Q3 2022 Roblox Corp Earnings Call
Good morning, My name is Vanessa and I will be your conference operator today at this time I would like to welcome everyone to the Roadblocks Q3 2022 earnings conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If he would like to ask the question. During this time simply press Star then the number one ardmore telephone keypad to withdraw your question Press Star one again.
I'd now like to turn the conference over to Stephanie No Tommy Director Financial Communications. Please go ahead.
Good morning, everyone and thank you for joining our Q&A session to discuss <unk> Q3, 2022 results with me today is roblox as CEO and David <unk> and CFO , Mike Guthrie before we start I want to remind everyone that earlier. This morning, we published a shareholder letter and earnings results.
On our Investor Relations website at IR Dot roadblocks dot com on this call we will make some brief opening remarks and reserve the rest of the time for your questions for our webcast participants. Please note. The question icon at the bottom of your screen, where you can type in your questions. We'll do our best to take as many questions as possible in the time, we have a lot of today.
On today's call, we may be making forward looking statements, including but not limited to our expectations of business future financial results and business and financial strategy forward looking statements are subject to risks and uncertainties that can cause actual results to differ materially from those described in our forward looking statements.
Such risks are described in our risk factors, including in our SEC filings, including our most recently filed Form 10-Q, you should not rely on our forward looking statements as predictions of future events, we disclaim any obligation to update any forward looking statements except as required by law. During this call. We will also discuss certain non-GAAP.
Financial measures reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our press release issued as well as in our supplemental slides copies of which can be found on our IR website. Finally, this call is being webcast and it will be archived on our website. Shortly afterwards with that I'll turn the call over to Dave.
Thank you Stephanie.
Welcome to <unk> investors <unk> community.
Some quick bullets before we dive into your Q&A, we had a wonderful October as we mentioned in our letter 701 million bookings in Q3 up 10% year on year and on a currency adjusted basis up 15% also we shared.
October 27 day numbers. So you can do compares to last year.
The first 27 days of October on a bookings basis were up 13% on an adjusted basis.
I want to really highlight to the roadblocks community on the revenue side, where in Q3, we showed up 2% at $517 million.
That we follow GAAP accounting principles, and we defer revenue over the life of our payers.
And in our letter we highlighted we've increased that lifetime from 25 to 28 months.
It is a very very good thing that relates to the retention of our player basis, and we would ultimately want that number to be as large as possible. The more we retain our customer and user base without that increase our Q3 revenue gap, but county would have been 600.
$28 million $111 million larger so actually watch us continue to try to increase that lifetime to increase retention.
On a <unk> basis in Q3, RBA use we're at $58 8 million, which is a 24% year on year growth rate and highlighting October those numbers in the first 27 days were 57 8 million.
Up 14% year over year I want to note, we still have difficult compares relative to opportunistic regions from last year, but youre seeing are core and strategic users with the booking start to lap COVID-19.
Our developer community once again number of developers with experiences gathering over 100000 hours up 54% and number of developers with experiences with over a million hours up 47%.
A couple of things for our large roadblocks in the Investor community I really want to highlight as you look at our business. We run the business internally as 30 separate cohorts. That's five age range as we look at gender and we also look at region around.
The world and we have a lot of headroom in many of these cohorts that I'm going to comment on that a bit I also want to comment that we run the company.
Seven product groups, and we have product groups directly responsible both for retention or frequency for engagement and for monetization I get a highlight a few of those numbers as well.
Before we even went public we have been sharing with all of you our vision of building a platform that optimistically brings people together around the world of all ages.
And through a wide range of uses including playing learning and working together and I'll highlight a few of those as well.
Around the world in the U S and Canada, we're showing 17% <unk> growth in what has historically been our most early and saturated reed regions, it's showing the amount of headroom, we have in our core market there in Europe , our da use our.
30% year on year in APAC our D R.
Our up 40% year on year.
