Yet Another Value Podcast - Francisco Olivera from Arevilo Capital on Roblox $RBLX

Episode Date: April 20, 2021

Francisco Olivera, founder of Arevilo Capital, discusses his newest investment in Roblox (RBLX). He covers his vision for the company, why he thinks it's more of a platform than a single game, and how he thinks the company will evolve over time.Chapters0:00 Intro1:15 Roblox Overview4:25 Comping Roblox to Minecraft and World of Warcraft7:00 Defining the Roblox business model11:35 Roblox valuation versus other game companies18:45 Risk from Roblox's user base26:25 Sustainability of Roblox's user base29:38 Growing Roblox's DAU34:00 Thinking about Roblox's COVID boost37:00 Content moderation risk42:00 Upside from Robux or messaging49:10 Breaking down long term margins52:40 Roblox's management team57:15 Capital allocation going forward59:55 Laying out a reasonable bull case1:05:45 Quick Falcon and Winter Soldier catch up

Hello and welcome to the yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm excited to have my friend Francisco Olivera. I don't, I'm laughing because I'm going to say you're the president at, you tell me how to pronounce it because you told me it's your last name backward. It is a nonsense word. You're the president at. Aravelo Capital Fund and Aririllo Capital Management. So yeah, just Olivera is my last name and Arabello's backwards. Well, I'm just laughing at that word. And now that I don't. of the history. But let me start this podcast the way I do every podcast. That's by pitching you, despite having a nonsense word for a partnership. Francisco, look, anyone who follows me probably

follows him. So you know how sharp he is. He's one of my favorite investors. He runs a, you know, his portfolio is a handful of names, big bets on good companies, trading at attractive prices. But you know, he's not here to run 50 stocks in 2% position. When he sees something, he swings hard. And I love to talk to him about media. I love his portfolio, so really excited to have him on. I guess that out the way, let's just flip it over. Your newest position, Roblox, went public through direct listing. I think you were out there buying the moment they came public.

So tickers, RBLX, Francisco, what are you seeing in Roblox? Well, first, Andrew, a huge fan of viewers, and obviously followed your blogs, newsletters, your pay subscription. So I'm a huge, and your podcast, I'm a huge fan. So I appreciate that. out of value out of your service. Roblox, they like to call themselves like the human co-experience category, but what it really is is an application where users come on and they go on to different what they call experiences, but they're really just games.

So you can go on there and there's basically 13 million experiences. It can be a racing game, a Formula One game, NFL, a game where just adopting pets and taking care of them. Basically, anything that you can imagine. And what is kind of different about them is that the games are really created by the users. So it's all user generated. Roblox is now creating the games. And it's a platform that benefits from two things, right? You have good content, attracts users, and then users attracts creators to come in, users to create content. So what they call a flywheel. But what's kind of also neat about this is also there's a social aspect to it. So it's live 3D virtual worlds you go on a game and then you can go on with your friends you can chat with

them you and i can go on a formula one game and race against each other chat about it and they say like hey and you let's hop on to this you know NFL game and we'll go there so it has um a more social like feature more like a social network in a sense and you become friends with people there as well and the more friends that you have on the on the platform the more attractive it is for to tell other friends and for new friends to come join. So it kind of benefits what they call, like basically two flywheels. So I think it's very interesting from that aspect. And we can get into some of the economics behind it or other parts.

But at a high level, really, it's an application mostly accessed via mobile phones, but also PC, tablets, Xbox, some virtual reality headsets. And then users come in and they play and they interest. interact with their friends. That's perfect. That's perfect. And I'm going to ask some basic questions. Obviously, I've done research leading this podcast. I've never actually played the product. Is it true? The rumors your due diligence consisted of just playing Roblox for four hours a day for the past one? Well, I have a five-year-old. So he kind of became my kind of go-to and seeing him basically use it and how he interacts. You know, the social aspect of it with the five-year-old

he's not really kicking in yet because he's not really chatting with friends and things like that. But I do see how he chooses games, plays, interacts with it. He wants me to buy him more the Robux currency so he can spend on the platform. So try to, you know, initially $5 here, $5 there, but you know, you got to take it easy because they take whatever. It adds up. It adds up. I remember when I was little, I loved magic cards. And, you know, There's, it's only $3 a pack, but you get a couple of packs and add some. So let me just ask a couple basic questions because, you know, I've done, but I'm sure there are people who haven't really experienced this.

Roblox, the two things that I think probably come to mind, you know, whenever you hear online, world and stuff, I think people probably think World of Warcraft. That's pay. I believe Roblox is free. And then comparing Roblox to Minecraft. Like, how do you think about the difference between the two of those? There are a lot of similarities. There are differences.

Many of those games, you pay for them, and some of them do have a creator ecosystem, but this was more explicit that, like, it's basically you don't go there to, like, have a singular game or pay for a singular game. You go there just because you just want to experience a bunch of different games. And some of them are really games, right? Some of them are just kind of, one is just like delivering pizza. One of them is called like Splash, and then you can just go to, like, a club and dance and be a DJ and create music. So it's just, it's sort of like different world, right?

I think what's really different is that they push really hard the fact that they want users, what they call developers, to create for the platform and for them to monetize their own experiences. And they push as well your identity and they have an avatar store where you pick the clothing that you have and the skin tone, how tall you are. are hats, t-shirts, you can buy a Tom Brady's Super Bowl jersey from the Buccaneers there. So it's really having your own identity experience in the old worlds, but really truly being a user, fully user-generated content experience where you just have many creators.

I think they have about 8 million active creators, but obviously, and they paid out to developers cashed out over 300 million last year. But obviously, it's the top tier, the ones that really make the money. But I think it's more truly focused. Minecraft, you can be a developer, a creator, but you've got to have your own server. It's more about it's a little bit different than that actually, hey, you buy the Minecraft game and you play Minecraft. It's almost like building a website and experience. And Roblox works really hard to have a studio platform where the creators make the games and it's all part of the,

part of the process there. So it's it's avoiding that singular experience more and being more creator driven. I think it's how I would differentiate. But there's a lot of similarities as well. So if I'm just thinking about in my head, right, the, you know, when Ready Player 1 came out, everybody's talking about the metaverse and everything. And Roblox in many ways, it's, hey, we've got this metaverse. We're this platform. And Andrew, if you love, you know, Disney movies, you can go build a Disney world. I don't know if they've got Disney licenses and everything, but you can they'll build a world that's Disney-like and invite people to come on to it. And you can even sell them, sell them goods through your things and make a living by selling things on this

