Q4 2023 Roblox Corp Earnings Call

Dennis: Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Roblox fourth quarter and full year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.

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 fourth quarter and full year 2023 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 you would.

Dennis: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again.

Like to ask a question. During this time simply press Star then the number one auto telephone keypad to withdraw your question Press Star one again.

Stephanie Notani: I would now like to turn the conference over to Stephanie Notani, Senior Director, Financial Communications. You may now begin your presentation. Thank you, Dennis. Good morning, everyone.

Speaker Change: I would now like to turn the conference over to Stephanie No Tawney Senior director of financial Communications You May now begin your conference.

Speaker Change: Thank you Dennis good morning, everyone. Thank you for joining our Q&A session to discuss roadblocks as fourth quarter and full year 2023 results with me today is roadblocks cofounder and CEO, David Besuki and CFO, Mike Guthrie as a reminder, our shareholder letter press release SEC filings.

Stephanie Notani: Thank you for joining our Q&A session to discuss Roblox's fourth quarter and full year 2023 results. With me today is Roblox co-founder and CEO, David Bazzucchi, and CFO, Mike Guthrie. As a reminder, our shareholder letter, press release, SEC filings, supplemental slides, and a replay of today's call can be found on our investor relations website at ir.roblox.com. On this call, we will make some brief opening remarks and reserve the rest of the time for your questions.

Speaker Change: Supplemental slides and a replay of today's call can be found on our Investor Relations website at IR Dot robots dot com on this call. We will make some brief opening remarks and reserve the rest of the time for your questions or commentary today may include forward looking statements, including but not limited to expectations of our business.

Stephanie Notani: Our commentary today may include forward-looking statements, including but not limited to expectations about our business, future financial results, and strategy. Such forward-looking statements are subject to risk, uncertainties, and assumptions that could cause actual results to differ materially from those described in our forward-looking statements. A description of these risks, uncertainties, and assumptions is included in our SEC filings, including our most recent reports on Form 10-K and 10-Q. You should not rely on our forward-looking statements as predictions of future events. We disclaim any obligation to update these statements, except as required by law.

Speaker Change: Future financial results and strategy forward looking statements are subject to risks uncertainties and assumptions that could cause actual results to differ materially from those described in our forward looking statements. A description of these risks uncertainties and assumptions are included in our SEC filings, including our most recent reports on Form 10-K and 10.

Speaker Change: Q you should not rely on our forward looking statements as predictions of future events, we disclaim any obligation to update these 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 can be found in our press release and supplement.

Stephanie Notani: During this call, we will also discuss certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP metrics can be found in our press release and supplemental slides. With that, I'll turn the call over to Dave.

Speaker Change: Those slides with that I'll turn the call over to Dave.

David Bazzucchi: Thank you. Hey, everyone, to our Q4 and full year 2023 earnings call. It's great seeing or hearing or talking with all of you.

Dave: Thank you.

Dave: Welcome everyone to our Q4 and full year 2023 earnings call, it's great seeing or hearing or talking with all of you and it was great seeing you all at Investor Day.

David Bazzucchi: And it was great seeing you all at Investor Day. We had a strong fourth quarter and a strong full year 2023 consistent with the outlook we made at Investor Day. Some highlights in Q4, our DAU 71.5 million, up 22 percent. Hours engaged 15.5 billion, up 21 percent year on year. Revenue 749 million, up 30 percent year on year.

Dave: We had a strong fourth quarter and a strong full year 2023, consistent with the outlook. We made at Investor day, some highlights in Q4 or <unk> $71 5 million up 22% ours engaged 15.5 billion up 21% year on year.

$749 million up 30% year on year and bookings, one 1 billion up 25% year on year.

David Bazzucchi: And bookings 1.1 billion, up 25 percent year on year. It was our first quarter over a billion in bookings and also our highest quarterly growth rate in two years. For the full year and fiscal year 2023, DAU's up 22 percent.

Dave: Our first quarter over 1 billion in bookings and also our highest quarterly growth rate in two years for the full year in fiscal year 2023, do you use a 22% hours are 22% revenue up 26% and bookings of $3 5 billion.

David Bazzucchi: Hours up 22 percent. Revenue up 26 percent. And bookings of 3.5 billion were up 23% year-on-year.

Dave: Yeah.

Dave: 23% year on year.

Dave: We continue to.

David Bazzucchi: We continue to invest in innovation and simultaneously invest very thoughtfully in the growth rate of those investments. And at our Investor Day, we discuss thoughtfully balancing the growth rate with our investments, both in the cost of revenue, infrastructure expenses, people, and capital expenses. And we're pleased to share that in Q4, we delivered net cash flow from operations of $143 million, up 20% year on year, strong net liquidity of $2.2 billion, and our covenant adjusted EBITDA was $259 million.

Dave: Invest in innovation and simultaneously invest very thoughtfully in the growth rate of those investments and at our Investor Day, We discussed thoughtfully balancing the growth rate with our investments Boston both in cost of revenue infrastructure expense people and capital expenses.

Dave: And we're pleased to share that in Q4, we delivered net cash flow from operations of $143 million up 20% year on year.

Strong net liquidity of $2 2 billion and our covenant adjusted EBITDA was $259 million, Mike will talk more about the balance of our investments in the management of our margin targets.

David Bazzucchi: Mike will talk more about the balance of our investments and the management of our margin targets. But I want to highlight, going all the way back to our S1, our four-dimensional growth strategy, including all ages, international, Roblox everywhere, and a vibrant economy. And in all four of these dimensions, we made great progress.

Mike Guthrie: I want to highlight going all the way back to our S. One our four dimensional growth strategy, including all ages international roadblocks everywhere and a vibrant economy and in all four of these dimensions, we made great progress on all ages are.

David Bazzucchi: On all ages, our 13 and over DAUs grew 28% in the last quarter, and over 58% of our DAUs are now 13 and up. And these older DAUs are interesting and exciting for the advertising business that we're building. Our growth continues to be the result of innovation and investment in the platform as well as our amazing creator community. On the international side, DAUs in the US and Canada grew 17%.

Mike Guthrie: 13, and over Dia use grew 28%.

Mike Guthrie: In the last quarter and over 58% of our da use are now 13 and up and these older da use are interesting and exciting for the advertising business that we're building.

Mike Guthrie: Our growth continues to be the result of innovation and investment in the platform as well as our amazing creator community on the international side D. A use in the U S and Canada grew 17% via use outside of the U S and Canada grew 23%.

David Bazzucchi: DAUs outside of the US and Canada grew 23%. A couple of highlights in Q4, Japan: DAUs grew 45%. India: DAUs were up 59% year on year.

Mike Guthrie: Couple of highlights in Q4, Japan da use 45%, India Q4, do you use up 15, 9% year on year.

