 and elder game era. While the initial beta period will focus on stability and retention, we will add social and deep meta to drive monetization in the coming months. We’re excited about this title’s potential and anticipated global launch in the second half of the year.
Our social fishing game also entered beta in the Philippines in early January, and we are pleased with its initial performance. The team’s creative experience and ability to quickly integrate with Glu’s infrastructure have been the driving forces behind the strong progress we’ve made in developing this title in a relatively short period of time.
Next I’d like to touch on two growth opportunities for 2020. First, we will be increasing our focus on M&A to complement our existing portfolio in growth game strategy. Glu has a strong track record of not only finding talented teams and studios, but also nurturing new titles with a critical resources and expertise necessary to achieve accelerated growth and profitability.
Secondly, as the gaming landscape continues to evolve, we are focused on opportunities that will broaden our audience and deepen connections with our players through cross-platform connected play. To that end, we are exploring the extension of two key Glu franchises, Design Home and 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 marked Glu’s third straight year of double-digit year-over-year bookings growth, proven that the Company’s foundation is strong. And we believe 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.
Eric Ludwig — Chief Operating Officer and Chief Financial Officer
Thanks, Nick, and good afternoon, everyone on the call. I will provide a closer look at our financial results for the fourth quarter and full-year 2019. And then, I’ll 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 in Tap Sports Baseball’s history.
Going through 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; ad bookings were $12.4 million, or 11% of total bookings; and on a GAAP basis, we generated an all-time record net income of $10.8 million or earnings of $0.07 per diluted share.
Growth games grew 10% over last year’s comparable quarter and contributed 77% to total bookings. Design Home grew 6% to $46.6 million. The Tap Sports Baseball franchise grew 13% to $19.4 million and Covet Fashion was up 19% to $17.7 million. Diner DASH Adventures generated $8.8 million in bookings in the fourth quarter. This was due to the planned reduction in UA spend from Q3 to Q4, due to seasonally higher CPIs in the holiday quarter that we had guided both back in August and November. Diner DASH Adventures transitioned from having a negative studio margin in the third quarter to a slight profit in the fourth quarter.
As the new title launches, we generally expect its profit life cycle to go through four phases, with the goal of ultimately becoming a scaled profitable growth game within 12 to 24 months. The first phase is in the first quarter or two following global release where we lean heavily in the spending on launch UA. Although the UA spending is expected to be ROI positive over the life of the users we acquire, the bookings generated in this phase are not enough to offset all of the studio costs, including UA. Thus in this first phase, a title has a negative studio margin. This is what occurred with Diner DASH in the third quarter.
In the second phase, we are focused on new titles becoming adjusted EBITDA breakeven where bookings cover all studio costs, including UA. This phase typically 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 UA, live ops and events. A title in this third phase is expected to be halfway between adjusted EBITDA breakeven on all studio costs 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 4 or 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 cost 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 headcount and accrued bonus costs plus allocated overhead and all product marketing and UA spend.
Larger titles such as Design Home and Tap Sports Baseball have higher studio margins in Covet Fashion due to the bookings scale and marginal flow through. In comparing studio margins to Glu overall margins, the only items excluded are sales and marketing headcount costs, allocated G&A, and some central tech headcount costs.
Kim Kardashian Hollywood saw bookings of $8.2 million in the fourth quarter. This was an 18% quarter-over-quarter increase. We ramped UA this quarter due to the high ROI yielding users we were able to acquire with the launch of the new season of keeping up with the Kardashians on TV.
On the expense side, adjusted platform commissions were $28.7 million; adjusted royalties were $5.9 million; and hosting costs were $1.9 million. UA and 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 year’s third quarter. Operating expenses, excluding UA and marketing, were $33.4 million compared to $29.8 million in 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 Glu IP titles generated 70% of bookings. Ad bookings were $50.7 million, or 12% of total bookings. And on a GAAP basis, we generated a net income of $8.9 million, our largest GAAP profit ever. On a GAAP basis, net income for 2019 was $0.06 per diluted share for the full-year 2019.