Talking about aging up highlighting that are over 13 segment.
<unk> grew 34% and now accounts for 54% of our da use and also 17 through 24 is our fastest growing cohort growing at 41% year on year.
There is a lot of room for us in both our 17 through 24 cohort as well as our 24 and the up cohort is and that is why once again, we ask all of our investors to look at us as a wide range of businesses across all of these cohorts based on age and region.
I also want to share some of the drivers of our business.
That highlight our optimism around roadblocks as the ultimate evolution to be a utility that is used very frequently.
We started to share some signal on frequency, which is the ratio of our da use to M. A use and I want to highlight that relative to September 2019, our frequency is 20% higher.
And our frequency is at or above levels, we saw in 2020 one during peak COVID-19. The the other thing I want to share.
The same with engagement our engagement levels, which are ours relative to da use are now yearly 20% higher than pre Covid September 2019.
Slightly below peak Covid times, but in a great direction.
And then finally, just highlighting the extent to which our brand experiences has started to grow and expand.
We are participating with Elton John in a new persistent world called Elton John presents E on the yellow brick road.
That premiered last Thursday on November 3rd.
I think as the showing the extent to which roadblocks brands have become really ubiquitous in the music and brand industry. Finally, we shared a lot around our product progression sharing roadblocks in Investor day. We thank you all for participating I want to highlight just on <unk>.
One small detail on that as we have started rolling out early versions of our immersive AD product and we are testing now with some publishers and brands and we will keep iterating on that with that I will ask Mike Guthrie, if he wants to add any other comments and if so welcome Mike if not we'll go straight to Q&A.
Yes, Thanks, I think you've covered it.
The secular trends that we've talked about an aging up our core market in strategic markets are really I think the some of the key financial points. So why don't we turn it over to Q&A.
At this time I would like to remind everyone in order to ask any question simply press Star then the number one <unk>, we'll pause for just a moment to compile between the roster.
Yeah.
Thank you. Our first question is from the line of David Karnofsky with Jpmorgan. Please go ahead.
Thank you Dave Adam as you noted the fastest growing demos is 17% to 24, which was hoping you could speak to some of the drivers of this growth are these last players that are coming back.
Not what are the types of experiences that are bringing these new users and then one for Mike just hoping you can provide us of your typical seasonality in.
In the year and I think you've seen some pretty strong step ups in bookings the prior two years, but there might have been.
Factors that were helping with that I just wanted to get a sense of how this has looked over a longer period of time.
Yes.
I'll highlight the 17 through 24 year old growth has been.
Continuous improvement over the last three to four years and our whole stack is contributing to this we continue to make exceptional gains in search and discovery, both cold start in warm start which means when a older players signs up enjoins roadblocks, they seem more and more experiences.
That are tailored to them.
We continue to make improvements in our game engine in our cloud.
Game engine as far as raw performance, we have made amazing improvements in our avatars back with layered clothing and the ability for older players to more and more have avatars that they can identify with we.
We're seeing developers respond with more and more content.
It is interesting and applicable for older players, we introduced experienced guidelines.
Shared that with you at our Investor day, which we will start over time, having some experiences that are ultimately 13 and up in 17 and up type experiences.
This is pervasive throughout the stack throughout the seven product groups. We really all are working on this and it has many many factors that have contributed.
Contributed to drive this growth I'll turn it over to Mike on the seasonality.
Hey, David Thanks for the question so.
In a period right now September and October when we are coming down off of the summer peaks in the summer July and August .
We saw.
That that seasonality occur in September down from from August October is pretty similar to September with.
A pickup in right around Halloween.
Really strong beginning of October of this year, a lot of special content around seasonal content that was that was quite popular going into the rest of the quarter November is typically up a bit from October and then of course December is the big months in the fourth quarter. So.
Like a lot of companies around the holidays.
For example November usually see a pretty big step up around Thanksgiving and then we're into we're into the holiday season. So December is always the biggest month by by a long shot.