thing. And obviously, the Roblox platform is, hey, we connect the users with, we connect the customers with these developers. We take a cut of the Roblox and everything. But that's the basic business models. So we think about that. Yeah. So here's how I would think about it. So essentially it's free, right? But there is a currency in the game that first, a user has to pay to buy the currency. and then they have the currency and then they'll go to the experience and the way let's talk about that formula one game we go to the formula one game maybe we can use these slower cars but if we want to use the Ferrari then we have to actually potentially we've got to pay for it it all the creator dictates how they want to monetize so if we're in that experience right and hey you can use any car

but the Ferrari you got to pay x amount of robocs well we have to have the currency we pay for the currency, and then we pay in the actual experience for the car. And the developer takes a 70% take of that. When they cash that out, there's essentially another fee. So if we talk about the gross dollars that you and I spend to buy the currency, the creator takes maybe like a quarter of that after you account for the 70% of the currency in the game and then a fee for cashing out. Perfect. And so if I bought one Roblox for a dollar, or whatever, and I gave it to you, when you, after you withdrew it, how much would you net? So it's basically a quarter, basically.

So you would net 25 cents if I gave you a dollar? And if I'm the, you're saying I'm the creator of the game. Yeah, if you bought a Ferrari in my game and you're the user, I would, when I cash it out, it'll be, it'll net a like a quarter around there. But if I keep the currency, it's a big take rate. But if I keep the currency, it's just 70%. Here's a couple of things, right? As a creator, if you spend 100 Robux on my game, and I get 70, right?

But there's an exchange rate when you cash it out. But if I can keep that 70 accumulate it, I can spend it on, there's a developer marketplace where developers can sell each other different things. So like if there's a cool sound effect that another, creator made and I wanted to I want to add that sound effect when someone crashes a car in my game I can pay that developer so I can use that there and so there's a difference the take rate is not as high because you're actually investing in your game and you're not paying the fee when you cash out but yeah it is a high take rate the company said that they're going to as they grow and

scale that cost benefits you know they spend very little in marketing GNA doesn't have to scale as much as they keep expanding globally they're going to keep increasing the payout rate for developers. Perfect. Perfect. Okay. And go ahead. And the other thing is that's interesting is like, you know, this is mainly consumed in mobile platforms. And if you're thinking about launching an individual mobile game, right, you got to spend a lot of money and you got to get people to download that ad. You got to keep people on that app. You got to spend maybe cost for AWS. And so there's a lot of costs for being consistent winner in this business. And they take all that away. They can give you exposure. They bring the audience. They bring the monetization.

You don't have to worry about cloud or anything or as much as acquiring user. So there are benefits. It's a little bit different than saying like, you know, the take rate that Xbox gets from a rent-the-thought-of-game. It's not really apples to apples in that sense. No, I get you. And that's a great point because this is not, you know, they are providing all the servers, they're providing the user. You're basically just plugging in everything you get is kind of incremental margin. Obviously, there was the time investment on your end. But it reminds me of Chick-Fleigh. Like I think Chick-Flea's royalty rate is 15% or something, which is way higher than every other restaurant chain. But Chick-Flea also, when you're opening, they literally buy the

property and build a property up. So part of it is there was no upfront costs to you. They're kind of recouping those upfront costs. Okay. So I think we did a great job with the overview. Let me come with the pushback one, right? When I saw you invest in Roblox, my first thought. was Roblox's value is around $40 billion, enterprise value somewhere around $40 billion. If I just look at that, I think Activision Blizzard, which, you know, that owns tons of franchises, World of Warcraft, Diablo, tons of Call of Duty, all these major, that's valued at $70 billion. Take 2, which makes Grant Thuffed Auto, Red Dead Red Dead Redemption, a couple other, that's valued under

$20 billion. So I looked at this and my first thought was Roblox, one game company, $40 billion. I compare that to these other huge companies and that valuation just seems ridiculous. So when I give you that first piece of pushback, how would you respond to that? The way I would look at it is that they're different business models. And yes, people are playing games. But it's also not the same type of games and then the same type of experience. I honestly, it'd be like comparing, you know, let's rewind a couple of years ago.

Let's be like comparing like selling Paramount Studios for 10, billion and then YouTube's worth 50 plus billion, right? And you're saying, well, like, you know, people spend more on the box office than YouTube at the time or something like that. But the reality is here, many of these game studios have to, like, they have to put, they have to have to have a huge upfront cost. And it's, it's a hit driven business at the end of the day. They have evolved many of those models as a more of a recurring type of relationship. But here, it's very different. Here, it's, you basically got, if grant that auto six fails, right, or is not a big hit,

that's going to be a huge problem for take two stock. If something breaks down with call of duty of the next game, that's going to be a problem for Activision stock. Here, you have 8 million developers pushing out. There's 13 million active experiences. You know, you're getting hundreds and hundreds and hundreds and hundreds of new ones every day, more shots on goal to like keep people on the platform playing, engaging, spending. You have to remember before, not remember, but looking at the data, even before the pandemic,

the average user spent over two hours a day on this. And they can keep those users because they can keep them engaged and they can keep them spending and the amount of money that they've been spending has been going over time. So it's a much stronger tie with the user and keeping them there versus. I think Activision and I think Activision's bookings are over $8 billion. You mentioned the market cap is over 70. Roblox's bookings are probably going to be around $2.1 billion this year. Market cap is well into the $40 billion. You can say, well, but here, they're still expanding globally. They have a big audience that is very sticky with them and growing with them and spending with them. And they're not really at risk.

if one game kind of is not good or a top 10 game decides to sign a contract with Epic or Unreal and develop with them and take the game out of Roblox, they have another shot on goal in the sense like, look, if you take away friends from Netflix, Friends is still going to be, I mean, Netflix is still going to do fairly well. If you take a couple of YouTube videos out of YouTube, YouTube is still going to have a great model where user generated is still powers it to So I think, yeah, Roblox has to prove out its business model over the long term that they can keep growing, people can keep spending more. And really that this ends up being a very, very good business for developers. And I think that's where you have the biggest kind of moat or the business, right?

The developers cashed out over 300 million last year. If you're growing their users in spending and then you're eventually paying billions to developers, that's something extremely hard. hard to recreate. And you think about the top AAA games, a very, you know, a grand theft auto six type of game, you're probably over over a hundred million dollars spent, right? Here, if you're paying billions, billions to developers. And we're still ways from that. But if you get to that level, then you can have maybe a potential grand theft auto type six quality game within Roblox experience. And once you have kind of that flywheel pushing those type of high quality experiences, it's really kind of, uh, very difficult to compete with them or recreate this model. So I think that's why it deserves a little bit of a different view than those two. But those are two great companies. I think if I could simplify your thesis, the way I came to think about it was the bare case is this is a one video game company, right?