Growth games 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, the Tap Sports Baseball franchise increased 21% to $90.9 million and Covet Fashion grew 24% to $66.1 million.
On the expense side, adjusted platform commissions were $111.5 million, adjusted royalties were $26.4 million, and hosting costs were $7.2 million. UA and marketing spend was $118 million, or 27.9% of bookings. This compares to $95.1 million last year. Operating expenses, excluding UA and marketing, were $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 of free cash flow for the year. In the fourth quarter, we received four monthly payments from Apple versus a typical quarter of three monthly payments. This happens every few years where Apple pays 13 months in one year and 11 months in the following year. This had the effect of pulling into 2019 an extra $13 million [Phonetic] of accounts receivable that typically would have been collected in January of 2020. Free cash flow for the first quarter of 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 such titles 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 2019’s actual results at 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 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 will have a full year of contribution in 2020, and our catalog will increase approximately $30 million on a year-over-year basis. The combination of these will result in a bookings range of $423 to $433 million. Our $433 million high-end guidance excludes any contribution from new titles, including Disney, Originals and Deer Hunter Next. For the sake of clarity, we will include bookings for Disney in our guidance for the first time on our May earnings call.
On the expense side and at the midpoint of our bookings guidance, we expect adjusted platform commissions of $112.6 million, adjusted royalties of $25.7 million, and hosting costs of $7.3 million. UA costs will be approximately $109.6 million, reflecting 25.6% of UA 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-end guidance in absolute dollars with the full-year 2019 actual results. I’d highlight that studio headcount costs for new titles have already been included in our operating expenses — in our adjusted EBITDA outlook. And in 2020, this totals over $24 million of expense in our core business adjusted EBITDA guidance.
Our three growth games are performing at scale and provides significant margin flow-through overall as well as on a marginal dollar basis. We believe that Disney Sorcerer’s Arena and Deer Hunter Next could over time become scale growth games, which contribute meaningfully to our long-term margins. We’re looking at the new titles in 2020. And excluding the headcount costs, which are already expense in the core business for adjusted EBITDA guidance 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-digit adjusted EBITDA loss in absolute dollars in the first half of 2020, and we believe that adjusted EBITDA will grow significantly throughout the second half of the year as new titles 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, Glu 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 of $25 million, adjusted royalties of $5.1 million and hosting costs of $1.8 million. UA costs will be approximately $30.9 million. I would point out that this UA guidance for the first quarter includes our launch UA assumptions for Disney Sorcerer’s Arena for modeling purposes, but our guidance has no bookings contribution for Disney. 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 Disney on retention and monetization and look forward to providing meaningful updates on the next earnings call regarding this title as well as the 2020 version of Tap Sports Baseball.
We’ll will now open the call for questions. Operator?
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from Mike Hickey with The Benchmark Company. Your line is now open.
Nick Earl — President and Chief Executive Officer
Hi, Mike.
Mike Hickey — Benchmark Company — Analyst
Congrats guys, strong quarter, strong year. Curious on your M&A commentary, Nick. I think that’s a bit of a pivot from what you’ve been saying in recent history. So, curious sort of your thoughts there and perhaps being more aggressive in M&A, what you’re seeing in the market, what resources you’re putting to finding deals, and what sort of deals you’re looking for? Thank you.
Nick Earl — President and Chief Executive Officer
Yes. Thanks, Mike. So, we’ve really been focusing in the last probably three years on building the internal studio infrastructure and making sure that we can get that up to speed and we’ve got the foundation underneath 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 acquihires like we just did with our Fishing team right up to large ones that we’ve done in the past, like Crowdstar.
We’ve a good track record of integrating and leveraging the infrastructure both on the creative side, on the analytics — the analytics as well as UA etc. So, we just think we’re well positioned for now. We think we’ve got the bandwidth to be able to expand our focus across internal and acquisition opportunity, and we just think this is a real great growth proposition for us going forward. So, we’ll see how things play out. We’ve got more focus from our Head of Corp Dev who is going to be spending more time in this than he was able to in the past. And I think it is just a great opportunity out there in the marketplace for buyers like us. So, we’ll go after it, and see how it plays out.