So far seasonality seems totally normal, but I think what we're probably most.
Excited about is this growth in the payer base and so you saw in the third quarter. All time peak number of pairs of $12 9 million Thats, a really good signal for us.
One other thing you may have picked it up in what I just said.
I'll circle back to the aged Upgrowth. Thank you Mike.
You hear how we always learn lead with raw product quality and virality, but I do want to pay notice to all the wonderful brands and music producers out there.
Intermediate agencies, creating some of these experiences in our own brand team that is also contributing to growth. So Wimbledon Wimble world $11 8 million visits our Tommy play experience. Our Chipotle experience has had over 20 million visits our FIFA.
Just started.
The visits are chain smoker concert once again.
There are 16 million visits so there's also a lot of potential traffic being driven by our brand and music partnerships on top of the raw product virality that we focus on.
Okay.
Your next question is from the line of Omar <unk> with Bank of America. Please go ahead.
Hey, guys.
Wanted to ask about something I don't I think that the market doesn't appreciate.
About how transformational limited items will be to the platform. In 2023 can you explain why it will fundamentally change behavior, among users and which of your Kpis should see the biggest inflection and also among which of your 30 cohorts do you expect to see those metrics inflect.
Pronounced and I have a follow up after that.
Yes.
Mike I'll do an early one on the cohorts.
All three of our cohorts are doing amazingly well.
<unk>.
And Michael will comment more on that.
Very early on in roadblocks.
We started building roadblocks items with the vision that ultimately we want our user community base to be really the provider of all UGC items, both clothing avatar items avatars all of that and the final step of that that we are in the process of completing.
<unk> is a limited marketplace. What this means is a creator such as I'll use Gucci as an example can be validated they can have a blue checkmark next to their profile and if they so choose they can make 10 of something rather than an unlimited number.
Those items can be indexed and just like in the real world, where we have both high volume items.
Louise called White T shirts. The example of a high volume low brand item just as we have that we're moving to an economy, where top brands will have limited index items.
Items that roadblocks is made which we want our creators to make that we've done in a limited fashion for example, our dominance crown trade at $20000 on the platform.
And we believe we will see similar trade value similar things that we see in the real world with scarce items with some of these.
We believe this is going to be really fun really good for engagement and will ultimately expand our economy. So it does look more like the real world and we have very high priced items as well the metric. This effect is bookings per hour or monetization and when we affect bookings.
Per hour.
Thats the whole platform, because we're driving those hours and raises monetization.
I'll kick it over to Mike as to whether you want to comment on any cohort.
Yeah. So omar thanks for the question.
Because it's going to be an open marketplace. I think the answer is going to be all cohorts. There will be content that is appealing to younger users and all their users I agree with Dave that youre going to see it mostly reflected in monetization as a core metric, though I also expect frequency engagement to also move up.
Because it's a better experience for the user and also.
I also believe in something we don't talk enough about is it will also affect.
All genders as well so the cohorts not just age cohorts.
<unk> will be appealing to users and female users as well so I think thats also really exciting.
One way to think about it.
What cohorts this affected in the real world, who buys high priced jewelry rare artwork and Ferrari those cohorts I think will be affected on roadblocks as well.
Awesome Alright.
Alright, I'm looking forward to that.
So then the second question is I wanted to ask about.
When some incremental revenue opportunities may hit.
Namely.
Dynamic ads and game content so.
In June I think your blog said that dynamic hence would be in the avatar store later this year.
November now.
Are you still kind of on track to.
Have those in the Avatar store this year in <unk>.
If so kind of what's your monetization model there.
And then on the game fund side.
I think you showed gains fund examples throughout the year.
When will those start to go into soft launch number one.
When will they launched in earnest number two.
And.
Do you expect any of them to be come like top 10 hits in the next in the next year.
Yes, I can comment on a couple of things.
Think for our investors I would ask you to consider dynamic.