And your bull case is, no, you're looking at it wrong. This is a platform company. And they are a platform that connects users on one side with developers on the other. and you get a flywheel going because eventually you've got, as you said, 500,000, 5 million, whatever different experiences. So users never have a reason to leave. And then developers never have a reason to leave because all the user on that platform. And over time, you get more users, which leads to more developers,

which leads to more experiences, so on, so on. And that's the flywheel. Whereas when you look at a video game company, as you're saying, every year they have to release a new video game, which is it costs money. They have to market it. Who knows if it's going to be a hit or not? and the margins are just over time much lower because the incremental cost of adding a user, adding a developer, taking an incremental payment here is basically zero.

So everything should be pretty high margin once you at scale. Yeah, look what happened to Cyberpunk 2077, right? Very, you know, a lot of money spent, a lot of hype. A lot of people bought the game, but it was an absolute disaster. And then, you know, look, you can look at the stock price of what happens there. And that's just one game. That was a very, very important game for that company. here actually like if you have a lot of churn a lot of failure but more and more and more being

developed and more shots on goal that's in a way that that's even that's even better right so I think kind of the the amount of content being created I think it's a huge advantage it's more like a diversified play so that's that's what I and something I mentioned earlier it's mainly engaged in mobile but they're expanding more and other platforms but if you look at another mobile game just like an angry birds mobile app you've downloaded but keeping someone there coming every day spending hours nonstop is extremely hard eventually they'll get tired of it right unless you just can keep creating create creating keep spending keep spending but spending on people making a great game keeping them there making them download the app it's it's really tough

it's in a way it's like you know one app to watch one movie versus is one app that has many movies like on Netflix in a way. It's not obviously the same comparison, but just that the fact that it's a platform that has many experiences is an enormous advantage. No, that's a great. I love the way you frame that. That's a great point. Let me talk about this is actually the risk I think is the biggest.

So we've talked about how they've got this flywheel. They've got a great user time. The biggest risk to me is I think 70% of users are under 17, more than half, for under 12, right? So, like, when I think of a Grand Theft Auto 5, right? They've got a huge user base. Users are really engaged, very similar to Sherlock's. But for Grant Theft Auto 5, let's say I was a big player, and I'm 32. And I decide for whatever reason to unsubscribe. Six months later, a year later, if Grand Theft Auto kind of tries to reacquire me, they're basically acquiring the same person, right? I'm a 33-year-old me. Maybe I'm a little fatter,

but my interests are the same. I haven't changed as a person. If they try, you know, Roblox, your son, five years old, if for some reason your son churns for six months, right, when Roblox tries to reacquire them, they're literally acquiring a new person. Or, you know, I think of when a 12-year-old goes to, when all these kids who've been stuck at home, when they go back to school and engagement goes down a little, when Roblox tries to reacquire them, like, it feels like that's going to be a more difficult thing. So how do you look at this user base, which is extremely young? And obviously, people love to get young user bases because you can form lifelong habits. But I worry a 10 year old playing a video game is going to be a much of much different consumer five years from now.

How do you think about that? So I have two thoughts. I think reacquiring as long as they're doing a good job, would it be necessarily as hard? Because it is a social aspect as well. So maybe my son gets tired of it for a couple of weeks or a month or so. But if his friends are still there and he's not in an age of you're chatting, but I'm talking about older kids. If their friends are there and they're chatting and they're experiencing, you know, you're going to go back. It's like trying to delete the Instagram app or Facebook.

Like eventually you get pulled back if you know a lot of people that are there and are experiencing in doing well the content. I think the bigger challenge is how do you age up the audience? Like you said, I think two thirds of the audience, of the daily users are under 17. But actually the over 17 group is the one that's growing the fastest over the past last couple of years. But anyways, to age up, you've got to change the platform. You've got to evolve the platform. And this is where I get, I think that it's a risk, but it's also an opportunity.

If I rewind and look at Roblox and some of the experiences and how it was and the graphics and the platform, how it was five years ago, you kind of have to go on YouTube and look at images and kind of read things from the past. But it's evolved a lot. It's improved a lot. The graphics are way better. And then as I look at like developers that post on Twitter and are working new beta products and in terms of imaging, graphics, sound, lighting, and you see the quality of that, it's improving a lot. So I think over time, what you want is to kind of evolve the platform, improve the tools, let, you know, if the growth comes from the current users and the money that's being given to developers, that they spend more.

right and then they use those new tools and then eventually the top kind of games are evolving into different things right so what's more relevant you know it becomes it kind of caters to the audience as they age up and and that'll benefit from from having the developers that they do so if developers something i mentioned earlier like if developers are being paid more and they have better tools and the developer marketplace is way better because like they can sell each other different things type of experiences will change. And that's why I'm bullish on them being able to retain users in age of the platform because I do believe that they are changing as they grow and as they get different users and with time and with the investment that they're doing. So what's it kind of

exciting is what are the top games in five years or experiences, right? I mean, I think they're going to look fairly different. There might be some that kind of stick around like the Adopt me game has been up there for a while. But I think if you look at the top 10, the top 25, there's going to be a lot of new things that we're not even thinking about. And some might be kind of temporary things. So they had the Little Naz-X concert

that was viewed by tens of millions of people. They had like the Ready Player 1 author released a new book, Ready Player 2. And then he had like an Easter Egg Hunt in the Roblox platform. And there's been a couple of things that they've done to kind of change over time. They're thinking about doing more things in the educational space. But even Hollywood is going to have to be that I'm confident because big companies are going to have to be here.

So Nike had a partnership that people could get sneakers in the avatar marketplace. I think millions of people got the sneakers. When Wonder Woman 1984 came out, they partnered with Roblox. They created this whole Wonder Woman experience in an Easter egg hunt. And I think just kind of how, you know, every company, every big company and brands need to be on Facebook. I think they're going to need to be on Roblox because they're going to need to engage with people and invests in the platform because they're going to have so many people there. So I think the way the platform is being used will change. And that's what makes me bullish on them being able to age up the platform.

If it's staying the same, the same games are the popular one. and the same users are using Roblox for similar things, then that's where I think that you might just have a younger user base that kind of uses it and sticks there, and it doesn't really evolve. But I do think in five years plus, the use cases will be significantly different, just how they were very different five years ago.

