Zynga Inc (NASDAQ:ZNGA) 39th Nasdaq Investors Conference Call December 5, 2018 10:00 AM ET
Frank Gibeau - Chief Executive Officer
Q - Unidentified Analyst
[Call Starts Abruptly] second day of our Nasdaq conference. We have -- I hope it's been a productive use of your time. We're thrilled to have Frank Gibeau with us from Zynga. And Zynga is a -- it's a great story. It's gone through a lot -- was it [Technical Difficulty] I think the timer isn't going either. Zynga has been an incredible story the last couple of years and really Frank is quoted in the architect. Behind that, he's been the CEO since March of 2016, really 25 going on 30 years of experience in…
With the 25 years of experience in the gaming industry. And it’s always great perspectives for what’s going on in gaming, what’s going on in that at Zynga. So thank you so much for joining us…
Pleasure to be here…
Before we get started, we always have the risks and disclosures. The text is not with me but please note that any important disclosures are available on www.morganstanley.com/research disclosures for any company’s named and its presentation for any disclosures associated with Zynga or any companies at all. Frank may make some forward looking comments. Specifically is based on assumptions as of today and for any more details on the risk disclosures there, please look at the Zynga's 10-K.
I wanted to start with a question just on the turnaround story, and it's almost like you wanted to say it again, don’t call it around anymore, because you guys have come so far and where you were versus where you are now. And so, I wanted to first ask you if you can just talk about the margin improvements that you’ve delivered to-date. And where do you see the margin trajectory of the business going forward and the key drivers to get there.
Okay. About 2.5 years ago, I took over as CEO of Zynga and started to build out a management team. And we started by looking at the Company’s basic strengths, right? And in the turnaround you want to find where you have heat and where you’ve got some leverage. And we saw it in our life services business. We saw it with Words of Friends, with Zynga Poker. And we had CSR2, which is a racing and it was just about to launch, but we’re doing too many other things.
So we went through a pretty structured reorganization, we looked at reprioritizing new games. And it came down to the idea of where did we have our best and our brightest and where we could put some of those work. And we looked at the business and it was $700 million top-line, which was pretty good. But it was only generating about 2% on the bottom. And there was just so many leaks in the bucket as you flow through from there, R&D was too much, marketing wasn’t well spanned, and we’re building too many games. And we weren’t really spending any time on our big games.
They were forgotten about their life services, so we reoriented the company become a live services focus. And the mission in this first stage was to unlock the value through better execution. At the time, Zynga was not consistent in its messaging about what it was going to do and it wasn’t good about executing against its goals. And so we didn’t have a lot of credibility with investors with our employees. And so we set on a goal of we’re going to unlock the value by focusing on these games and we’re going to progress against margins. We’re going to grow the top-line but really what we need to do to get back is gaming is such a high margin business and it’s a great business to be in, we’re not really like amongst the worst companies in terms of generating returns off of revenue that size. And we started our first company meeting we put all the companies in the industry and layered this out on that front. And so we set on that plan and over the 2.5 years, we have grown the top line, consensus has just north of 9.50, so top lines move nicely.
And then in our last quarter, we generated 21.6% on the bottom. So we've seen a nice lift on that bottom it's largely being because we focused back in on life services. We had very high DAU audiences on these games but we weren't innovating. We weren't bringing out new features, new content that would bring players back that would get players to play more that would acquire new players into these franchises. And Zynga has a tremendous history of building big games. And so there's a lot of lapsed players as well. So we embarked on how do we acquire new, how do we get existing players to play more and how do we bring these lapse players to come back and it was about getting new features in the Zynga Poker, new features in Words With Friends to get CSR2 out and successful. And that core mobile business has been growing very aggressively, It's been the engine for what has delivered the results over these last two, three years.
And for the margins, you're in the mid 20s I think you talked about reaching the 30%. What are the keys to driving the next leg to that 30% peer level?
We set a goal that we want to be in the same conversation with our peers in the industry. Now, our 21% is off of reported bookings number, it's not net revenue but it's right there. When we look at getting to 20%, we felt like that was base camp one. And in order to go to the next -- get to the top, we needed to start to look at a new product pipeline that would allow us to go from 20 to 25 and then 25 to 30. And recently, we announced relationships with Star Wars, Game of Thrones and Harry Potter. And the reason that we went after those brands was they were globally appealing brands, they're brands that you could bring in huge audience day one. And with the right game team and right designs, we felt that we can really in a high probability way create some hits that can fill out the rest of our portfolio.