Dynamic heads as not just a monetization.
Product, but ultimately the future of roadblocks as far as immersive conversation and we're moving from a world.
When we think about where all of the people and roadblocks are primarily using text chat with static heads.
The demo I showed at Investor day, we're more and more we show expression our faces to animate just like we do.
With our camera and we're communicating by voids as well. So we have dynamic heads in the catalog division. Ultimately is every one and every head on roadblocks is dynamic and we ultimately get to the point, where everyone can animate their avatar, we've not give.
The specific data on this but this is slowly rolling out and we will rollout continuously over the next year. There is a blog post on our blog for those that are interested that we published at the end of September called funding future roadblocks creations.
That shows some of the progress in the game fund I think some of these will be transformational.
Don't want to comment on which end win but if you see the general pattern of the game fund experiences Youll see there primarily aimed at older players many of them involve older avatars.
And.
Many of these are getting ready to launch soon and we have more in the hopper, but I won't.
Comment on them, but I will comment that.
We have some fairly seasoned developers building very professional experiences for all of their players and Mike I don't know if you want to <unk> at all on that at all.
No I think the perfect and then nothing to add.
Great. Thank you.
Thanks Omar.
Our next question comes from the line of drew Crum with Stifel. Please go ahead.
Thanks, Hey, guys. Good morning, So Mike in the shareholder letter you noted that you intend to target, an EBIT margin or EBITDA margin below 10% through at least 2023.
Is there any change to what's driving that figure relative to the updates from earlier in the year and how are you viewing this metric beyond next year, and then I guess for Dave I know you briefly touched on immersive advertising efforts and the early observations you can share an update on how and when you intend to deploy that.
Across the platforms. Thanks, guys.
Yeah, Hey, Mike I wanted to just maybe.
Quickly lead first on the earnings and EBITDA long term.
And I know right now there are a lot of companies doing layoffs.
And I want to highlight a couple of unique things about robots. We are going to continue hiring through 2023, we have a exceptional talent base that we are constantly.
Adding to and improving.
And we're going to do this in a way that keeps.
Really stock based comp.
In really good range and I think this is this highlighting our drive to continue innovating and the ability to do this with $3 billion of cash in the bank.
And a good forward looking cash position in the company. So we are an innovation mode. We are in thoughtful balanced hiring and growth mode. We run the company.
In a very thoughtful way looking forward modeling forward several years in advance so hopefully we're moving the tiller gently and thoughtfully towards driving this type of innovation.
I'll, let Mike comment a little bit more on the earnings as a result of that.
Yes, Andrew Theyre really again for big.
Areas of cost and investment in our business payment processing in one.
Could you asked whats changing or has anything changed payment processing has generally been coming down a little bit as a percentage of bookings or we've been getting a little bit more efficient there which is great.
Massive moves but comfortable improvements over time.
And then there is three big investment areas that Dave has really highlighted that revolve around being innovative and thats our infrastructure in trust and safety.
Personnel and the investment in our developer community all of those are there's really nothing has changed in terms of the.
The waiting the emphasis our desire to make investments in those areas. We have the ability to do it we have a lot of liquidity, we feel like we're adding long term value into the business.
We've grown them, all and really sustainable ways and so we see this opportunity as one sort of optimizing investment and the near term and coming out of this maybe after 'twenty three 'twenty into 'twenty four with an ability to see real leverage in the cost structure across really.
Almost all of these areas.
Nothing has changed we're not but we havent done is ramped up investment in marketing or any other things like that.
User base.
And.
Topline are still very much organically driven by great product.
And.
And improvements in that product. So we are really taking an opportunity to continue to innovate and build the best business.
Most defensibility and sustainability that we possibly can.
Roofing on things like roofing on immersive advertising and the opportunity.
One of the things we've always done at Roadblock is built you can call it UGC or self serve and that is build platform and products that everyone can use.