If you and I wanted to go on Roblox and doing it, what are experiences that they, that like you know adults or older people would get because adopt me seems like you just go and you kind of adopt a pet and maybe feed it which obviously I think that's a pretty younger audience though Animal Crossing's huge but you know what are some of the older experiences that they have on Roblox so they have they have a lot of people replicating things um from from other game uh platform but I think there's someone who replicated a big part of the Grand Theft Auto world I'm not sure you know they hadn't really had problems with the licensing of that type of thing but but they do have

tried do you remember um when fortnight did this like galactus marvel event that everyone someone replicated that in roblox and it looks fairly high quality so so if we wanted to engage in that battle um they have a partnership with marvels and that's why i think they were able to replicate that so there are like more shooter type of experiences more but it's it's not there yet that where you and I would rather be on Roblox than you know maybe play Grand The Auto or Call of Duty or even Zelda Breath of the Wild right it's it's not quite there but there are some things that that you and I could have fun in and race you know cars and shoot games there's one that you escape from jail um so kind of like a runner type experience that you're trying to get out of a

type of quasi maze so there are things that you and i could have fun but i would i would you know i'm not going to tell you it's going to be the the the most fun compared to the other alternatives uh adult alternatives that's perfect uh let me talk a little bit more about users because you know in my head i i think you've done a great job laying out why this is a platform company and everything but in my head i look at this and say for the most part you know video games and again world of warcraft is the one i keep coming back to which different model, all that. I understand there weren't.

But, you know, World Warcraft had a lot of these social network effects. Fortnite has a lot of these social network effects. Again, all of these are different models. But all of them have kind of, they've hit peak and then they peter out over time, right? So I guess my, I sent you a tweet, Fortnite. There's a couple other free to play games that kind of copy it that are starting to surpass it. Minecraft, I think, has lost a lot of users, probably to Roblox.

But I do look at this and I worry like, hey, we don't have a lot of examples of video games that have huge legs of, huge legs of growth where they're just super sticky. There are some examples, you know, League of Legends and Counterstrike are both like 10 to 20 years old and both of them are still extremely popular. But, you know, they're definitely past their peak leg. So how do you think about that risk? Yeah, it is a risk. I think it's a huge space, right?

So I think a lot of people can do fairly well. But yeah, you don't want to, you don't want to get to the point where kind of the flywheel start reversing and then you can't really. kind of put it back together yeah and i i think kind of one of the things that gives me confidence is that the average uh user engages with 20 experiences a month so you think about is that like 20 different games right um so it's it's 20 chances that you just different the game so like my son can be on it he might get tired of a particular robot experience but he'll go on to the next one um so that's i think why it's a little bit different like you can get tired of playing battle royale

I think Fortnite's done a great job in terms of adding different characters and different experiences and adjacent kind of, you know, the party mode and concerts and things like that to kind of keep it there. And obviously they're really going after the metaverse type of opportunity. But when it's another particular game, which is soul experience, yes, you can go play Mario Cufford or particular time or Smash Brothers or any other kind of Nintendo game or other platform. But the fact that there's so many experiences that are improving over time, users engage with 20 a month. That's why I think they have a chance to kind of keep you there.

But hey, it's super competitive. Something kind of, I think, Fortnite came out of the blue for many people. Robot kind of came out of the blue for many people. But here's a thing. This company was founded in 2006. I think the product actually launched 2008. So they've been kind of grinding at this for a time.

And if you see a company that's been grinding for such a long period of time and then they have breakout success well into the, you know, almost 15 years or 10 plus years in, I think it's a company that really knows how to adapt, really knows how to push their strengths. And I think that's something I value highly in the company. So very, very competitive, like you said, someone can come out of the blue. But I think they have a reasonable shot of continuing to be relevant in gaining in their user base. over time and globally. Cool. Let me ask, you know, all my questions so far, I've been in sustainability and all this for yourself. Let me ask a different question. I think there was a three quarters of Americans age nine to 12 play Roblox, which, you know, that is just a mind-boggling that. But when I look at that, you know, you're paying over, you're paying over 20 times

booking for this company. We can talk COVID effects on this. But I look at that and I say, oh, well, if three quarters of American are already playing Roblox, all of their growth, you know, has to come from one of two places. They have to expand the category, right, and probably get more people over 12 playing it. And I think you've talked about how you could maybe get that, especially as hopefully you retain your user base as they age up and then you refill that bucket with new users. But I guess when I look at this and I say, okay, 20 times booking, they've already got just about every American 9 to 12 on there. Growth has to come internationally. And international users tend to be they tend to pay much pay much less they're much lower

lifetime value because they they tend not to have much income so how do you think about that like have they already kind of reach saturation people playing five hours a day they've got every american playing it like how do you think about that risk um yeah it is a risk but i think it's it's still nine to 12 um look i mean a one-third is over 17 right so there's still a big pie to take in in terms of the age group so yeah they have have a huge concentration that 9 to 12, but hey, they're doing, they're probably growing fast with the 5, 6, 7, 8, and then they're growing faster overall with the over 17. That means they're aging up.

So they're, that means they, they have a special sauce with that group, but I think they're still at all age groups. And you're right. I think about, about a third of actually, of, I think it might be 38 or in that range or 32, our daily active users are U.S., right? But over two-thirds of bookings are U.S. and Canada. That previous stat was U.S. in Canada as well. So like you said, the minority of users are U.S. in Canada,

and the majority of bookings are U.S. in Canada. So they do have, you're right, that outside of the U.S., our pool is probably not going to be higher, but there's still a huge opportunity, right, to kind of increase the amount that people outside the U.S. are spending. They have a JV with Tencent in China that hasn't launched yet. And Tencent from they've been going to, when they go to Wall Street conferences, they've actually spoken very highly of Robles, excited about the opportunity.

So that's just some optionality there. They only own 51% of it, not the whole thing, but they'll still get a big benefit there. So I think when you think about kind of the global. global space. And this, you know, they're growing really fast in Europe. And some of those markets could have much higher ARPU. And in ages below nine, ages above nine, I think they still have a lot of opportunity to attack. And this year, like, they're not going to grow as fast. And they're daily users and engagement. I think they said it's roughly flat. But obviously, right, if you're, if you're not in school all day and you're all day in your house right you know there's a lot of

more hours that this user group could engage with last year the fact that the engagement hours are flat i think is actually a this year they're projected i think it's still fairly positive so long answer short i think they they do have a big opportunity in the higher and the lower in age groups and then i think globally they still have a huge opportunity one of the things that they do is that if you're a developer in the u.s and you're a you're a developer in the u.s and you you create this game, they're creating the technology, which automatically translate into a bunch of different languages. So if I create this, like, shooter game and it's English, everything's English, click of a button. It can be German, right? It can be, you know, Spanish. They're growing

very, very, they're going fairly fast in Latin America. So I think when you look at the global, the globe, right, and the opportunity that they have here and you look at it more of a social network type of type of platform there's still a lot of opportunity to tackle it's perfect that's perfect um let me you mentioned covid i guess let's just touch on that one more second i think you address it pretty well but i want to make sure you touch you know i i do think you look at this peloton uh any other gaming company peloton zoom all this stuff like this was a mammoth beneficiary of covid right people were stuck at home especially kids were stuck at home no school And you can see that in the financials.