David Bazzucchi: This growth, we believe, is supported by our international expansion playbook, including a foundation of safety and civility, and AI-powered language translation, so all of the content our creators create can run around the world. Our infrastructure, including edge data centers around the world to supply performance and reliability, great content developers popping up all around the world, and continued innovation here. On Monday, we announced that our own AI model is powering real-time AI chat translation, allowing people around the world to communicate with people who are chatting in a different language.

Mike Guthrie: This growth. We believe is supported by our international expansion playbook, including a foundation of safety and stability.

Mike Guthrie: Automatic AI powered language translation. So all of the content creators create can run around the world our infrastructure, including edge data centers around the world to supply performance and reliability great content developers.

Mike Guthrie: Developers popping up all around the world and continued innovation here on Monday, we announced that our own AI model is powering real time, AI chat translation, allowing people around the world to communicate with people who are chatting in a different language.

Mike Guthrie: On robots everywhere in Q4, we released roadblocks on Playstation and unmet request both of them attracted new users and continued on our vision that we want roadblocks everywhere in our vibrant economy expansion in Q4, we delivered developer subscriptions.

David Bazzucchi: On Roblox Everywhere In Q4, we released Roblox on PlayStation and MetaQuest. Both of them attracted new users and continued our vision that we want Roblox Everywhere. In our vibrant economy expansion in Q4, we delivered developer subscriptions. We're moving consistent with the vision that everything is creator-driven. From our avatar platform to full UGC and a quick update on our advertising initiative. We had the most brand engagements ever in Q4, 69 great brands working with the platform, and we're scaling up over 2024. A couple highlights of the innovation that we're building on top of all of this. On our social side, we're connecting more friends all the time. We released real names for 17 and up players.

We're moving consistent with the vision of everything as creator driven our avatar platform to full UGC.

Mike Guthrie: And quick update on our advertising initiatives, we had the most brand engagements ever in Q4 69, great brands working with the platform and we are scaling up over 2024.

Mike Guthrie: A couple of highlights on innovation that we are building on top of all of this.

Mike Guthrie: On our social side, we're connecting more friends all the time.

Mike Guthrie: And we released our real names for 2017 and up players, we released video capture or sorry image capture now into where we might go there someday an immersive communications side, we saw great growth in our voice.

David Bazzucchi: We released video capture, or sorry, image capture now, a hint of where we might go there someday. On the immersive communication side, we saw great growth in our voice DAUs. Voice DAUs are up 161% year over year, which is just highlighting our vision of Roblox connecting and really acting as a connection and communication platform. On the avatar front, we continue to make progress in immersive, connective avatars in addition to the layered clothing we released this year, and we're seeing more penetration of facial animation everywhere.

Mike Guthrie: <unk> voice voice via user up 161% year over year, which is just highlighting our vision of roadblocks connecting.

Mike Guthrie: And really acting as the connection and communication platform.

Mike Guthrie: We on the Avatar front, we continued to make progress in immersive connected avatars. In addition to layered clothing, we released this year and we're seeing more penetration on facial animation everywhere.

David Bazzucchi: We are seeing more penetration on voice chat and a hint of what's to come at our Roblox developer conference. We hinted at the use of our own AI to generatively create avatars. The AI opportunity at Roblox is manifest and everywhere. We've been working on this behind the scenes for many, many years. On the more visible generative side, we have announced Roblox Assistant, which is now in beta, where creators can use natural language text prompts to generate new ideas in addition to code assist and material assist.

Mike Guthrie: We are seeing more penetration on voice chat.

Mike Guthrie: And a hint of what's to come out or Roblox developer conference. We hinted around the use of our own AI to generally typically create avatar.

Mike Guthrie: The AI opportunity roadblocks as manifest and everywhere we've been working on this behind the scenes for many many years on the more visible generative side.

Mike Guthrie: We have announced the roadblocks assistant which is now in beta where creators can use natural language text prompts to generate new ideas. In addition to codexis and material shift.

Mike Guthrie: Just behind the scenes, we continued to rollout more and more AI on real time image voice and chat moderation, which in addition to constantly improving quality is also making our whole safety platform much more efficient.

David Bazzucchi: Behind the scenes, we continue to roll out more and more AI for real-time image, voice, and chat moderation, which in addition to constantly improving quality, is also making our whole safety platform much more efficient. Looking forward, we will continue on our path of innovation and execution, consistent with what we shared with you at Investor Day in 2024. We are driving growth and engagement in DAUs. We are relentlessly focusing on the leverage we gain from raw performance, quality, and cost-to-serve efficiency. We are focused on accelerating monetization through advertising and our virtual economy. We are using AI both in, once again, the user-facing generative way to accelerate creation and expression, but also behind the scenes for cost and quality.

Looking forward, we will continue on our path of innovation and execution.

Mike Guthrie: Consistent with what we shared with you at Investor Day in 2024, we are driving growth in engagement in da use.

Mike Guthrie: We are relentlessly focusing on the leverage we gain from raw performance quality and cost to serve efficiency.

Mike Guthrie: We are focused on accelerating monetization through advertising and our virtual economy, we are using AI booth in once again, the user facing generative way to accelerate creation and expression, but also behind the scenes for cost and quality and.

David Bazzucchi: And underlying this always since day one is our focus on safety and civility from the start of our platform to this day forward. And we continue to be optimistic about our mission to connect a billion people every day with optimism and civility, not just in gaming but in entertainment, ultimately in shopping, ultimately in social communication, and ultimately in learning and education, where we're making amazing progress as well. With that, I'm going to pass it over to Mike Guthrie, our CFO. Thanks, Dave, and good morning, everyone.

Mike Guthrie: Underlying this always since day, one is our focus on safety and stability from the start of our platform.

Mike Guthrie: Through really this stay forward.

Mike Guthrie: And we continue to be optimistic about our mission to connect 1 billion people every day with optimism and stability not just in gaming, but in entertainment ultimately in shopping ultimately and social communication and ultimately in learning and education, where we're making amazing progress as well.

Mike Guthrie: Well with that I'm going to pass it over to Mike Guthrie, our CFO, Thanks, Dave and good morning, everyone.

Mike Guthrie: Just a few quick comments before we open it up to your questions. So, obviously, we're pleased with the 23 results. I'm going to reference our supplemental materials, which are on the IRA website, ira.roblox.com, and some of the charts there. So, on bookings, as Dave said, Q4, 1.127 billion dollars. That's 25% growth year over year strength across all geographies, which you can see on page 18. Expense growth, in particular compensation, and infrastructure, are two big fixed costs.

Mike Guthrie: A few quick comments before we open it up to your question. So obviously, we're pleased with the 23 results.

Mike Guthrie: I'm going to reference our supplemental materials, which are on the IR website.

Mike Guthrie: <unk> robust dot com.

Mike Guthrie: And some of the charts there so on bookings.