And that treat all of our developers as well as all of our partners equivalent that is the target.
For next year hopefully in the first part of next year to get this rolled out for everyone without a specific ship date.
That said we are testing right now so we are testing our immersive advertising technology right now with some brands and with some of our developers. So testing now next year self serve for everyone.
Your next question is from the line of Matthew cost with Morgan Stanley . Please go ahead.
Hi, everybody. Thanks for taking the questions I have two.
So just looking at the bookings in September and October there is a pretty meaningful acceleration going on there in terms of year on year growth I'm just wondering.
Dave earlier in the Q&A you were talking about some of the platform improvements that you've been making which makes a lot of sense were there any specific user behaviors or types of experiences or new platform features that were kind of needle moving and behind that re acceleration you saw in the past two months and then just separately on.
Given that youre running kind of at levels of kind of <unk> ratio that you saw during Covid I think you said at or above.
How much headroom do you see going forward in terms of boosting that ratio. Thank you.
Yes.
From a product architecture and the way we work on the roadblocks. This is really a wide technology stack, we have amazing product and engineers working on our user experience on our social graph on the access points mobile console, we have Austin people.
We're working on our growth team search and discovery, our core creator tools.
<unk> simulation engine that powers roadblocks, the economy that drives not just monetization, but actually the fun on the platform. The core cloud infrastructure that supports this and of course the.
Very wide ranging safety and stability teams that that make robots are welcoming safe and optimistic place.
There's so much stuff going on that historically growth has been driven not by single big needle movers, but by many many needle movers all being developed in parallel as quickly as possible.
Highlight some of these things are are things most people don't notice including gains in the raw performance of our game engine or kudos to the game in simulation engine team gains to the raws to the time and how quickly people can join these experiences, which most people don't notice but actually draw.
<unk> growth as well so there are a wide range of things.
Really done across the platform that improved search and discovery.
All areas really of the product on frequency.
I am personally.
So bullish even in our core nine through 12 year old USA market.
Round the headroom there because I think as we saw during COVID-19 people used roadblocks as a utility to connect and be together people used roadblocks side by side with video and phone and tech.
As a way to hang out together and this is a utility use that goes beyond play that I think we will see people migrating to more and more higher frequency numbers I can't share specifically, what they are but there is a lot of headroom in USA nine through 12.
Yeah, and Matthew Thanks, Mike I wanted to just.
I had a couple of things what Dave just said.
As it regards to bookings and acceleration maybe just point you to page 27 in the supplemental materials, which is the payer community. If you look at Q2 'twenty two in Q3, 2002 that sequential growth and Payors.
Is.
As high or higher than I think we've almost ever seen.
So there was a big pickup in the number of payers and we talked about the ratio of payers earlier in the call and you can see that in the second and the third quarter. It's obviously September is a part of that.
Similarly, you would expect that we had pretty good payer numbers in October so that conversion rate is.
It's really a very good point right now and we've talked about it in the in the <unk>.
Earlier in the letter.
There's a whole bunch of reasons for that one is there is a very positive mix shift going on as Dave suggested in our core markets U S.
Canada, we are back to peak levels.
In all age cohorts and we are aging out very quickly.
So as the rate of number of payers, it's increasing in the U S and Canada is also increasing as a percentage in the strategic markets opportunistic has slowed down a little bit they do have a little bit of a tougher compare right now so it makes it the payors is moving towards areas, where theres more monetization.
One question is why why are we seeing that conversion rate and so that you have to look at our other core metrics frequency, our retention and our engagement numbers and those are all moving up as well and that that impact starts at the highest level with your users and then flows all the way through.
And so you get the payers and so we're seeing improvement really across the board in all age cohorts all all demos.
And more and more payers and again very good sequential growth in pairs in the third quarter. There was a question earlier around seasonality.
That speaks to really healthy movement as we go into.