You know, I think, let me see if I can get my model up in time. Yeah, I think in 2018 to 2019, they grew like 40%. And then 2019 to 2020, they grew 100%. So COVID is a 15-year-old company that doubled their growth rate 100%. Like COVID was this mammoth beneficiary. And I do think there is something to, you get a user on a platform who wouldn't have been there. It's a platform. They're locked in a little bit.

So there is definitely a long-term boost, but it is difficult to look at the financial to say how much of this was a one time versus how much is long-term sustainable growth. So how are you thinking about that? Yeah. So the key is that's just what you said at the end there is the key. The key is whether this was just like a bump that's going to reverse or the accelerated people who are going to come on the platform anyways down the road. And just acquiring the user was that much easier because everyone was in their house.

And I think as you go through the comparable this year, going to be very, very tough. I think there's a reasonable chance that they re-accelerate into 2022 and 2023. They had 400 million in free cash for last year. They basically said they're going to take that down. They're going to spend more. They're developing their commercial team. They announced a partnership with Hasbro, which I think is just touching the early days of potential partnerships that they can do so licensing the brand to to it's going to be a monopoly game and then partnership with nerve guns and you're going to have absolutely have nerve guns that you can buy in the avatar store and use and there's going to be a nerve experience within roblox so I think they're

really taking the opportunity that they got all this this um they acquire all these users they accelerated the amount of cash that came in and they're putting it to work and they just hired a chief scientist from invidia and they're putting together a good team to tackle opportunities that it has so to evolve the platforms to keep the growth going so early days um there there are some trackers of companies that've kind of seen them the growth actually be strong still in the early part of this year so that that's a good sign um so the key will be how the 2022 growth looks And I'm reasonably confident that as they put dollars to invest in the platform, keep, you know, basically the platform changing and improving that they'll be able to.

But, yeah, they've definitely got to prove it out as to whether this was just a easy acquisition of people or it's people that were going to be on Roblox anyways. Perfect. What about 50% of the audience is under 13, right? That creates huge content moderation issues. It's kind of timely because over the weekend, there's a Wall Street Journal article on, hey I went and looked and my seven-year-old was in like a dominatrix world or something and you know it's going to raise questions and I do think one of the long-term things is you very

well could wake up tomorrow to a thing that says hey we found child pornography on Roblox or something something very bad and you get investigations app stores kicking them off you know this is in effect this is a company that is monetizing people under 13 now they're providing them you know games and stuff I don't want to say there's But the majority of the revenue is coming from people under 13, and that creates huge issues around that. So how do you think through that risk? Well, first, it's the parents of people, the credit cards of parents of his under 13.

They're monetizing you. They're just doing it indirectly through your kid. No, but it's a great point. And I obviously read the Wall Street Journal article, and I do monitor my son, and I have seen things that are inappropriate, and I have flagged it. And I do think they take it seriously. And I think, look, this is going to be something that they have to constantly invest.

And we've seen times how YouTube has gotten into trouble, has Facebook and other platforms as well, with particularly with kids. You don't want to. There's certain things that kids just shouldn't be seeing online. And I think, you know, it's one of their biggest expenses that they spent over $200 million in safety, something that they take very. very very seriously and it's in all it's a very complex problem because you can have the the the wall street journal article basically show graffiti that was inappropriate in within a game so how do you even detect like a graffiti that's inappropriate how do you detect like a dance move that might not be a dance one can be sexual that an avatar is doing

sound music that's inappropriate for the user so it's a fairly complex problem they're putting a lot of money to it um my experience when i've there's been few but I flagged things and it's been taken out fairly quickly. So I do think that's a problem. But also they're putting a lot of dollars behind it. And I think they can, you know, we've seen over time how YouTube has, you know, basically improved because of that. And we, they're basically going to do a rating system now.

I think that came out in the Wall Street Journal article. And I think that will help out. And we've seen, look, in Facebook, it's, you can't go on Facebook and, you know, You're not going to see porn on Facebook, right? So some of these companies are become really, really good at basically taking things out and they'll have hiccups. But I think they'll improve over time. And we'll see. Yeah, it's not something I can really defend because I've seen sometimes things aren't inappropriate.

But I do think you can see it. It's a line item, right? Safety, I think they call it. Let me look it up now. It's an infrastructure trust and safety is an income statement line item for them. I don't think you see that for many companies. So they're putting the resources behind it. So I think they'll get better over time.

I wonder if you and I are describing it as a risk, but in the long run, it's actually a scale benefit for them and it increases their mode. You know, I think back to GDPR with Google, Facebook and all these. And the interesting thing was, oh, this is going to be a huge expense for them. And then in the long run, it was, oh, no. And some people were pointing this other time. This is actually a huge benefit for these guys because they are the only companies that can pay these costs. Any other startup or something is going to be booted off. And for Roblox, I wonder if it's one step further because not only are they the only

company who pay these costs, but you know, you as a parent, if your child comes to you and says, hey, I want to go download knockoff Roblox competitor, you don't know if they're doing the type of screening. Whereas with Roblox, yes, things might slip through the cracks, but at least you know that they are trying to screen it and you're not downloading. You know, there are lots of issues with apps or where you've downloaded a game that you think's one thing and it turns out to be another. So at least you know there's the effort is being made here and they're probably weeding things up pretty quickly.

Yeah. You know, when you sign up, you got to, you got to, I have basically had to onboard my son, but you got to put their, put their age. You're kind of, you're kind of flagged as under 13 if you're under 13. So you can go into certain experiences if you're under the age. And sometimes there's been kind of things that kind of slip through, but that that will be corrected over time. But yeah, it's a huge expense. It's going to increase as an expense. I don't think that's something that they can lever as a as a fixed cost in terms of operating leverage. anytime soon um so it'll be hard to replicate that there's a billion chat messages a day on on roblox so what are people telling each other right if someone's saying that they're 13 but they're like 50 and they're talking to a seven year old it's a it's a very very complex issue they're going to introduce voice chatting now um things that i've read i think if you're if you're under 18 i think you're not you might not be access to that feature or another age so it's a very complex problem So I think it could be actually a scale benefit, like you said, over time. But it's something that's not an easy problem to tackle.