Mike Guthrie: As Dave said Q4, one <unk> 7 billion, that's 25% growth year over year strength across all geographies, which you can see on page 18.

Mike Guthrie: <unk> growth in particular compensation and infrastructure are two big fixed cost in pages 12, and 13, you can see are growing at a slower rate than bookings growth and that's yielding health.

Mike Guthrie: In pages 12 and 13, you can see that revenues are growing at a slower rate than bookings growth, and that's yielding healthy operating margins and more cash flow from operations. Cash from operations on page 19, you can see the growth there and how we saw good growth year over year both in Q3 and in Q4 and then reduced capital expenditures are yielding significantly higher free cash flow. I want to now address some seasonality, which I think will help people with their models. We're really starting to see good seasonality in the business. And, and really, in 22 and 23, we're through COVID comparisons, and so you can really start to see things more clearly.

Mike Guthrie: Healthy operating margins and more cash flow from operations.

Mike Guthrie: Cash from operations on page 19, you can see the growth there.

Mike Guthrie: And how we saw good growth year over year, both in Q3 and in Q4, and then reduce capital expenditures are yielding significantly higher free cash flow.

Mike Guthrie: I want to now address some seasonality, which I think will help people with their models.

Mike Guthrie: We're really starting to see good seasonality in the business.

Mike Guthrie: And.

Mike Guthrie: And.

Mike Guthrie: Really in 'twenty, two 'twenty, three where through Covid comparisons and so you can really start to see things more clearly on bookings back to page 17 normally Q1 is down from the Q4 of the prior year. The holiday season, Q1, and Q2 are pretty similar in terms of our bookings with a slight uptick in Q2 and then we see.

Mike Guthrie: On bookings back to page 17, normally Q1 is down from the Q4 of the prior year, the holiday season. Q1 and Q2 are pretty similar in terms of all bookings with a slight uptick in Q2. And then we see very good sequential growth in Q3 with the summer, and then a big sequential jump in Q4 for the holidays. And then again, back down a little bit in Q1 of the next year.

Mike Guthrie: Very good sequential growth in Q3 with the summer and then a big sequential jump in Q4 for the holidays, and then again back down a little bit in Q1 of next year. So thats normal seasonality on bookings and you can really see that on page 19, you can start to see our cash flow from operations in the seasonality around cash from operations. Let me just talk a little.

Mike Guthrie: So that's normal seasonality in bookings, and you can really see that. On page 19, you can start to see our cash flow from operations and the seasonality around cash from operations. Let me just talk a little bit about that.

Mike Guthrie: A bit about that.

Mike Guthrie: Note that Q1 is normally the highest cash from operations rather than Q4, which is the highest in bookings. And the reason for that is simply working capital. We get a working capital build up in Q4 when holiday bookings are at their highest, and then there's a big release of that with post-holiday collections. And so Q1 tends to be our highest cash flow from operations. On page 36, looking at covenant-adjusted EBITDA, it's a little bit different than cash from operations because the difference is actually that change in working capital.

Mike Guthrie: Note that Q1 is normally the highest cash from operations rather than Q4, which is the highest in bookings and the reason for that is simply working capital we had.

Mike Guthrie: Working capital buildup in Q4 with holiday bookings at the highest and then there is a big release of that with post holiday collections, and so Q1 tends to be our highest cash flow from operations.

Mike Guthrie: On page 36, looking at Covenant adjusted EBITDA, it's a little bit different than cash from operations because the difference is actually that change in working capital and therefore, the seasonality around covenant adjusted EBITDA tracks much more whereas normal bookings. So Q1 is lower because we don't have the working capital benefit Q2 goes down a little bit because.

Mike Guthrie: And therefore, the seasonality around covenant-adjusted EBITDA tracks much more with normal bookings. So Q1 is lower because we don't have the working capital benefit. Q2 goes down a little bit because we tend to grow the top line, but also invest a little bit, and we have some amount of fixed cost growth. And then, in Q3 and Q4, covenant-adjusted EBITDA tends to pick up with growth in summer bookings and then, of course, hits its peak in Q4 with peak holiday bookings. And free cash flow will start to see more seasonality, normal seasonality, as long as CapEx sort of matches and flows throughout the course of the year, which we think it will. Some other quick call-outs.

Mike Guthrie: We tend to grow the topline, but also invest a little bit and we have some of some amount of fixed cost growth and then Q3 and Q4.

Mike Guthrie: Kevin and adjusted EBITDA tends to pick up with growth in summer bookings and then of course hits. Its peak in Q4 with peak holiday bookings and free cash flow will start to see more seasonality normal seasonality.

Mike Guthrie:

Mike Guthrie: As long as Capex sort of matches and as flows throughout the course of the year, which we think it will.

Mike Guthrie: Some other quick callouts, Dave talked about <unk> growth and hourly growth great numbers.

Mike Guthrie: Dave talked about DAU growth and hourly growth. Great numbers, both overall and across all geographies and with older users. But I do want to call out monetization.

Mike Guthrie: Overall and across all geographies and with older users I do want to call out monetization, our bookings <unk>, which you can see on page 26 was up 3% overall and on page 27 was up across most of the regions around the world and then on page 28 monthly unique payers.

Mike Guthrie: Our bookings per DAU, which you can see on page 26, was up 3% overall, and on page 27, it was up across most of the regions around the world. And then, on page 28, monthly unique payers hit an all-time peak in the fourth quarter, and a big call-out. Bookings per monthly unique payer was the highest of any Q4, and actually, of course, the highest in history, and that number was up nicely over the same number this time last year.

Mike Guthrie: Hitting all time peak in the fourth quarter.

Mike Guthrie: And a big call our bookings per monthly unique payer was the highest of any Q4 and actually of course the highest.

Mike Guthrie: In the history.

Mike Guthrie: And that number was up nicely over the same number at this time last year, our share count grew by about three 7%.

Mike Guthrie: Our share count grew by about 3.7%. We'll talk a little bit about guidance and then we'll open it up to your questions. We are obviously guiding to gap revenue and gap net loss. These are going to be a little bit difficult for you to get exactly right because of the waterfall of the deferred and the factors that go into determining that number.

Mike Guthrie: Let's talk a little bit about guidance and then we'll open it up to your questions. We are obviously guiding to GAAP revenue and GAAP net loss. These are going to be a little bit difficult for you to get exactly right because of the waterfall of the deferred and the factors that go into determining that numbers. So those are the natures of good of goods purchased whether its a consumable or a.

Mike Guthrie: So those are the natures of goods purchased, whether they're consumable or durable, and then the life of a paying user. We're also guiding on a non-GAAP basis to bookings and adjusted EBITDA. Now, you're all familiar with bookings.

Mike Guthrie: Durable and then the life of the paying user we're also guiding on a non-GAAP basis to bookings and adjusted EBITDA.