So as you think about some of the new product announcements that we made related to there, we also talked about FarmVille and CityVille bringing back two huge brands that helped get Zynga on the map over the years to rebuild from the ground up and re-imagine from mobile. And those are going into test market in early 2019. So if you think about the next year and the year after that, there's this new pipeline of products that will help drive the top line and they're in a position where they can -- they're additive to the existing life services business. We'll leave 2018 with about $1 billion life services business and it's not a flat business, it's growing high single-digits low double-digits in a given year.
And as we think about that as a strong profitable base of those margins that we were talking about and you layer in new games on top of that, that's the pivot that we're taking from the turnaround stage of Zynga to now much more about the growth stage. The other thing that I'd add is that we have a fairly robust balance sheet. We've got $450 million in cash. We own a building in San Francisco that's very valuable. So we've had a really good track record so far in terms of bringing in some companies to partner with. And we'll look at that as we continue to focus in on growth, we'll look for some growth assets out there that we can then layer on top of the new game pipeline on top of the live services, and we feel like we have a compelling plan there.
Got it. Just to drilling a little bit to that the existing $1 billion, which is largely these forever franchise. You mentioned how you had all this IP and you really did improve the monetization on that front through live services. Can you just talk some of the learnings of how you can bring in more DAUs, get more spending and engagement on DAUs and how do you think about continuing to drive engagement higher and monetization higher at some of the core forever franchises, going forward?
I think if you look at gaming over the last 20 years or so, the power of franchise has increased every year. And if you look at a concentration of revenue, and it doesn’t matter which platform it really, really concentrates in big known franchises. And if those franchises continue to innovate and if you put new features and new ways of playing if you can sequel, you can keep them very alive for a very long period of time. And so at Zynga, we call them forever franchises and they're basically franchises that can do over $100 million a year and they can last for five years or more. And the more of those you have the better your portfolio, the better your growth and your consistency. And if you look at Zynga Poker, for example, that’s 10 years old, Words with Friends is now eight years old and they’re now seeing the best quarters they've ever had.
And so when we embarked on the process -- on the program of how do we keep these things vibrant, how do we grow them? We started with the idea that the relationship that the player has with that game is based on the fact that the game needs to be high quality but the game needs to stay fresh. It means it can’t really, really die on the vine in terms of it gets old or it gets repetitive. The hardest thing to solve in mobile gaming is engagement and retention, and that’s where you focus all of your efforts. Monetization and acquisition are easier to solve than long-term engagement. And if you don’t have long-term engagement in a mobile game, you pretty much have nothing, because it’s a free to play model. And so at the very earliest stages of development, we look at how do you solve that for a new game but also when you’re looking at a live service game, Zynga has absolutely tremendous product management data science capabilities. It’s something that Mark Pincus and the team build on Facebook and it’s really carryover into mobile.
So we have really good sense of how players are doing and how long they’re playing, how many sessions, how many moves, how many hands of Poker they’re playing per day and we look at those metrics very carefully. And so when we look at growing the live services, it started there. And we said, we’re going to look out five, six quarters ahead and we’re going to pick each and each quarter, we're going to introduce new content and new ways to play that are going to move the engagement and retention metrics in a positive way. And so we calculate expected outcomes for every one of those investments, every engineering hour is looked at and measured against those expected outcomes. We look at ways that we can bring in new players through viral flows, through social game play. We look at ways to get laps players to come back. And we have a process that we share like to every month and that our teams go through almost daily and we go through those, we call them bold beats and we go through them rigorously and continuously in a very strict production cycle.
And so for Words with Friends, we’re already working on the bold beat for next Christmas on CSR2. We’re already working on next year. And like, for example, the CSR2 legends will be that just released, it's off to a great start and we’ve been working on that for a year. And so by removing, oh my gosh, what are we going to do next quarter, if I think that far out ahead and building the cycles and the process, we really have been able to get into a much more predictive roadmap. And we've also been able to institutionalize the learning from one game to the next. So if we have a breakthrough in tournaments in Poker, that’s something that we share across teams in a very consistent way. And it’s really benefited a lot. And it's something that I learned when I was at Electronic Arts on how EA Sports hit, the start opening day season for every sports and that was a whole production competitive advantage and methodology that was designed. It’s something that I saw could lend itself very well to live ops at Zynga. And so that we applied that thinking and talent against that idea and that’s what’s been secret for us.