You mentioned, we've mentioned two things that I think are interesting here. You said a billion messages a day thrown over there. And then robots, right? They've got this digital currency that funds their economy. And I do wonder, like, are there opportunities to spin these things out and make them bigger? You know, like could they spin out a voice messaging thing that Fortnight had the voice message where even if you weren't playing Fortnite, you could use it to connect to your friends, right? And I don't think much is coming to that.

But I look at Robox and they have a fully functioning digital ecosystem. Like, could this expand to be a digital currency? And like, it would almost be too much proving that we're in a simulation if like everything Bitcoin was supposed to be. It ends up that this digital currency, Robux is the digital currency of the future. I don't think that's where we're going. But you could see the possibilities build out. So how do you think about all these like kind of different opportunities to explain the platform?

So in terms of chatting and voice chatting, and if you think about, you know, eventually you and I can watch a movie together within Roblox and things like that and talk to each other and being interactive, I think there's a lot of opportunities that we're not even thinking about today in terms of how you can leverage chatting and communication. I'm not going to say exactly what because I'm not sure how that will evolve, but I'm confident that they're probably thinking about that. I think they've done basically Zoom-like interviews within Roblox when they had the Easter egg hunt for the author of Ready Player 2, Dave Bazuki, the CEO of Roblox, which, by the way, is a very important part of the thesis and the company. That's the next question, actually. But he basically had like a Zoom-like experience within Roblox with the author of Ready Player 2. That's not something that's a feature that's available to basically anyone yet. But there's a lot of things that you can leverage in terms of communication. In terms of the currency, I think spinning that currency, you know,

basically they set the exchange rates, right? And they're going to set those exchange rates to benefit, you know, basically themselves as a business, but also I think creators over. I think I'm, I think you generally want to increase the payouts because I think it's going to be good business in the long term is if you get developers more. So as having that infrastructure where how people pay for the currency, You know, they also have a subscription as well that's fairly new that you kind of buy a certain amount of currency.

And what they said is that people who have the subscription are actually extremely likely to spend the money that they get monthly, but also spend even by even more currency. So kind of having that currency system and payment and knowing how users buy things and interact and then having the currency that developers get that currency and be able to use that same currency to, to pay for things in the developer studio marketplace as well. So there's a marketplace between developers, between user and developers, between users and developers and creators, what they call in the avatar store. Just having that kind of ecosystem is extremely hard. But in terms of, so I think that's a huge advantage of that in the currency, but in just like spinning it out and having it trade on on Coinbase or something like that,

I think that's, you never know, but that's, I think that's not going to happen anytime soon. I wasn't, well, Coinbase, but I was thinking, you know, I could see, hey, you're, you get the Roblox subscription and, you know, 15 different video services or something could take Roblox and kids could go use Roblox to subscribe to. I don't even know. Yeah. There's ways you can leverage it. And I think a part of the subscription also wanted to mention that's interesting is that one of the reasons they say they're doing is that because they want to pay developers who don't necessarily want kind of. of like a to ask users for money so what they do they have a an engagement payout system now that's fairly new but if you're a a subscriber so you're like a roblox premium uh user and you are in a an unexpected game that doesn't require me to spend in the game then that developer actually gets engagement based payouts based on the number of premium subscribers in those games so what they want is developers do not necessarily have to create a monetization system themselves

but to have the incentives that have a lot of engagement and then be able to pay developers who have a bunch of engagement based on the amount of premiums of users that are that engage with the platform. So that's something interesting that's still in their early days. But yeah, leveraging subscriptions and currency and other adjacent type of business could be fairly beneficial to them long term. But my guess will be as good as yours in terms of how that will evolve. I think that paying people based on, paying developers based on engagement in their games.

It's such a great idea, but I do think it's just a really good idea and it's really interesting. And you could see, right, three years from now, they say, hey, we've got a billion dollars in recurring revenue from these subscriptions, you know, put in a number of users who are doing this. We pay, you know, 50% of it out to developers, but value this $500 million subscription stream plus, you know, the average person who's describes we've got their credit card and they're on average. pay an extra, you know, five times in buying one-off things. And we've got developers who are developing these great games that people spend hours and hours in and they're making tons of money without selling anything. It seems great. One last one of the currency, the business model benefit to them as a corporation, as a

business, is that you and I can, you know, buy the currency today. You know, it takes time. So there's float. There's float. We will spend it fairly quickly, but then the developer gets it. They might have to accumulate a certain amount before they cash out. Maybe they spend it to the studio marketplace. So by the time, our dollars go in the checking account of the developer, time can pass by.

So that's why they believe they'll be able to convert over the long term, over 25% of bookings into free cash flow. And last year, it was about 21, I think. the years before was fairly lower. But I think at scale and having that currency, even if you're paying out more percentage-wise to developers, it has huge business model benefits in that sense. And this is a business that didn't need to raise a lot of money throughout his history. I mean, they raised, you know, direct listings, so they didn't raise money there in March. In January, they raised $500 million.

But before that, I think they had raised less than $400 million in their entire history. So before that $500 million. They have a billion and a half in cash, right? And they've only raised like $900 million in their entire history. So I think it shows that at scale, the currency, the infrastructure, the float does have huge business model benefits. Why only 25% free cash flow margins from booking at scale? It seemed just off the top of my head, it seems to this should be higher. Could you like break down a $1,000 of budget?

booking, how much of that is going to a developer? How much that do you think goes to cover overhead and how much drops to the bottom line? So, yeah, so that's what they said at scale, I scale long term. Last year, and so I'm not, you know, completely off. Like last year, they paid out over 17% of bookings to developers when they exchanged it, right? So that's when the developer decides to exchange. So that can be higher this year. There's one thing. that probably will throw the wrench at the reasoning that you think that it should be higher than 25% is the Apple tax, right? So this is a platform that's, you know, three quarters of it is engaged in mobile. And when you buy the currency in the mobile web, you're paying Apple 30%.

So just paying, and when you do it in Android, you're playing Google 30%. So, hey, Fortnite and Epic Games and Apple are battling and people are starting to push back in Apple, but you can't bet on that take reducing. So I think having to pay Apple and Google's a huge percentage of revenues off the bat, I think that's what kind of, you know, pushes down the bookings as a percent of the cash flow as a percentage of bookings long term. But yeah, it could definitely at a huge scale, right? I mean, sales and marketing was like 3% of last year's bookings. This is a company that hasn't had to spend a lot of money in terms of acquiring users. So you're probably right that it should be some people have said it's conservative, the 25% plus.