Mike Hickey — Benchmark Company — Analyst
Thanks, Nick. Last question from me on the Tap Sports Baseball. It seems like every quarter you drive an upside here. I guess, just even more insight into where the strength is coming from? How you think about ’20? And then, your release date in Q1, is that earlier than normal? I didn’t get a chance to compare it, but like maybe a little earlier than you normally come out. If there’s any shift maybe from 2Q and the 1Q, if that’s the case? Thank you.
Nick Earl — President and Chief Executive Officer
Yes. We’re continually surprised — positively surprised at how well this franchise performs. It’s really testament to the strength of that team and their capability on the live ops front. They’ve also been adding more systems and features in the elder game, which really drives monetization and engagement. We think the experience is far superior than what it was a couple of 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 the growth. So, we are definitely bullish on this game.
And then, the second part of your question was about the launch date. Yes, we’re going to launch this on March 17th, which is earlier than we normally do. We’ve got, obviously, another launch for Disney. So, we’re trying to space them out a little bit, but they’ll both be in that latter part of March. And we’ve obviously got a lot of execution to do here with two big launches, but we think we’re prepared for it, and definitely looking forward to the 2020 version of Baseball.
Mike Hickey — Benchmark Company — Analyst
All right. Thanks, guys. Best of luck.
Nick Earl — President and Chief Executive Officer
Thanks, Mike.
Operator
Thank you. Our next question comes from Matthew Cost with Morgan Stanley. Your line is now open.
Matthew Cost — Morgan Stanley — Analyst
Hi, guys. Congrats on the quarter. If you could — two from me, if you could. If you could just go over your philosophy in terms of category mix. Obviously, you’re making a big push into RPG and strategy with Disney Sorcerer’s Arena coming later this quarter. What are your thoughts in terms of allocating resources to different teams or obviously your expanded focus on M&A in terms of broadening away from lifestyle and sports and pushing into those other categories? And then, if you could, just a quick update on the Crowdstar title and sort of how you see it layering in with Design Home and Covet Fashion? Thank you.
Nick Earl — President and Chief Executive Officer
Yes, I’ll take both of those, and Eric can jump in if he’s got any comments. So, from a category perspective, we’re not purposely setting out to integrate or go after sectors or categories in particular. I think we’re more driven by the intent and the kind of the creative interests that the teams have. And the team that’s on the RPG game on Disney, this is really their — in their wheelhouse and something they’re 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 than what it may seem. I think we’re looking at the opportunity to go after both the two — what we call umbrella brands. And that really is the female lifestyle side and that’s really the Crowdstar games. And then on the other — pretty much the other side of the coin, the more male sports and outdoors games, and that’s obviously Baseball but also Deer Hunter and Fishing. So, I look at it from those as being the kind of the big opportunities for us that I think will go definitely continue to go deep on, and then we’ll add this RPG and see how this does for us and figure out where that takes us going forward.
And then the second question was, I think on — what we call P3, which is the third game 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 beta sometime soon, but we were going to definitely take our time and get this one right. There’s just a massive opportunity with the third — we believe with this third Crowdstar game. It will feel like the other two, but it is in a different vertical. And that’s what — we’ll leave it at that for now and have a lot more to say for that over the course of 2020.
Matthew Cost — Morgan Stanley — Analyst
Great. Thank you.
Nick Earl — President and Chief Executive Officer
Thanks, Matthew.
Operator
Thank you very much. Your next question comes from Darren Aftahi with Roth Capital Partners. Your line is now open.
Darren Aftahi — Roth Capital Partners — Analyst
Hi, guys. Afternoon. Thanks for taking my questions. Three, if I may. So on your 2020 growth drivers, I think Eric, you had said the growth games high single digits. I’m just kind of curious like one with Design Home and two with Tap Sports Baseball. I think you said 100 new countries. Can you kind of give us a sense because it looked like Design Home only grew, I don’t want to say, [Phonetic] 6% in the fourth quarter, if I’m not sure it’s correct. What’s kind of cadence between those three games.