I think it’s interesting because you do have so many years of experience of understanding how to develop games and develop successful mobile games. And now as you mentioned earlier, there is a pipeline with some really exciting licenses from Star Wars, Harry Potter and Game of Thrones, it’s pretty strong. I think there’s lot of good brands there. I would imagine that someone in this room is a fan of at least two, three of all of those, incredibly strong brands. So as you approach that new potential IP, maybe talk to us about the key milestones that you're focused on and making sure that you execute on those opportunities. And how should we think about the margin trajectory for the business that you invest in these new games and hopefully harvest them after they launch.
In mobile, it's different than console in that R&D is single-digit millions to get a mobile game built and into test market wherein console it's much higher than that. So actually the capital requirements of a mobile game are in the marketing, it's not in the development. And so what that means is you can spend a lot of time focusing in on the earliest -- you should spend a lot of time in the earliest stages of figuring out long-term engagement and how the game will acquire across markets, across channels.
And so at the very earliest stages of development on new games, we look at how does the game going to with the cost of install going to be, what's the lifetime value of that game potentially going to be based on the design, the meta game that you build into it, the category that you're in. And we use a lot of competitive tear downs and a lot of interesting things to get a sense of what's the margin contribution going to be of that game at scale and over what period of time. And then we layer it into our models to see as we build out the portfolio, how that will take us from the journey from 20 to 25 and 25 to 30. And then how do we look at the licensing costs of these products and how does that help offset the cost of acquiring players. It is a license like Star Wars and it brings in a lot of players they want, we don't have to spend as much in paid acquisition. The paid acquisition, you do spend is a lot more targeted and a lot more effective. And there's a lot of puts and takes that you go through as you model these things out and as we looked at our portfolio on this ascent from 20 to 30 over the next couple of years and that's all part of the plan that we're working on.
And also the mix of titles in the new product pipeline includes a lot of wholly owned IPs like FarmVille like CityVille. The Gram studio that we are partnered with over the last year, they're working on some new games that coming from the Merge Dragons! Family, so it's pretty exciting.
There's a lot of debate in the gaming industry right now around, there's been a lot of volatility in the stocks, the highs, the lows, et cetera. Some of the discussions that I have with investors are, are users tapped out, is monetization tapped out, is gaming broken. So I guess as you look at your portfolio and you have so many different levers to pull and try to drive monetization, whether it's DAUs more spend, a higher percentage of DAU spending, a higher spend per DAU. Could you just talk to each of those three opportunities and is any one materially less than the other two at this point?
I think if you've been in the gaming for a long time like I have, it's bit of a dinosaur, you tend to have gone through a lot of cycles, right? And so -- and in console, it's very much a hardware cycle type of flow. Mobile is very different from that standpoint. It has different types of flows in and out of it. And the PC is one of those categories where people keep forecasting it's going to die, it sure doesn't die. So it still grows. And in fact, there's more innovation happening now in the PC with what Epic is doing and Steam is doing than ever before. So overall, the gaming business right now is under some pressure. And there's been some audience execution issues recently that has caused a lot of churn in it but overall, more people are playing games than ever before. There's more markets coming online globally than ever before, in the emerging world in Asia outside of North America and Western Europe, there's really vibrant mobile markets and PC markets starting to emerge. So the long-term nature of gaming is in great shape.
And as you look at the device proliferation, certainly in mobile where you have very high performance Chinese phones going into emerging markets, better and better phones in western markets, you have 5G on the horizon where you're going to be able to change the content delivery model, you're going to have higher performance. I really like where gaming is going. I especially like where mobile is at. And for a long time, people had talked about the dream of a cross platform play, it’s finally arrived. You’re able to see with Fortnight and PUBG that these traditionally segmented and segregated platforms weren’t able to talk to each other now talking to each other for the first time.
So I think setting aside a lot of the short-term turmoil, I think the sector and the future is very bright, especially for a company like Zynga where we’re looking at the global market, we’re fully focused on mobile, it’s existential for us, it’s not a hobby. So we can really reap the benefits of that focus. And I like how -- if you look at the competition between iOS and Android, if you look at the competition between Microsoft, Amazon, Google for the back and there’s a lot of innovation that’s going to come from those things. And in particular, I’m excited about the impact of 5G on mobile and what’s going to happen there.