But I do think having to pay Apple and Google a lot of money is going to put pressure on that, though. Yeah, this just seems to me like off the top of my head. And again, I do work. to study these things, but I haven't done insane amounts of work. It seems to me that this should be a 40 to 50% to 50% free cash flow margin business in the long term. But that's really interesting they're paying the Apple tax because you get a free call option, right?

If the Apple tax ever goes from 30 to 10%, well, they just took their long term margins from 25 to 40%. And they also, with their user base and their dedicated user base, I'm surprised they haven't pulled the Netflix and said, hey, you've got to go put your credit card info in directly into a website and just try to skip the AppleTimes. Yeah, they do gift cards. So if you go to the Walgreens or a gas station or any store, basically you can buy a gift card and you basically have to go to their website, you know, on a PC or a browser and then put that gift card in cash in an account, Roblox that then gets converted into currency.

So there's some loopholes. They kind of nudge you to get the subscription outside of the app because I think you get a better kind of you pay a monthly amount and then you get a certain. amount of currency. And I think if you do that outside of the Apple app, you do it in a browser, you get a little bit more of the Robux currency. So there are some things that they can do, but I think they've decided not to pull the Netflix quite yet in terms of whenever you want to buy currency. It's got to be outside of the app in terms of a browser. Yeah. No, it's just interesting because you say 25% free cash margin. My first thing is like, they're already at 20%. This strikes me as it should be way, way higher, longer term. So I feel like

there's something interesting there. Let's talk management. This is actually the area I've done the lease work, but can we talk CEO management, how you look at them? Yeah, I think it's a really founder, visionary-led company. Dave Bazuki founded this company in 2006, and he had like a physics rendering 3D kind of company before that that he sold, and then his then started Roblox, which is what he really wanted to do and kind of simulate a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a a, a, a, a, a, a, a, a, a, a, a, a, a, a. physics environment in 3D and where people can come in there and play and then they can create their own things. And it was, he kind of pushed that vision on fairly early, fairly visionary. He had a co-founder that unfortunately died of cancer a couple of years after founding the company.

But he, they have like developer conferences every year and he has his big speech and talks about these big goals of when, you know, when the president of the United States will use roadblocks and when there'll be a robot, when does, when will IP create out of robocs that will be made of movies and put these huge goals in front of the company. He has super voting shares, but one interesting aspect of it is that after 10 years, his super voting shares will revert to normal loading shares. So that's not something I, you might have seen that with other companies before, but I don't think kind of like Mark Zuckerberg is going to convert his super voting shares.

There was a lawsuit over Zuckerberg converting his shares. The only company, only other. company i can think that did that i believe yelp did that a couple years ago uh yeah so 10 years is still a huge amount of time but i think it shows that kind of like hey you know either you pull this off in over 10 years or if it doesn't really grow baby then it won't it won't matter but a different type of of company they they kind of they try to create kind of a sort of like i think what amazon calls like primitives in terms of like little groups within the company and then kind of foster kind of competitiveness and putting out goals in Korean autonomy.

They recently, a couple of weeks ago, they had like their all employees get like a spring break apparently. So you get a week or so of like just kind of relaxing. But it's kind of quirky in a way, visionary way, but different and long term focused and thinking really kind of grandiose. And I think he's, you know, been battling and creating and fighting for this company. over, you know, over a decade and seeing it grow and now he has a lot of resources to really push of where he could really take this company. So I think Dave Bazuki is an extremely

important part of the investment in the company and having his kind of, because, you know, when you have a CEO who really believes in where they're going and really puts up the capital behind that and they're executing, I think that's very powerful when you have a more business minded of like, hey, how do I extract capital? How do I, you know, maybe pay it out to shareholders? And obviously, companies are in different life cycles and different strategies are warranted. But I think his kind of vision of pushing that, I think is really important for the company is there's many of this. He's been on a couple of podcasts and he's talked about how he views the company and the two flywheels that I talked about that he mentions.

So I think it's a very, very important part of the company. It'd be very mature. if he all of a sudden steps away or is out. It's also shows that like, hey, this is a company that probably would be very, very beneficial for a Microsoft to buy, for a Facebook to buy. I think there's a quote that in my write-up, I have a Mark Zuckerberg of like, what's the perfect social network? Like, what's the holy grail social networks is really when you feel that you're experiencing something with somebody else in the virtualist race. And this is what they're shooting to obtain. And it's really powerful, you know, if you go with a friend, write Formula One cars or, you know, voice chatting, chatting and then spending together money. And that's more powerful than like kind of like comedy on a picture or liking a picture or something like that or seeing a story and putting an emoji reacting to it.

So I think having him there makes like, you're really not going to sell the company because they're just going to really go after that opportunity. So I think it's a really important part of it. But I do think it's a valuable business for others. And I think I'm sure Microsoft would love it in another. But I don't think that's even that's going to be, I wouldn't say that's part of the investment case at all because they're really going to go after the opportunity that they see. So companies got $1.4 billion in cash on their balance sheet. They've only raised $900 million. I don't think they're ever going to need to raise money again off this round.

I mean, the company's already generating cash flow. I think this is going to just, you know, I had the discussion earlier. I think this is going to mint cash flow going forward. So my question is, how do you look at capital allocation going forward? Like, I've got my personal preference of the thought, but I'm interested to you. Is this, are they going to go do some acquisitions, aqua hires? Are they going to look to technology? Is this a return of capital story?

How do you look at that? I don't think it's a return of capital story. There's a couple of things that are going to do. I think that short term, they're going to tape down free cash flow. They had over 400 million last year in free cash flows. I think short term, they're really going to build up a better commercial team, more people. improve the tools. They try to not rely on third-party cloud services.

They want to have it all in-house. They're spending a lot on cloud infrastructure. And I think that they believe that's a benefit to them long-term versus basically paying a rent to AWS and Microsoft. The other part is they have made some smaller acquisitions. They made like this tech company that uses kind of AI to kind of detect your kind of intelligence, really, an IQ, like a more advanced SAT, based on AI.

They bought like an avatar company as well. Why are they detecting people's intelligence? Well, I think they want to spot talented developers early. Okay, okay. And then give it. So what they have like camps and conferences where they find like really like young promising developers that create a game or an experience that is getting a lot of engagement and they want to give those people more resources.

Some of these are fairly young, and they're trying to evolve the platform from being kind of like, you know, a random person working on a game and giving them tools. So kind of pushing them to, like, create teams, create companies. There have been some venture deals for companies that are exclusively making games on Roblox. And so they want to spot talent early that are creating great games and content. And I think that might be a part of the reasoning for the acquisition. But you can just see why you say, oh, yeah, here's this company that's got a bunch of children on it. And they've got AI to sort out intelligence pretty early. Yeah.