Question two, these are for Eric. I think Q1, the implied EBITDA looks like a little bit of a loss. Is that driven mostly by the implied Disney UA spend? And then three, maybe for Nick, now with Disney in beta for a while in Canada and maybe 45 days or less from formal launch like what are your kind of thoughts going into that? Thank you.
Eric Ludwig — Chief Operating Officer and Chief Financial Officer
Yes, a lot to unpack there Darren. So let me first start off on the three growth games. So, as we said in the past that our games have sometimes some seasonality. So Baseball, as always, we’ve talked about how seasonality. So in the first quarter, we always see a 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, it 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 is doing a better job at bringing over the 2019 users into the 2020 version. We’re also unlocking more user acquisition dollars by looking at it kind of a cross-year multiplier in terms of ROI that we’ve — some analysis we’ve done, coupled with unlocking a lot more countries, which we never had access to as well as having a new stadiums and the homerun derby. So, I think Baseball, we think those are the opportunities 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 year, as you see in the IR deck. We’ve had a great seven-year running growth of this title. And this is the epitome of what we call a growth game.
Talking about Design Home, yes, we had kind of a year-over-year 16% [Phonetic] growth. These titles get to plateau and then grow again and plateau and grow again. We’ve talked about that base camp philosophy before. I think we had kind of that base camp in the first half of this year around some UA’s 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, a record growth in the fourth quarter. So, I think we are looking at deepening more meta as well as other monetization targets for Design Home.
Covet Fashion has had just a phenomenal year, growing 20% plus on a year-over-year basis on the backs of prop shop and a lot of monetization technique. So, I think we’ve been hopefully conservative in our guidance that the three growth games collectively will grow high single-digits. That was what our guidance was last November about 2020 and we’ve really been largely unchanged from what we said there to now. And hopefully, we’re — hopefully, that proves conservative.
Then going into Q1 on the EBITDA loss, yes, it’s a small guidance of adjusted EBITDA loss of about $1.5 million EBITDA loss, really largely from a couple of reasons. One, we have that seasonal down trend in terms of bookings from Q4 to Q1 on Baseball. And that takes just 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 churn before typically in January and early February with the hangover that retailers will have in spending in the holiday seasons. We see CPIs come down from the November-December levels into January, so we lean heavy into that.
And then thirdly, yes, you definitely saw that’s in my guidance talked about — I’m including in that guidance zero revenue or bookings from Disney, but I do have my launch marketing both my product marketing spend as I’m using the term, escape velocity spend, as well as the week plus of UA spend that we have for the quarter as well. So, that’s what’s driving that guidance on a quarter-to-quarter down based on EBITDA.
And then the other one was — here’s the — over to Nick.
Nick Earl — President and Chief Executive Officer
Actually, I’ll just — one comment before I get to 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 15% margins [Phonetic], 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 as 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 what we’re seeing in the KPIs in Canada is that it is improved dramatically in retention engagement and monetization, which is really nice to see. So, that is really coming together. And we feel like that the time that we took will be well worth it by the time we launch it. But yes, new fighting mechanic, so, really a new core loop and core mechanics, expanded character roster, which is much more cinematic in nature. So, you really show off the heroic nature of the characters and really building up the social and live operations continue to tune the economy and get this game polished for release at the end of the quarter. So, so far so good. We’re not talking about KPIs just yet. We’ll talk in more detail, 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 Glu. Of course, that’s industry-wide. We think we’ve got good execution plan there, but I feel like the game unit economics are solid 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 implying our strong UA capabilities going out to kind of the marketing side and the brand side. And then, of course, a leaning into the strength of the Disney brands.
Darren Aftahi — Roth Capital Partners — Analyst
Great. Thanks, guys.
Nick Earl — President and Chief Executive Officer
All right. Thanks, Darren.
Operator
Thank you. Our next question comes from Matt Thornton with SunTrust. Your line is now open.