Mike Guthrie: You're all familiar with bookings.

Mike Guthrie: This quarter, we're guiding to adjusted EBITDA, and that calculation differs from what most of you refer to as adjusted EBITDA in your Roblox models. What most of you are referring to is covenant adjusted EBITDA. So just to clarify again, the difference between covenant adjusted EBITDA is calculated by adding back that net charge of deferrals. And so that's what most of you are modeling to.

Mike Guthrie: This quarter, we're guiding to adjusted EBITDA and that calculation differs from what most of you referred to as adjusted EBITDA and your robots models. What most of you are referring to as covenant adjusted EBITDA. So just to clarify again the difference between covenant adjusted EBITDA is calculated by adding back that net charge of deferrals.

Mike Guthrie: And so that's what most of you are modeling two so when you see the adjustments and Youll see in our in our.

Mike Guthrie: So when you see the adjustments, and you'll see in our releases, you have to add back the deferred to get what's in your models as adjusted EBITDA. Margin guidance, about 100 to 300 basis points. We talked about this at investor day, that means year-over-year by quarter and for the full year. So when we have variance and margin, that's okay.

Mike Guthrie: Releases, you have to add back the deferred to get whats in your models as adjusted EBITDA margin.

Mike Guthrie: Margin guidance about 100 to 300 basis points, we've talked about this at Investor day.

Mike Guthrie: That means year over year by quarter and for the full year, So where we have variance in margin. That's okay. We're going to show margin improvement in each of those quarters and then overall. So for example, many of you on your margin expectations for Q4 were at about 18%, we generated about 23% and for.

Mike Guthrie: Just we're going to show margin improvement in each of those quarters and then overall. So for example, many of you and your margin expectations for Q4 were at about 18%. We generated about 23%. And for us, that compares to 20.3% last year. So it was about a 270 basis increase in the fourth quarter. And then for the full year, consensus estimates were about 10% for 23.

Mike Guthrie: That compares to 23% last year. So it was about a 270 basis point increase in the fourth quarter and then for the full year consensus estimates were about 10% for 'twenty. Three we produced 12, 3%. So that's about 230 basis points of improvement now for the full year, and then I'll stop and let you ask questions.

Mike Guthrie: We produced 12.3%, so that's about 230 basis points of improvement. Now for the full year, and then I'll stop and let you ask questions. For the full year, the midpoint of our margin guidance would suggest 13.4%, or 110 basis points higher than where we were last year. And the high end implies about 14% or 170 basis points. And for Q1, the midpoint is about 8%, which is also 110 basis points higher than where we were last year in Q1. Again, just the seasonality and the change in margins. And the high end implies 8.3% or about 140 basis points of improvement. So with that, why don't we turn it over to questions?

Mike Guthrie: For the full year, the midpoint of our margin guidance would suggest 13, 4% or 110 basis points higher than where we were last year.

Mike Guthrie: And the high end implies about 14% or 170 basis points and for Q1. The midpoint is about 8%, which is also 110 basis points higher than where we were last year in Q1 again, just the seasonality and the change in margins in the high end implies eight 3% or about 140 basis point improvement so with that.

Mike Guthrie: Matt why don't we turn it over to questions and just highlighting two growth rates Q4 bookings grew 25% fiscal year bookings growth, 23%. So thanks, Mike.

Mike Guthrie: Yeah. And just highlighting two growth rates, Q4 bookings growth, 25%. Fiscal year bookings growth, 23%. So thanks, Mike. At this time, I would like to remind everyone, in order to ask a question, simply press star, then the number 1 on your telephone keypad. We'll first go to the line of Omar D'souza with the Bank of America.

Mike Guthrie: Okay.

Matt: At this time I would like to remind everyone that order to ask a question simply press Star then the number one onto your telephone keypad.

Matt: We will first go to the line of Omar <unk> with Bank of America. Please go ahead.

Omar D'souza: Please go ahead. Hi, thank you for taking my question. I wanted to get a sense of how much the developer layoffs in the video game industry could potentially be a tailwind for you in 2024. Some industry experts estimate that over 10,000 workers lost their jobs in the video game industry in 2023, and Kotaku reports that over 6,000 have already lost their jobs in January, including 2,000 from Microsoft.

Omar: Hi, Thank you for taking my question.

Omar: I wanted to get a sense of how much.

Omar: So the developer layoffs in the video game industry could potentially be a tailwind for you in 2020 for some industry experts estimate that over 10000 workers lost their jobs in the video game industry in 2023.

Omar: Kotaku reports that over 6000 have already lost their jobs.

Omar: In January including 2000 from Microsoft and.

David Bazzucchi: I was wondering, did you notice more mobile app and PC console game developers than usual joining the Roblox developer community in Q4 or in January so far? And what is Roblox doing in 2024 to attract some of that video game industry talent to your ecosystem? And then I have one quick question after that. Hey, there are two ways to talk about this.

Omar: I was wondering did you notice more mobile app and PC console game developers than usual joining the roadblocks develop developer community in Q4 or in January so far.

Speaker Change: And what is roadblocks doing in 2024 to attract some of that video game industry talent to your ecosystem and then I have one quick question after that.

Speaker Change: Yeah.

Speaker Change: Hey, Ed two ways to talk about this first we continue internally within the company to hire throughout this year.

David Bazzucchi: First, we continue internally within the company to hire throughout this year. Also, over really all of the last years, all the cohorts of the creators on Roblox have continued to grow and make more money, whether it's the top ten, top hundred, or top thousand. So what you're asking has already been in place for several years.

Speaker Change: Also over really all of the last years, all the cohorts of the creators on roadblocks have continued to grow and make more money, whether it's the top 10 top 100 or top.

Speaker Change: So what you are asking is already been in place for several years and as we grow bookings we grow the economic opportunity on our platforms. So we believe naturally irrespective of the layoffs, our creator community will continue to grow.

David Bazzucchi: And as we grow bookings, we grow the economic opportunity on our platform. So we believe, naturally, irrespective of the layoffs, our creator community will continue to grow. Okay.

Speaker Change: Okay got it actually you've answered my question. So I'll, let the next person go thank you.

Omar D'souza: Actually, you've answered my question, so I'll let the next person go. Thank you. Thank you. Next, we'll go to the line for Jason Tilghen with Canaccord Genuity.

Speaker Change: Thank you.

Canaccord Genuity: Next we'll go to the line of adjacent <unk> with Canaccord Genuity. Please go ahead.