Oh, that seems like it could go weird. Yeah. Well, I mean, yeah, I could see that. But, yeah, they spot talent early and, you know, they have those IQ tests. They can give those people more resources. But, but yeah, I could see how that could sound weird as well. So let's talk end game here. I agree.

I think a lot of different companies would like to acquire. them. I think we could have a debate on price and value and all that. But right now, Roblox trading $75 per share valued around $40 billion. I think you laid out in your letter how you think the financials look, call it five years from now. But I'll take it from the horse's mouth. When we're looking at this five years, what do you think the financials look like? What do you think kind of the base case upside that you're playing for when you buy this stock is? So I think there's two of things. either this really becomes a platform that can have hundreds of millions of daily active users. And then if you're at, you know, I talked about a scenario where they're above 300 million

and you can really easy get to extremely high free cash flow numbers there. Or this becomes a sort of like, they kind of like, like you said, 75% of 9 through 12, they might get a little kids a little older, a little younger, but it's really not going to expand of those hundreds of millions and it'll just probably generate a couple billion or a billion over a billion in free you know they were already 400 million last year so you can get a couple billion or a billion and it'll be a high multiple and maybe it won't be worth as much but it won't be kind of a huge destruction of value what I kind of talk about is like look this is a global business highly highly engaging very very social where they're very

involves 8 million people developing. Obviously, the cream of the top basically make all the money, and it's a lot smaller. But it'll be more over time, more shots and goal in terms of having huge experiences that explode on the platform. And if they can keep pushing, they're evolving, on grow the audience. I could see them get to the hundreds of millions of daily active users that Snapchat has. I think Snapchat has around over 200 million. active users and forget the exact number. And this business is, this platform is way more engaging.

People are on their more. They're spending money. They're maybe not chatting with friends as much, obviously, as Snapchat, but it can get close to that. And if you get to those numbers, right, if you can just get to the daily active users that Snapchat has, is I have a very, very powerful business model that just has, it'll make the free cashful multiple look fairly low, right? Because if you can get to 300 million daily active users, probably you're going to get tens of billions of revenues and at the margins that we talked about, it'll fairly attractive compared to today's stock price.

I think it'll take time, right? You know, not necessarily in five years to get to 300 million users. I think within 10, they could probably get there. But this is also something that if it's really, really working, it's going to accelerate faster at some point. Not this year because you compare it with COVID and they're still building up different. capabilities. But that's how I really think about it. And look, the caveat is, you know, you and I are invested in the cable business. And we both like, for example, charter and charter prints out free cash from the back stock. This is not charter, right? I don't size it like a charter.

I don't look at it as a charter. But I look at it as a business that they've really done something special and unique, very, very hard to replicate. And they really can go after the bigger a global opportunity that they're seeing, it's just dwarfs the market cap that they have today. And the business model is fairly, you know, doesn't consume capital. They have float and they have a focus management team. So that's how I would sort of put it all together in terms of how I see the opportunity and weighed it appropriately. The two things that I mentioned charter in there and you said they buy back.

I mean, when I look at this business and the economics and the free cash flow of it, I would be shocked. if they're not buying back stock in the next call it two years. And I think over time, this becomes a levered return on capital plus growth story. And you mentioned Snapchat, which I do think is interesting for Roblox where, you know, Snapchat, when it was at $5 per share, there were a lot of stuff going on. But it was getting value like that because people looked at it as a product at that time, right? It was a one app company with a product. And now it's, I don't even know what it's at, but it's, you know, more than 10x.

And the difference is they evolve from a product to a platform. and I look at Roblox, and I think they're getting some credit for it. You know, if they were only getting valued as a product, they're a $5 billion company, they're getting some credit for it. But when you look at the platform and, you know, I do have some visions of YouTube here. I think YouTube, bigger general audience, but a lot less engagement. You know, if you look at it, I'm buying YouTube at a $40 or $50 billion valuation, like you can see the big upside if they successfully execute on that kind of platform opportunity.

Absolutely. I agree. Cool. All right. Well, I think we, this has been really interesting. We've talked to a ton. Anything you want to say to wrap this up? Anything you wish we had hit harder or anything? No, I think, I mean, I think we covered, I think we covered basically all the, all the main points.

Cool. Well, hey, this is super interesting one. You know, I could just see running this back. I don't have a position now I'm going to keep working on and looking at, but I could just see running this conversation back three years ago and being like, oh, yeah, it was a 5x. And here was the exact thing. It was buying into YouTube early. Or I could also see, oh, yeah, Microsoft bought them for pennies on the dollar. Yeah.

The network effects. They could also have a hiccup and then have a decline kind of like Snapchat gave where people lose trust. And then maybe that's a bigger bargain opportunity. It's not out of the question. But there are a lot of scenarios of what can happen here. But I do think that long term, if they do execute it, the upside is fairly big. All right. Last question.

Falcon and Winter Solar, your five episodes in, how are you feeling about it? far feeling good uh love it man um they that i wonder you know it's kind of nice to explore those characters and in in more in death but i feel like six episodes seems tight where where this is going but i i hope they can stick the landing um because it seems like it's going to culminate in a big kind of a kind of battle but it's pretty impressive what what what disney is doing with how they're upping their game. Marvel Studios is upping their game for Disney Plus, so very excited about it. How are you liking the show? I've really enjoyed it. I didn't like Wanda Vision that much. I thought it was just way too slow and there was always that hint of mystery, but I've just

really loved, I enjoy it, but I love the moments where you get like the quiet time with Sam at home and like when Sam went to the bank and it was like, you've always wondered that, but and it drove the plot, but it was also just really interesting to see like, hey, here's this Avenger who doesn't come from money. How does he get money? Bill Brewster called me. He's like, are you kidding me that Falcon can get a loan from the bank? This is a V.S. But I thought it was funny.

So it was nice those moments, you know, where they're quietly, you know, Bucky and Falcon, they're kind of building, you know, repairing the boat and talking and chatting. And all of a sudden you get, I don't want to, you know, do spoilers, but different angles from different movies kind of colliding with the show. So it's fun. It's a lot of fun. I think I'm excited. The trailer for Shang Shi dropped, I haven't watched it yet, but dropped this morning.

So that should, that should be fun too. For those who don't know, Francisco, you know, he, again, only a handful of stocks. And one of them is Disney. So you got to ask Disney. And maybe next time we'll be talking Disney. We'll be talking charter. Who knows? But Francisco, this was great.

Thanks for giving the Shrewblocks thesis. And we will chat soon. Awesome. Thank you.