Yes, the fact that maybe in the last two days we’ve seen the idea that take rates to go from 30 down to 20, potentially even 12 with Epic. Just fascinating to think about where everything is going…
Yes. I mean, the digitization of the console business going away from retail had a huge impact. And one could argue that that’s largely been realized. But if you look at it in terms of mobile and how the platform providers and what Epic and Steam are doing on PC, there’re still those opportunities out there. I also think that there’s tremendous opportunity with business model innovation. Subscriptions are very prevalent in other forms of entertainment, linear entertainment, whether it’s music or film, Netflix or Spotify. If you look at gaming, it’s just starting in its very earlier stages.
And I think it’s very obvious that there’s going to be franchise level subscriptions in mobile conceivably companywide ones. But in general if you look at the take rates on ARPDAUs or conversions, those things are heading in the right direction. If you look at our company, in particular, the last 2.5 year we have more players, we’re converting more players than the amount of money that we’re generating or value that we’re giving to players is generating more money for us per player, and then we open up more of those opportunities with new business models and new platforms and new markets, I think it’s all positive.
It's interesting because when you talk to generalist investors about video gaming and you say mobile is the biggest and the fastest growing, most general don’t know that. And that’s really what you’re capitalizing on. The one area I think also that it’s important going to get out, because you've seen mobile and people say what it’s all China and Asia. And so maybe talk about some of the M&A and how you're positioned now for a potential at least some assets that could play into those markets?
Yes, over the last couple of years, we’ve really focused in on two elements related to our coverage. And the first was geographic. We have pretty good demographic, 60% of the players at Zynga are women. So we have a really nice blend. We’re not at the traditional core gamer company, our brands like Words with Friends really -- and the Villes really appeal broadly and we reach a lot of ages as well. So we felt really pretty good shape there but where we we’re under indexing certainly was in Asia and on Android. And Android is what powers a lot of these new emerging markets.
So we’ve undertaken a lot of efforts to optimize and start to build for Android, search for Android earlier in the development process. You have the tendency with Western based game teams to focus in on iOS at the end and support exercise. Android, you have to flip that around in order to get the high performance games. We had to look more aggressively at how the fragmentation within the Android market could be mastered and how to use that complexity to our advantage. So we've started to simplify and lower the minimum standards for some of the games in terms of performance levels.
And then we started to look at companies and particularly we've recently partnered with Gram and Peak, which are based in Istanbul. And both of those companies had very good exposure in the Middle East, emerging markets. And in Asia, we have Merge Dragons!, as an example, one of our franchises that's doing very well in China, and Japan, and Korea and starting to take off. So we were making -- taking these steps and it's one of those things we can't just put a PowerPoint up that says we're going to be number one in China, right? It's farcical…
And so what you have to do is you really have to go game by game, partner by partner and start to build that momentum and that base out. And we really like markets like Korea and Japan, Southeast Asia. We've actually even started to build games for the Indian market. We have a very large studio in Bengaluru, which is pretty much the top and largest gaming studio in India. And so we started to build local games to test out and understand that market, and that's the beauty of mobile. And there's 2.5 billion smart devices, you're never going to reach market saturation. And as new markets, whether it's India or Nigeria, or Southeast Asia, as they come online there's vast audiences. And as the purchasing power in those markets start to raise, smart devices and entertainment are amongst the top three things that folks want to buy when they have that ability. And so long-term that's why I'm so bullish on mobile and with the infrastructure improving constantly and with the devices constantly improving and getting more price performance, entertainment is right there to benefit.
The other area, I think it's interesting from a consumer value proposition and offering is messaging. And messaging is such a rapidly growing form of engagement on mobile. We see it on Facebook and Messenger, and WhatsApp, and all these platforms, WeChat. So maybe talk about what you've done -- I know it's very early in messaging. But what steps are you taking to position yourself so that Zynga can really capitalize on these billions of people who are messaging every day?
Yes, we have to think about it as a platform, first and foremost. And I think that if you look at LINE, Kakao and what WeChat have built as a gaming platform in Asia, it's huge it's profound. And in the West that doesn't exist. It's odd that the more social device is in your phone and more social part of the phone is in chat but there's no way to really entertain as much as you could there. So that was the thesis we started with. And then there's ways to monetize that channel in a way that isn't disruptive to the game player or the social liquidity and that's through advertising.