Jason Tilghen: Please go ahead. Great morning, thanks for taking the question. I'm curious about the really strong bookings growth in Q4, wondering to whatever extent you can share about the upside that was driven by advertising and then, at a higher level, where do you stand today in terms of building out some of those additional capabilities and measurement tools you talked about yesterday? I'll go high level and then Mike.

adjacent: Great. Good morning, Thanks for taking the question.

adjacent: I'm curious with the really strong bookings growth in Q4, I'm wondering to whatever extent you can share about upside that was driven by advertising and then just more higher level, where do you stand today in terms of building out some of those additional capabilities and measurement tools, we talked about at the Investor day.

Speaker Change: Although high level and then let Mike.

Nick.

Speaker Change: We have a plan through this year to add more ability for our partners to measure and see what's going on on the platform. We had real bookings in Q4, we have a quarterly target for advertising within the company. We're not sharing the splits but we are are very focused on.

David Bazzucchi: We have a plan throughout this year to add more ability for our partners to measure and see what's going on on the platform. We had real bookings in Q4, and we have a quarterly target for advertising within the company. We're not sharing the splits, but we are very focused on this year maturing the size of that market. Hey Jason, we've said in the past that we're going to start disclosing specific financial data on advertising when it becomes material and really important to the financial results. And so, while we're really pleased with the progress, we have not hit that point yet. Thank you very much.

Speaker Change: This year maturing the size of that market, Hey, Jason We've said in the past that we're going to start disclosing.

Speaker Change: Specific financial data on advertising when it becomes material and really important to the financial results and so while we're really pleased with the progress we are not we have not hit that point yet.

Jason: Okay, great. Thank you very much.

Mike Guthrie: Thanks. Next, we'll go to the line of Brian Pitts with BMO Capital Markets. Please go ahead.

Speaker Change: Thanks.

Speaker Change: Next we'll go to the line of Brian Pitz with BMO capital markets. Please go ahead.

Brian Pitts: Thanks for the question. While you continue to make progress aging up the user base, this does remain one of the biggest questions from investors. What do you attribute as being the biggest factor in attracting and retaining older users? Is it higher quality, or is it different content?

Brian Pitz: Thanks for the question, while you continue to make progress aging up the user base. This does remain one of the biggest questions from investors what do you attribute as being the biggest factor in attracting and retaining older users is at the higher quality or is it different content and then as you look at the audience I'm really curious about.

David Bazzucchi: And then as you look at the audience, I'm really curious about how the different age cohorts are engaging differently on the platform. It'd be really great to hear more in terms of gameplay and spending habits between the different age cohorts. Thanks so much. First of all, how do we do this?

Brian Pitz: How the different age cohorts are engaging differently on the platform. It would be really great to hear more in terms of gameplay and spending habits between the different age cohorts. Thanks, so much.

Speaker Change: Hey, first one on how do we do this I want to highlight we have been doing this for two or three or four years already and in several years back the vast majority of people on our platform were under 13, so seeing the growth over 13 is a really good sign.

David Bazzucchi: I want to highlight, we have been doing this for two, three or four years already. And in a, in several years back, the vast majority of people on our platform were under 13. So seeing the growth over 13 is a really good sign. We, we attribute it to such a wide range of things, quality of the platform, search and discovery, organic growth of new, older players, existing players retaining and, and aging up, we do see a, a play, play habits generally of older players that might mirror what we see in existing gaming and communication markets. We can see certain cohorts that might lean in for longer engagement on a PC type experience. We can see other cohorts that lean in socially on mobile. So the, the good news is we are seeing patterns on Roblox that mirror really large markets, the overall gaming market, the overall social communication market. And we're, you know, no specific thing, many, many things all contributing to both I would say retention-based growth, as well as viral new player growth. Around the world.

Speaker Change: We attributed to such a wide range of things quality of the platform to search and discovery organic growth of new older players existing players retaining an aging up we do see a.

Speaker Change: Played play habits generally of older players that might mirror, what we see in existing gaming and communication markets. We can see certain cohorts that might lean in for longer engagement on a PC type of experience. We can see other cohorts that lean in socially on mobile so the good.

Speaker Change: News is we are seeing patterns on roadblocks that mirror really large markets. The overall gaming market. The overall social communication market and were.

Speaker Change: No specific thing many many things all contributing to both.

Speaker Change: I would say retention base growth as well as viral new player growth around the world.

Mike Guthrie: Hey, Brian, just add to Dave's comments. Yeah, we've been seeing the growth in older users has been higher than the growth in younger users for a long time. It's the majority of the user population today in terms of behavior.

Brian Pitz: Brian just add.

Brian Pitz: Dave's comments, yes, we have been.

Brian Pitz: The growth in older users has been higher than the growth in younger users for a long time, it's the majority of the of the user population today in terms of behavior and that has been consistent quarter after quarter after quarter.

Mike Guthrie: And that has been just consistent quarter after quarter after quarter in terms of behavior. In addition to Dave's comments about engagement, the older users do tend to monetize a bit better on a, on sort of a like for like basis, meaning cohorted by time spent on the platform. So over the long run, that is generally a boost to monetization. I want to highlight one can qualitatively see the expansion of content that intuitively would seem appealing to older players, both in maybe the realistic battle genre and in the fashion and dressing genre. I tweeted to highlight some of these properties. Great, thanks so much. Stay friends.

Brian Pitz: In terms of behavior. In addition, today's comments about engagement the older users do tend to monetize a bit better on a sort of a like for like basis, meaning cohort. It by time spent on the platform. So over the long run that is generally a boost to monetization.

Brian Pitz: I want to highlight one can qualitatively see the expansion of content that intuitively would seem appealing to older players both in maybe the realistic battle genre in the fashion and dressing genre tweeted to highlight some of these properties.

Brian Pitz: Yeah.

Speaker Change: Great. Thanks, so much.

Speaker Change: Thanks, Brian.

Clark Lampin: Next, we'll move to the line for Clark Lampin with BTIG. Please go ahead. Thanks. Good morning. I've got two, one for Dave, and one for Mike.

Speaker Change: Next we'll move to the line of Clark <unk> with BTG. Please go ahead.

Clark: Thanks, Good morning, I've got two one for Dave one for Mike Dave The network effects that you've talked about in the shareholder letter is it possible to contextualize for us how much of your user base is either.

David Bazzucchi: Dave, the network effects that you talked about in the shareholder letter, is it possible to contextualize for us how much of your user base is either utilizing the voice tools or maybe some of the more recent text translation and how much that affects behavior? And Mike, the uptick in bookings per DAU growth that we saw this quarter, should we expect that to continue? And if so, are there recent releases or maybe, you know, economy items that are in the pipeline that you'd highlight for us amongst the drivers? Thank you. I will. I don't have in front of me the voice DAU number I do.

Clark: Utilizing the voice tools or maybe some of the more recent tax translation and.

Clark: And how much that affects behavior and Mike the uptick in bookings for <unk> growth that we saw this quarter should we expect that to continue.

Mike Guthrie: And if so are they recent releases or maybe economy items that are in pipeline that you'd highlight for us.