Matt Thornton — SunTrust — Analyst
Hi. Good afternoon, guys. I joined a little bit late, so I apologize if any of these have been asked. Maybe for starters, you talked a little bit about the EBITDA linearity throughout the year, starting obviously with a small loss in 1Q. My question is, how do we think about 2Q? Should 1Q kind of be peak loss? Should we think about 2Q as similar to 1Q, and then ramping into the back half of the year? Any color there would be helpful.
And then, just secondly on the Fishing game, it would seem to me that the in game economy is an opportunity there — probably very similar to Deer Hunter. And my question is, is the game mechanic that dramatically different? Any color there. And could this game conceivably kind of pulled into 2020, given kind of the familiarity and the fact that it’s already kind of entering beta? Any color there. Thanks guys.
Eric Ludwig — Chief Operating Officer and Chief Financial Officer
Right. I’ll take the first one, Matt, and turn over to Nick on the Fishing topic. So in terms of EBITDA, I’d say the — what we talked about was the first half, inclusive of new titles, will be a slight single-digit loss for the two quarters combined. So, I think the midpoint guidance for Q1 is about $1.5 million [Phonetic]. So, it’s going to be something a little bit bigger than that, but not massively bigger than that in the second quarter. And that will really because we have a full quarter of, call it, Phase 1 spending on Disney. So, I talked about these phases.
So, Matt, you may have missed it in my script. I talked about four phases of a launch from a new title. Phase 1 is where we’re spending a lot, even though it’s ROI positive, but our forward spending with CPIs being low. So, Q2 will be a full quarter of Phase 1 spending on Disney. And that will drive more and more EBITDA than the first quarter. We will also have Tap Sports Baseball, which comes out of the gate rip-roaring, typically on — by April 1st. And so, I think that title will be kind of offsetting, probably profitably. Tap Sports 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 it, it’s in the seventh year. It’s already very mature at Phase 4, but that’s — those two things are going on in the second quarter.
But then, our Q3 and Q4 is where basically all of the EBITDA comes in. And it’s kind of out of the gate pretty big in Q3 and bigger in Q4. But the combination of these small loss in the first half and the profit in the back half equals at the high-end of guidance, the full-year 2019 adjusted EBITDA, that we just put up on the ticker.
Nick Earl — President and Chief Executive Officer
Yes. So, Fishing, it’s — I think it’s little too early to comment on launch timing. It’s possible that it could make ’20, but we want to give it its due course and make sure that we really create something that’s enduring long-term. In terms of the structure of design and gameplay, it has elements of both Deer Hunter and Tap Sports Baseball and is part of that studio group. So, that’s kind of makes sense that it would be that way. A little more like Deer Hunter. So, you’ve got a very compelling core mechanic that is both enjoyable, but simple, and then a very deep elder game that’s built around social and upgrading and really in RPG style elder game. So, I’ll leave it at that for now. We will be talking about this more over the course of the year and we’ll be sharing updates as we go ahead. But we really like the way the studio operates. They’re incredibly agile. They’ve paired very well with our creative infrastructure as well as the analytics and the other offerings that we’ve got as a scaled company, and they are a great cultural fit. So, so far so good with this group, and very excited about the title. And like I said, we’ll be talking a lot more about it, as we get through the year.
Matt Thornton — SunTrust — Analyst
Great. Thanks, guys.
Nick Earl — President and Chief Executive Officer
Thanks, Matt.
Eric Ludwig — Chief Operating Officer and Chief Financial Officer
Thanks, Matt.
Operator
Thank you. Our next question comes from Franco Granda with DA Davidson. Your line is now open.
Franco Granda — DA Davidson — Analyst
Hi, guys. Good afternoon. Congrats on the results, and thank you for letting me ask a couple of questions. So, the first really is on the sports side of things. I know you kind of talked about it in the first question. But right now, you have MLB leading the charge and you’re adding Deer Hunter and Tap Fishing. Do you think that the sports category will eventually get to a point where it could rival the lifestyle games?
Nick Earl — President and Chief Executive Officer
Yes, I do. I think it’s certainly has a 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 female side of the business and the more of the male side of the business. And it gives us tremendous diversity, as we think about how we market our games in terms of spending our UA 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 go, as we add more, and we will be talking more about the — more of the high level brands as well as the individual games as we go forward.