We have a very robust and good advertising business. I think we're amongst the top gaming platforms for advertising. And so it all fit together for us. It's very early days and there's a lot of structural and platform things to go through. But we like the idea that Zynga can entertain and brings games to life and create that social gaming experience in any platform, platform agnostic really. And we think of chat as a platform not as something that isn't a serious thing, is you have to design specifically for it.
You mentioned the advertising business. You do have one of the largest mobile advertising businesses, Words with Friends as advertising associated with it, et cetera. Maybe talk about the one or two key factors that you see driving that ad business as you go into '19 and '20?
Right now, advertising is around 25% to 26% of our total revenue. It's up 47% year-over-year. So it's growing very fast. We have a really strong team internally. This is not a team that plays golf with advertisers is they're all data scientists. And what they do is they look at the relationship between the ads that you're serving, the number, the tie, the unit, the creative and the impact that it has on player engagement. And we have a lot of specialized that we developed over time, algorithms and things that we have ML on it. But we try and understand exactly the impact of advertising on the player engagement. And what we find is that certain ad units actually drive engagement improve engagement.
For example, we have an ad unit that which is watch to earn. If you're playing our CSR2 racing game and you get to a point where you want to buy something you can actually watch an ad instead and we’ll give you currency, we’ll give you an object in the game. And you’ll watch that ad, which the advertiser loves because it’s a high quality impression, it’s a guaranteed impression it’s in context. So they feel good about the ad. And it demonstrates the click through rates so we can put that back. And then the player gets content that keeps -- allows them to keep playing the game. Whereas before you put up an in app purchase window and they say, I don’t want -- I want to do it or they just move on to the next thing. So we’ve actually found ways to make sure that the advertising experience inside the games isn’t disruptive and negative but it’s actually positive engagement and advertisers see that as a huge win.
And so we’re never going to have the same level of user data like a Facebook will have but what we do have is advantages. We get close on a lot of fronts but we also have the context advantage and we have the value prop advantages and if you watch ad and gain value and they see that as a very beneficial thing. And that’s been the key to differentiate us from a lot of other. And we have all the other standard stuff like interstitial manners and other video units but really that’s how when we’re talking to advertisers that’s how we really stand out. And that’s what’s been one of the core elements to driving into that data science focused on engagement, tied back to high value context displays of advertising. And we started to expand the footprint, the inventory and the number of games that are carrying ads. And we’re going very slowly to make sure that we don’t ever disrupt that engagement.
And the moment we see a player engagement starts to fade, we immediately go into protocols like is it the copy, is it frequency, is it the type, and we shut that stuff down until we understand why and then we can scale it back up. And it happens all very quickly as a daily thing that we go through, but I think that’s been the case. It's very -- on paper seems like an easy thing to do but when you actually go into operate it, there’s a lot of nuance in there.
The nuances of operation and game development an area where, I know you’ve made a lot of great changes to the way the game development process works and it’s impacted your R&D. So I guess for the audience, I’d love to hear you could chop open the onion a little bit and talk to us about some of the changes you made and how the teams go about making games. How is your R&D split now in between live services, new IP and how do you prioritize the budget at this point?
Yes. So for the prioritization absolutely is -- look, we’ve got $1 billion live services business and it’s growing, we keep doing that, don’t put that at risk, right? Because we have a bit of a saying, which is everything new fails. So what does the business look like and make sure that that’s a compelling business. And so we start there. And then we start to go into the first issue is the hardest thing in a game to solve and mobile is engagement, first of all engineering is like figure out what the hardest problem is, solve that one first. So it’s a very earliest stage of the development and we have very few people in the game.
The first thing that we’re looking at is does the game design between the core loop of what you’re doing and the strategic meta-game systems, do you have engagement figured out? And we start to really prototype, test and look at that very carefully, very early on. And if we can’t get to a satisfactory answer, we won’t. It’s so fast so often early when it’s not costly and you can you shift to other things. So that’s kind of -- we look at that a lot and we do a lot of testing early on. That’s the beauty of mobile is because the R&D on a relative basis is cheaper than a lot of the other gaming consoles, you can go out and try things and test things and test markets and learn a lot on the choices that you could make.