The rest of the seasonal rest of the year in the fourth quarter, but I really would look at that that number as a an output of a whole bunch of core metrics that we are focused on let's start with frequency.
It goes to engagement goes to monetization.
That conversion rate has just been has really held up post COVID-19 at very high rates and so I think thats why youre seeing that acceleration.
Great. Thank you.
Your next question is from the line of Clark <unk> with BTG. Please go ahead.
Hey, good morning, Thanks for the questions I have two.
The developer community and advertising first Mike you talked about secular dynamics with AZ that before as prevailing on the developer side such that you are bringing on more 17 to 24 year old developers and the content that they're creating is helping you drive.
It seems like a more recent inflection and growth of Boulder users.
All for monetization and payer conversion and then the second question on advertising understanding that that.
So the Doctor of monetization is really early stage right now we did pick up some good feedback intra quarter from marketers that basically said, we'd like to spend more on roadblocks over time, those demand from our customers or from off of ourselves, but one of the gating factors right now measuring that and Im curious is building.
Performance framework is part of the roadmap for the ads business.
Yes.
Possibly you could give us some color on the timeline.
Nothing like that thank you.
Dave you want to pick up on that.
A question and I'll, just I'll take the first one head.
I'm really excited about the potential for a measurement of the brand as well as action based type of advertising here and we are going to be providing both of those types of things.
There will be two types of immersive <unk> AD units on the platform. Those that are brand, where we will be able to measure views amount of dwell time and really this is the creation of a set of new types of measurement for immersive <unk> advertising.
<unk>.
It's almost as if in the real world, It's really hard to measure how many people saw a billboard on a bus when it went driving by but in an immersive three D world. We can actually measure how many people saw that so theres the potential in digital to measure things, we can do in the physical world more and more of.
The experiences we believe in in platforms like roadblocks.
We'll be teleport type ads, where.
Brands that we've highlighted today want to bring fans to their experience.
Even for short amount of time to experience the brand to possibly acquire items from the brand as a pop back out and come back to where you were and these of course will be fully measurable as action type units once again with as much measuring the ultimately the time and the experience as well there is an <unk>.
Even longer term thing that we're not going to comment on or promise, but ultimately the ultimate long term thing is we hear anecdotally.
People, who have been in our experiences than migrating to the real world and wanting to go into that same store, we've heard that anecdotally around our vans experience, where the ultimate would be to figure out a way to measure that.
Players on roadblocks connection to visiting that <unk> experienced and then visiting the real experience and Theres a lot of savvy people out there are starting to think about how we might do that so so yes. This will be measurable is early and I think there is potential for types of engagement that just cannot be done with video that can.
Not be done with print I'll kick it back to Mike for the other piece of it.
And Clark to your question on developers as it really interesting ones. So we are seeing a dynamic with older users wherein they are monetizing very well in what I would call. The top experiences on roadblocks that may or may not be aged up experiences.
However, we also see that same user base.
Experimenting and.
And other experiences that are much more age that content.
They're not going to popular experiences right now on robust, but they're much more aged up experiences and in those older users are spending quite a bit more now it's in its early and its on a smaller base, but that indicates to us that they that the older users.
Have a really high affinity for HDR content. Our belief is of course that most of that age of content is also coming from an age that developer community. So to answer your question I don't know I don't have numbers, specifically with the same level of precision on growth rates, but I suspect they are.
They're pretty similar.
And we're seeing more and more.
Content is starting to break through I think there's a long way to go there.
And we'll try to pull together some.
Some metrics that we can share on that but we definitely see that behavior with our older <unk>.
And.
And time spent there they are finding cool edged up experiences and they're very engaged and they monetize very well on those experiences and those are going to get bumped up over time and again theres almost no doubt those are coming from an older developer base.
Yes, and we don't.
I think roadblocks long term combines the best of long tail discovery young developer starting out as a hobby is on the high end, though as our larger studios go beyond the 100 people in our earning tens of millions of dollars a year.