Mike Guthrie: Amongst the drivers thank you.

Speaker Change: I will.

Speaker Change: I don't have in front of me the voice <unk> number I do I shared a 161% in voice <unk> growth year over year in the quarter, our internal metrics. When we look at users who are using voice show lovely gains on retention on engage.

David Bazzucchi: I shared 161% voice DAU growth year over year in the quarter. Our internal metrics, when we look at users who are using voice, show lovely gains on retention, on engagement, and on other aspects. So there is a network effect in that the more of our base that is using voice, we see other metrics go up at the same time, and Clark on the bookings per DAU question. I'm going to be focused primarily, we will be focused primarily on bookings and booking growth. If DAUs happen to grow a little bit faster, then that number might come down a little bit.

Speaker Change: And on other aspects. So there is a network effect and that the more of our base that is using voice we see other metrics go up at the same time.

Speaker Change: And Clark on the bookings per day your question.

Speaker Change: I'm going to be focused primarily will be focused primarily on bookings and bookings growth. It <unk> happen to grow a little bit faster than that number might come down a little bit if they happen to grow more slowly that number will go up a little bit on the other hand, I will say.

Mike Guthrie: If they happen to grow more slowly, that number will go up a little bit. On the other hand, I will say the economics team at Roblox has more compelling initiatives going on than I've ever seen. And so I'm certainly excited and optimistic about the ability to continue to improve monetization. Thank you. I would also look at that number generally again just to make sure of seasonality, and just compare like periods to like periods for the most part.

Speaker Change: The economy team at roadblocks has more compelling initiatives going on than.

Speaker Change: Then I have ever seen and so I'm, certainly excited and optimistic about the ability to continue to improve monetization.

Speaker Change: Thank you.

Speaker Change: I would also look at that number generally again just to just make sure seasonality just compare like periods to like periods for the most part.

Mike Guthrie: Next, we'll move to the line for Ken Goralski with Wells Fargo. Please go ahead. Thank you for your time. I appreciate it. And the opportunity. I want to go back to advertising.

Speaker Change: Next we will move to the line of Ken <unk> with Wells Fargo. Please go ahead.

Ken: Thank you for the time I appreciate it.

Ken: The opportunity.

Ken: I wanted to go back to the advertising and I understand that it's too early to quantify but could you give us a sense of kind of the key signposts, we should be looking for as you develop the opportunity.

Ken Goralski: And I understand that it's too early to quantify, but could you give us a sense of the kind of key signposts we should be looking for as you develop the opportunity, whether it be market research or case studies with brands? And how do you think about the, how should we think about the development of your direct sales force? Where are you in the build out of that process? And are you ready to go to market? Thank you. Yeah, I'll share the signposts that one might watch.

Ken: Whether it be market research or case studies.

Ken: With brands and how do you think about the how should we think about your that.

Ken: The development of your your direct sales force where are you in the build out of that process and.

Speaker Change: You're ready to go to market. Thank you.

Speaker Change: Yes, I'll share the signposts one might watch we shared anecdotally the just rough growth in the number of brands advertising on the platform. This year, you'll see from a platform point of view more and more measurement abilities for our partners to attrit.

David Bazzucchi: We shared anecdotally the just rough growth in the number of brands advertising on the platform. This year, you'll see from a platform point of view more and more measurement abilities for our partners to attribute brand advertising. We have shared that we are also building experiments with physical shopping, but no ship date on that, that we think will ultimately create a full closed loop effect for advertisers on the platform.

Speaker Change: Brand advertising.

Speaker Change: We have shared that we are also building experiments with physical shopping but no ship date on that we think will ultimately create a full closed loop effect for advertisers on the platform as Mike said, we're not sharing specific numbers on the development.

David Bazzucchi: As Mike said, we're not sharing specific numbers on the development. In Q4, we hired Stephanie Latham, who's driving just an awesome team, and we're growing out that brand partnership team to go to market. I just met with them all yesterday, actually, and it's an amazing team.

Speaker Change: In Q4, we hired Stephanie Lytham who's driving.

Speaker Change: Just an awesome team and we're growing out that brand partnership team to go to market I, just met with them all yesterday actually and it's an amazing team like I don't know if you want to add anything on top of that no I was going to say the same thing both Dave and I had the opportunity to address the new and emerging organization. So it's growing new people all the time.

Mike Guthrie: Mike, I don't know if you want to add anything on top of that. No, I was going to say the same thing. Both Dave and I had the opportunity to address the new and emerging organization. It's growing; new people all the time, very talented, very excited. Ken, I think one of the main points of this is, what are the best ways to show signposts as we get to that revenue level that will become material? And so we'll continue to come back on that. Right now, the sheer number of engagements is the right way to look at it.

Speaker Change: Very talented very excited and Ken I think one of the main <unk>.

Speaker Change: <unk> of this is what are the best ways to show signposts as we get to that revenue level that will become material and so we'll continue to come back on that right now.

Speaker Change: The sheer number of engagements is the right way to look at it and Dave talked a little bit about the number of brands that started to work with us in Q4 and the <unk>.

Mike Guthrie: And Dave talked a little bit about the number of brands that started to work with us in Q4, and the quality of them and the depth of the engagement is fantastic. So we'll be talking more about that in subsequent quarters. Thank you both. Next, we'll move to the line from Eric Sheridan with Goldman Sachs. Please go ahead.

Speaker Change: Quality of them and the depth of the engagement is.

Speaker Change: Is fantastic so we'll be talking more about that in subsequent quarters.

Speaker Change: Thank you both.

Speaker Change: Next we'll move to the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Eric Sheridan: Thanks so much for taking the question. I want to know if we can go a little bit deeper on some of the more emerging platforms, elements of augmented reality, spatial computing, platforms like the Quest 3 and the Vision Pro from Apple, and how you think about continuing to widen means of distribution and new experiences for users over the medium to long term.

Eric Sheridan: Thanks, so much for taking the question I wanted to know if we go a little bit deeper on your updated thoughts on some of the more emerging platforms elements of augmented reality spatial computing platforms.

Eric Sheridan: Platforms like the quest, three and division pro from Apple and how you think about continuing to widen out means of distribution and new experiences for users over the medium to long term. Thanks, so much.

David Bazzucchi: Hey, really proud to be on Quest with Meta and along with PlayStation in Q4. Highlighting our vision that immersive 3D connection and communication should be on phones, tablets, computers, VR headsets, and consoles. We can span the other platforms where we're not on, and those are all logical candidates. Vision Pro obviously is an interesting candidate.

Speaker Change: Hey, really.

Speaker Change: Proud to be on quest with meta.

Speaker Change: Along with Playstation in Q4, highlighting our vision that immersive three D connection and communication should be on phones tablets computers VR headsets consoles.