So very early on and we call it marketing R&D. We’ll actually mark-up a store of what is the presentation will be like and then we go into test market and test it with players. And we find we’ll test variants of this feature set versus that feature set, this intellectual property versus that intellectual property. And there has been plenty of cases where the game play elements people will be like, awesome, love it, but I hate the intellectual property. I don't want to go experience that universe or that world and then they'll make a shift and you'll actually make the changes early on. We're still in a pre-development stage where we haven't really scaled up the team fully into production. So you try and remove as many unknown as possible, you try and look at engagement as early as possible. And then you just you leverage the fact that you can test things with folks in mobile and you make good decisions.
I think that's why Zynga's competitive advantage and product management data science is so compelling from my perspective where game development is really the balance between art and science. It's the creative conception of this place that you want to go but you can actually value the creative choices along the way and you can prioritize them differently based on how players will take to them. So very early on, we'll look at what's going to be the cost to install, by category, by platform, by country and various types of creative, what do we think the LTV, lifetime value of the player is going to be and we'll make judgments on whether or not this is a worthwhile use of capital and the engineering time that it's going to take to build the game. So that's how we really remap new game development.
I talked earlier about the bold beat process where look six quarters out, look at each quarter and trying to design those tentpole pull events that excite people. The combination of those two things is actually -- it's pretty manageable. And from an R&D standpoint, we make sure that we zero base budget the live services, so that's covered. And then we look at new game development from the standpoint of -- if live service is working, we don't have to rush a game. We talk about some of my experience in the industry, I've been around a lot of games that bombed too. And I've learned a lot from the failures coming more from the failures than not. And more often than not, it's, oh, my gosh I got to make the quarter and so you rush the game. And ultimately, the player doesn't care about your production problem. All they care about is a great game.
And so in mobile by having such a robust and profitable base with live services, it's not that we're going to take forever but we can take our time without feeling we have to rush it out right now. We can actually adjust in soft launch and say, hey, we're going to hold the game for six weeks, because then it's going to have a positive outcome, we have to make these changes. So that's how we tried to construct it and so far so good.
Yes, learning a lot from mistakes. I've learned a lot from all my bad call. So, yes, this is important. The last one I wanted to ask you is on M&A and expanding the portfolio. You've made a couple of acquisitions recently you mentioned one before with Peak. I guess there are so many opportunities and mobile continues to evolve. What excites you most of potential options to add to the overall Zynga portfolio?
Well, I think if you look at where we start is we start by looking at the team, the leadership of the studio that's potentially a partner that we would go out and acquire. We look at the intellectual property that they're working on and we really ask ourselves could this be a forever franchise, because if we can take a forever franchise like a new game, like Merge Dragons!, we can put it on our publishing platform with our advertising stack, we can really have outsized returns, right. So one more forever franchise on that journey from 20 to 30 is very, very valuable. And so we're constantly prospecting for what's emerging platform games get a market that’s small there, we're starting to pop into the charts and we play a lot of things we try and get a sense of what could be hot.
So we looked at over the last 2.5 years, we did two, what we call tuck-ins, which were sub $100 million purchases. And there're brands or products that we could tuck right into the business. And we did that with peak and with a company called Harpan, had a solitaire game. And that allowed us to build the largest casual card game network in the world and it leverage the strength of Zynga Poker product. We then partnered with brand, which was what we called more of a growth asset. We saw Merge Dragons! product that was really starting to become popular. And they had a great hyper casual business called 1010! and some other games. So we saw the opportunity to grow that. On a trailing 12 months basis, you look at it, okay. But if you look forward on it and you really -- you craft it and you say, that’s a growth asset for Zynga that could add another forever franchise to the mix, and I’m happy to report Merge Dragons! is on track to be a forever franchise in ’19. And so that’s how we’re looking at the market going forward.
And there’s lot of opportunities and mobile, there’s not a tremendous amount of investment going into mobile startups anymore. There’s a lot of developers and companies globally that have interesting products and interesting opportunities that are in some sense of scale that we could plug into our existing publishing platform and our NASDAQ that would really benefit us. So when you think about how we’re growing all these next couple years it's live services that’s going to grow, the new pipeline comes online, and then we're going to use our balance sheet to, if we can -- if we’re good we’ll go out and find another forever franchise and plug it into the business.
Thank you so much. I can’t wait to play Star Wars and Game of Thrones.
All right. Thanks everyone.