Think the top developers ultimately and very quickly mirror top game developers on any platform or experienced developers, we're seeing that mature very quickly.
Thank you.
Your next question is from the line of Eric Sheridan with Goldman Sachs. Please go ahead.
Thanks, so much for taking the question sticking with the theme of aged up cohort.
Cohorts do you see different behavior by geography.
<unk> cohorts and I'm curious if you do how that informs elements of what you want to invest in the infrastructure or the product development over the long term.
And then even away from just geographic skew among inched up cohorts.
Any sense of how you continue to think about partnerships.
The content side, and bringing more original content into the platform that can be consumed via partnership or licensing over time to sort of drive higher forms of engagement as well. Thanks. So much.
Yes, I feel as if we're if we're doing our job right.
We are building high performance immersive three D infrastructure as the utility.
Pools, with amazing search and discovery and an amazing creator base.
So just as with other forms of immersive media of which we're very immersive, but whether it's the video print or whatever we're providing a high performance platform in all regions of the world that our developer community can respond to more then we respond to technically so we.
We focus very much on whats latency in India, we have a new data center in India do we have edge data centers around the world to provide high performance are we doing awesome search and discovery in South Korea, or Japan, or India to help drive growth there and then.
What we can see is when we go to various regions around the world a mix of what we would expect some classic roblox experienced top in many many countries using our dynamic translation facility, but also regional experiences just as we would expect in various countries.
I think this is what philosophically is driving our growth in Japan, now, which is driving our growth in India, right now, which is our OSM infrastructure coupled with great.
Really content from our developers from a partnership.
Standpoint, our goal is to make this self serve our goal is to make it. So developers can couple with brands and we're seeing more and more partnerships on the platform that we have not been involved with which is exactly where we would ultimately want to get too which is this.
Spontaneous partner ecosystem.
And then ticking to Mike if you want to add anything on the partnerships like.
Not on the partners is on your <unk>.
On <unk> I, just want to make sure I've got it right youre, saying by geography, do we noticed any different behavior with agent of users across the geos, meaning does it <unk> user in 17 to 24, Youll user and you ask behave differently than in.
In Germany is that what youre asking.
That's part one and if so does that inform any elements of how you think about product development and platform development over the long term.
Yeah, I would so basically by geography, what we're seeing is similar in each geo meaning.
Meaning Asia users are now engaging at basically the same rates if not even higher in some cases younger users. They are monetizing now at higher rates than younger users and thats pretty consistent around the world as we look at it.
So they were seeing the same kinds of dynamics within each geo and.
If I, if I were to say aye.
And Asia have user in the U S.
<unk> monetization.
Above it.
Hey, just somewhere else in the world is about the same as it is with the younger user.
It's pretty similar.
But within a demo Asia abusers now pretty much the same frequency pretty much the same amount of engagement and higher monetization.
Maybe a philosophical way of thinking about this we saw different behaviors with aged up people in Germany relative to the U S.
We would take a look at that and build platform infrastructure that supported both of them.
Those so that our developers could respond to the differences rather than us having to split the platform. So we're always trying to build a worldwide utility that works in all regions.
Okay. We have time for one more question and then obviously, we're going to be available.
For the rest of the day.
Thank you operator question. Thank you today's final question will come from the line of Mark.
One moment will come from the line of Matthew.
Johnson with <unk> Securities. Please go ahead.
Hey, good morning, David and good morning, Mike maybe two if I could first Mike on expenses as we think about 2023.
Should we go back and look at kind of what the Opex centric lines have done in terms of sequential dollar growth over the past four quarters and kind of extrapolate that forward and similarly should we look at kind of where we are right now.
When we look at the two more variable type lines and again kind of assume that we kind of hold there through next year is that a reasonable framework for thinking about the expense base and expense investments through 2023, and then just second question.
More on just what you're seeing from a macro perspective, just kind of curious you guys have a global footprint I'm kind of curious what you're seeing if anything in <unk>.