Speaker Change: We can span the other platforms, where we're not on and those are logical candidates vision CRO. Obviously is an interesting candidate there are others out there that you all know about as well.

David Bazzucchi: There are others out there that you all know about as well. And I think looking way off into the future, we're excited about the really connection and communication things we're building out on our platform, including our open-source Roblox Connect that shows off a lot of communication APIs, and we're well aware that some of this communication may go beyond VR into MR and AR as these platforms become more prevalent. Thank you, Eric. Thank you. Next, we'll move to the line of Drew Crum with Stiefel.

Speaker Change: And I think looking way off and into the future. We're excited about the really connection and communication things. We're building out on our platform, including our open source robots connect that shows up a lot of communication API and we're well aware that some of this communication may go beyond.

Speaker Change: On VR in the MLR and as these platforms become more prevalent.

Thanks, Eric Thank you.

Yes.

Andrew Edward Crum: Next we'll move to the line of drew Crum with Stifel. Please go ahead.

Andrew Edward Crum: Please go ahead. Okay, thanks. Hey guys, good morning. So we saw that you introduced real-time chat translations on the platform recently. Any early learnings you can share there? And, you know, as you continue to push the globalization of the platform and launch features that enhance localization, what would be the next milestone? Is it voice translation?

Andrew Edward Crum: Okay. Thanks, Hey, guys. Good morning. So we saw that you introduced real time chat translations on the platform recently.

Andrew Edward Crum: Any early learnings you can share there and as you continue to push globalization of the platform and launched features that enhance localization.

Andrew Edward Crum: What would be the next milestone as it voice translation and any sense of timing on that.

David Bazzucchi: Any sense of timing on that? Yeah, highlighting my tweet on Monday and our release that, I believe, right now, between 16 languages, we're allowing real-time text chat translation, always sitting on top, of course, our same safety, civility, and back-end infrastructure. This is the first step really to some of the dreams we shared where a class in the United States might have a partner school somewhere overseas and be able to go visit them and communicate with them.

drew Crum: <unk>.

Speaker Change: Highlighting my tweet on Monday in our release that I believe right now between 16 languages, we're allowing real time text chat translation always sitting on top of course, our same safety stability backend infrastructure. This is the first step really to some of the dreams, we shared where.

Speaker Change: A class in the United States might have a partner.

Speaker Change: School somewhere overseas and be able to go visit them and communicate with them also highlighting this as our own model based on our one ml platform were behind the scenes. We're building out this AI platform to support both generative as well as stuff like this translation and its running on the same technology.

David Bazzucchi: Also highlighting this is our own model based on our own ML platform; we're behind the scenes, we're building out this AI platform to support both generative as well as stuff like this translation. And it's running on the same technology that allows translation of content as well, without any ship dates and leaning in on vision. Two things: we're getting really good at high-volume voice processing for safety and civility, once again, on our own infrastructure at low cost. And, as you see, we're getting good at models that can drive real translation. So you can project the overlap of those two Venn diagrams.

Speaker Change: That allows translation of content as well without any ship dates and leaning in on vision.

Speaker Change: Two things were getting really good at high volume voice processing for safety and stability once again on our own infrastructure at low cost and as you see we're getting good at models that can drive real translation so that.

Speaker Change: You could project the overlap of those two venn diagrams, and I think I'd treated once again on Monday voice would be lovely someday once again with our safe Foundation.

David Bazzucchi: And I think I tweeted once again on Monday: voice would be lovely someday, once again, with our safe foundation. Thank you. Next, we'll move to the line of Andrew Erkowitz with Jeffries.

Speaker Change: Thank you.

Next we'll go to the line of Andrew <unk> with Jefferies. Please go ahead.

Andrew Edward Crum: Please go ahead. Yeah, hi, thanks for taking my question. Mike, could you just talk a little bit about the full year 24 guidance? How do you think about the different mix of DAU growth and maybe spend per hour, even maybe, maybe spend per payer? Like what are the key metrics we should be watching for to see whether you overperform or come in line there? So, Andrew, the forecasts that we build internally are generally driven primarily by user growth. We tend to take a conservative assumption on engagement.

Andrew: Yeah, Hi, Thanks, Thanks for taking my question, Mike could you just talk a little bit about the full year 'twenty guidance, how you think about the different mix of <unk>.

Andrew: <unk> gross and maybe spend per hour even maybe.

Andrew: Spend per payer like what's the key metrics, we should be watching for.

Andrew: You see whether you're over performer or come in line there.

Mike Guthrie: So Andrew.

Mike Guthrie: The forecast that we built internally are generally driven primarily by user growth we tend to take a.

Andrew: A conservative assumption on engagement, we have relatively high engagement on the platform. So we don't tend to forecast meaningful increases in engagement per user even though we have achieved those over time, but we just generally take a fairly conservative view.

Mike Guthrie: We have relatively high engagement on the platform, so we don't tend to forecast meaningful increases in engagement per user, even though we have achieved those over time, but we just generally take a fairly conservative view. We stay conservative on our conversion to payer numbers, and so we tend to have a little bit of extra room there. And then in terms of monetization, we are fairly conservative improvements in monetization, but we do forecast some improvements so that we have to achieve those. As I mentioned earlier, our economic team has a lot of things that are very compelling opportunities to improve monetization. We tend to bake a fairly small number of those into the models, but those are available for upside.

Andrew: We were relatively stay conservative on our conversion to payer numbers.

Andrew: And so we had intended to have a little bit of extra room there.

Andrew: And then in terms of monetization.

Andrew: We are fairly conservative and improvements in monetization, but we do forecast some improvements that we have to achieve those as I mentioned earlier we.

Andrew: Our economy team has a lot of things that are very compelling opportunities to improve monetization, we tend to bake a fairly small number of those into the models that those are available for upside. So generally the models that we build internally and from which we yield our guidance are.

Mike Guthrie: So generally, the models that we build internally and from which we derive our guidance are focused on user growth and continued user growth. Got it. Thank you. And then, just as a housekeeping question, on the Covenant Adjustability, but you're making no other adjustments there besides deferred revenue. So it truly is.

Andrew: We are focused on user growth and continued user growth.

Speaker Change: Got it. Thank you and then just as a housekeeping question.

Speaker Change: On the covenant adjusted EBITDA, Youre, making no other adjustments there besides deferred revenue so it truly is.

Mike Guthrie: Your historical adjustment, you would, plus the change in deferred revenue. That's correct. Yeah, that's right. And on page 36 in the supplemental materials, you can see that number. What will look odd a little bit in the letter with the guidance is adjusted EBITDA is negative because the deferred revenue is not in there. You have to add the deferred revenue to that.

Speaker Change: Our historical adjusted EBITDA.

Speaker Change: The change in deferred.

That's correct, Yeah, that's right.

Speaker Change: Page 36 in the supplement supplemental materials, you can see that number.