Eric Ludwig — Chief Operating Officer and Chief Financial Officer
And Franco, if I can add there, and I’ll use a little bit of sports analogy here. We’ve been talking over the last kind of six months in a couple of other settings, a couple of other webcast and events, using Baseball powerline in terms of where our games sit, singles, doubles, all the way to grand slams. And the industry has grand slams. I’m going to call it Grand Slam, but $0.75 billion [Phonetic] 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. They persist pertain — sustain for a long time. Home runs, I’m going to call or $0.25 billion a year to $0.75 billion [Phonetic] a year. There is multi-handfuls of these titles. The multi-dozen handfuls of these titles that are out there. And we don’t have any of those, and the margins of those titles are also phenomenal. Then I would call a triple being with Design Home is. A triple being a $150 million to a $0.25 billion a year and growing. And Design Home has very, very good studio margins. I’ve talked a lot about studio margins in the mid-30s without allocations of SG&A costs.
And then Baseball is a double, call a double of $75 million to $150 million. Interestingly, our Baseball title has margins of a triple, even with the license fees, the MLB because it seems small. We’ve been able to reacquire users year over year over year. So, it’s in that mid-30s studio margins as well.
And then a single, call it, it was a again that’s $25 million to $75 million a year. And then, we’ve got Covet Fashion is at the high-end of that range. Diner DASH is at the lower-end of that range. And so, as I think about the sports category that we’re in, Nick has said in the past that he feels that Deer Hunter as a category game could 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 answering that question, one, I want to make sure I address 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. And I think it really also ties back to the four phases of profitability that we get to. But, yes, we’re very excited about the sports category and I think it can be — will be one that’s growing for us in the years to come.
Franco Granda — DA Davidson — Analyst
All right. Yeah. Thank you for the color. That’s really helpful. And then one more, if I may. It’s exciting to see that you’re sort of maximizing the growth from the growth games by bringing them to PC. Do you or why do you choose the Design Home and MLB game? And then, is there a potential for more to join later on?
Nick Earl — President and Chief Executive Officer
Yes. Listen, we — those are two of our biggest games. Actually, our two biggest games. So, it just kind of makes sense to look at extending those. They have got big audiences. They’ve got really engaged audiences, and they both will benefit tremendously for being on the PC layout, if you think about a PC screen versus a mobile screen. There’s a lot of information 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 capability and the bandwidth to explore these platforms. So, really those are kind of the two key reasons. And if this works, and we start to get some early signals from this being a positive move, we’ll certainly look at other options inside the portfolio as well as the new games that we’re bringing out. But right now, we think these are the best candidates, and we’ll have to see how this all plays out. This is a new business for us. So, it’s — we will be treading carefully, as we get into it.
Franco Granda — DA Davidson — Analyst
Great. Thank you.
Nick Earl — President and Chief Executive Officer
All right. Thanks, Franco.
Operator
Thank you. And our next question comes from Jeff Cohen with Stephens. Your line is now open.
Jeff Cohen — Stephens — Analyst
Hi, guys. Thanks for taking the question. If I’m not mistaken, I think the Kim Kardashian license agreement is up fairly soon. Given that game is still producing pretty significant revenue for you guys, can you talk maybe about whether there’s a plan to renew the contract or how you think about sun-setting the game?
Nick Earl — President and Chief Executive Officer
Yes, I’ll start and Eric can jump in. So, we have 18 months left in that contract, and we are incredibly happy with the way it’s going. No comments yet on what’s next or what happens after 18 months, we absolutely will update all investors and the Street when the time is right, but we love working with her and her team. We respect the way they go about their business and this audience is in [Phonetic] highly engaged one. You saw by their results in Q4, just how much they absolutely love this experience. So, it is going well. It continues to go well. We will update, as we get towards any changes with regards to the contract.
Jeff Cohen — Stephens — Analyst
Great. Thanks, Nick.
Nick Earl — President and Chief Executive Officer
Thanks, Jeff.
Operator
[Operator Closing Remarks]