Terms of any type of changing behavior as macro has got a little more challenging, especially in certain regions and perhaps certain demos I'm kind of curious what you're seeing if anything thanks again guys.
Hey, Matt.
Cost I mean again, let me just sort of a point.
Point people to the supplemental materials.
Looking at pages nine through 12, those are the big cost items cost of revenue as a percentage of bookings.
Our payment processing fees as a percent of bookings has generally been flat to down.
And I think flat is a good way to model it and we hope to see a little more efficiency prepaid cards. It definitely helped us take that number down.
And we are growing our prepaid card business, there's a lot of demand for it out there it's done incredibly well and it's a really efficient channel for us so that.
Could help us lower that cost over the next.
A few quarters in 'twenty three developer exchange fees have been running 22, 23% of bookings.
We're not looking for leverage in this area right now so I would suspect they will stay in this range.
Throughout 'twenty, three and if they went up a point or two we would be okay with that.
But flat probably a good way to estimate it.
<unk>.
Personnel cost.
Exclusive of stock comp as a percentage of bookings that last few quarters. This number has been going up as we have been hiring and investing.
Sure.
I think it will hold at around the Q3 Q numbers for most of the year.
While we are going to continue to hire as Dave has mentioned.
We're probably not quite at the same rate of hiring next year, but we're adding quite a few people into the company, but I think as a percentage of bookings that number will be closer to what you see in Q2, and Q3 and in terms of infrared Trust and safety, we've made a really healthy investment here.
Over the last three quarters.
There will be leveraging this number eventually I wouldn't look forward too much of it in 'twenty three we're still making significant investments, but we're also.
With all of our teams are pushing to make sure we're doing things in the most efficient way possible. So I think if you model it out in the last couple of quarters have been you are probably in pretty good shape.
As it relates to the macro I'll start and I data has any other comments, we look a lot other than the fact that obviously currencies continue to move against the dollar.
When we look underneath the currency changes around the world, we're seeing really healthy behavior.
Users are growing around the world hours of engagement are growing around the world.
Our retention looks good our conversion rates look very good.
Pure monetization around the world looks quite good when adjusted for those currencies.
So I would say.
We all know the macro environment is a little bit challenging where it is most pronounced for us is translation of currencies back into dollars.
But overall the behavior of the user base teams fairly healthy.
I wouldn't say, we've seen anything significant on.
David you have anything to add to that.
We're going to wrap up really quickly to lightning bullets one.
Rewatch, our Investor day, Youll see a wonderful presentation on how our infra ultimately is moving to active active and there'll be amazing leverage there. We're right now doing a two to one in for builds and as that gets to four to three and five years before you'll see amazing cost savings there.
Long term also we pay all of our wonderful engineers and product people in U S dollars right now so you'll see a long term.
Move from US just to make sure we're absolutely tightening up exchange rates and our platform when we collect roebucks as well around the world but.
I'm feeling very positive about the macro trends that we see around the world on the platform.
Yes.
Yes, just on the on the infrastructure spending.
They brought it up we will spend a little over 300 million on PP&E This year.
The lion's share of the of the Big intra investment is done this year, although we'll spend another $300 million next year.
There'll be a little bit of a shift a little bit less of that will be an infrastructure.
And a little bit of incremental.
We'll be around real estate. So we are still growing.
We're moving into some new offices and so we've modeled in some investments in real estate. So overall PP&E will be basically flat year over year, but the amount of thats around infrastructure will actually be down next year as we have taken most of that this year.
Okay, that's great color. Thanks, Mike Thanks, David.
Okay.
Operator, I think we are ready to wrap up Dave any closing comments.
No just once again, thank you to the robots community all of our wonderful investors, We love working with you and appreciate your support.
And thank you everyone that does conclude today's conference call. Once again, thanks for your participation and you may now disconnect.
Okay.
Okay.
Yes.