Speaker Change: We will look at a little bit in the.

Speaker Change: Letter with the guidance as adjusted EBITDA is negative because of the deferred is not in there you have to add the deferred to that and you'll be back to covenant adjusted EBITDA, which is normally the number that we're talking about.

Mike Guthrie: And you'll be back to covenant adjusted EBITDA, which is normally the number that we're talking about. We got it. We got it.

Eric Handler: Okay. Perfect. Thanks, guys. Next, we'll move to Eric Handler on the Roth MKM. Your line is open.

Speaker Change: We got it got it okay perfect. Thanks, guys.

Speaker Change: Okay.

Speaker Change: Next we'll move to Eric handler with Roth <unk>. Your line is open.

Eric Handler: Good morning, and thanks for the question. Mike, I think you alluded to this earlier, but your operating cash flow, or your EBITDA operating cash flow conversion has been running close to about 100%. Is that a good measure to think about for 2024 and beyond? And also, what's your CapEx expectation?

Eric Handler: Good morning, and thanks for the question, Mike I think you alluded to this earlier, but.

Eric Handler: Operating cash flow or your EBITDA operating cash flow conversion has been running close to about a 100% is that a good measure to think about for 2024 and beyond and also what is your capex expectations for the year.

Mike Guthrie: When you say free cash flow conversions, the EBITDA operating cash flow conversions, can you restate that part of it? Your covenant adjusted EBITDA to operating cash flow conversion is pretty much, you know, right in line around 100%. Is that it?

Eric Handler: Yes.

Eric Handler: When you say when you say free cash flow conversion.

Eric Handler: EBITDA.

Speaker Change: Cash flow conversion restate that part of it.

Speaker Change: Your.

Speaker Change: Your covenant adjusted EBITDA to operating cash flow conversion is pretty much.

Eric Handler: Yeah, that's right. That's good. It's just timing. That's right, Eric. It's just the timing difference.

Speaker Change: Alright and line around 100%.

Speaker Change: Yeah, that's right that's a good.

Speaker Change: Timing, that's right here I guess, that's a timing difference and it has to do with working capital and the timing of working capital and is most significant in Q1 and Q4 Q4, it's the buildup of.

Mike Guthrie: And it has to do with working capital and the timing of working capital. And it's most significant in Q1 and Q4. In Q4, it's the buildup of working capital. And in Q1, it's the collection, the heavy collections that come in.

Speaker Change: Working capital in Q1, it's the collection the heavy collections that.

Mike Guthrie: So those are the quarters where there's a big difference. CapEx expectations this year are, 180, yeah, 180 million for the year. And I think in prior periods, we've indicated some of that is related to real estate. It's not all infrastructure. Our infrastructure investments have come down pretty significantly.

Speaker Change: That come in so that those are the quarters, where theres a big difference.

Capex expectations this year.

Speaker Change: Our.

Speaker Change: Okay.

Speaker Change: $180 million for the year end.

Speaker Change: I think in prior periods. We've indicated some of that is related to real estate. If not all infrastructures are infrastructure investments have come down pretty significantly.

Mike Guthrie: Okay, and then just as a follow-up, you are not now that margins are expanding, the cash flow is once again, nicely positive, you have the high quality problem of, on a petition, having a good amount of excess cash. What's your view on that excess cash, and sort of as you think about capital outlays? Well, I would say we're in a position to have a nice cash position; whether or not it's excess for a company of our size is kind of a matter of opinion. We like having a very strong balance sheet.

Speaker Change: Okay, and then just as a follow up you are not now that margins are expanding free cash flow was once again nicely positive you have the high quality problem of being in a position of having a good amount of excess cash.

Speaker Change: What's your view on that excess cash and sort of as you think about capital allocation.

Speaker Change: Well I would say we're in we're in a position to have a nice cash position.

Speaker Change: Whether or not it's excess for a company of our size is I would say is kind of a matter of.

Speaker Change: Of opinion, we we like having a very strong balance sheet, we like having enough capital on hand.

Mike Guthrie: We like having enough capital on hand where if we needed to do something or wanted to do something opportunistic, we could do that. We're also in a nice position where we continue to invest in the business, continue to grow and invest, and we do that out of operation. So for now, we like the balance sheet. We like where it is. We don't really look at it as a lot of excess cash. Our capital allocation is really investments in infrastructure and engineering and product, and we're able to do that out of the operating cash flow of the company. So that's a nice place to be.

Speaker Change: Where if we needed to do something we wanted to do something opportunistic we could do that.

Speaker Change: We're also in a nice position, where we continue to invest in the business continue to grow and invest and we're doing that out of operation. So for now we like the balance sheet, we like where it is we don't really look at it as a lot of excess cash.

Speaker Change: Our capital allocation is really investments in infrastructure and engineering and product and we're able to do that out of the operating cash flow of the company. So that's a nice place to be.

Mike Guthrie: Thank you very much. Thank you. Next, we'll move to the line for Brandon Ross with LightShed Partners. Please go ahead. Thank you so much.

Speaker Change: Thank you very much.

Speaker Change: Thanks.

Speaker Change: Next we'll move to the line of Brandon Ross with light shed partners. Please go ahead.

Thanks, so much.

Brandon Ross: One of the tools that you've introduced into the economy has been subscriptions. Just wondering if you see that as an important monetization tool and how that may impact developers' abilities to create new types of experiences. And in general, when you roll out a new tool for developers, how long does it take for that to be integrated into how developers create new experiences? What's the lag there?

Brandon Ross: One of the tool.

Brandon Ross: Tools that you've introduced into the economy has been subscription just wondering if that's if you see that as an important monetization tool in and how that may impact developers abilities to create new types of experiences and in general when do you when you roll in due to allow for.

Brandon Ross: Developers.

Brandon Ross: How long does it take for that.

Brandon Ross: That too.

Brandon Ross: Kind of be integrated into how developers.

Brandon Ross: Create new experiences like what's the lags there.

David Bazzucchi: Yeah, we're not breaking these numbers out, but subscriptions are very consistent with our vision of creating a platform where a lot of developers have optionality on how they monetize. We saw a, I don't know if we shared it, you could probably go in and figure it out, what percent of the top 20 creators on the platform are now offering in-experience subscriptions, highlighting that we've seen good adoption amongst our And these subscriptions allow an individual creator to create a recurring revenue stream, whether the user is using mobile payments or credit cards or other recurring types of payments. We believe this will contribute to long-term monetization on the platform. We're not sharing the breakout. Mike, I don't know if you have any.

Brandon Ross: Yeah, we're not breaking these numbers out but subscriptions are very consistent with our vision of creating a platform where a lot of developers have optionality on how they monetize we saw a I don't know if we share and you can probably go in and figure it out what percent of the top 20 creators on the plan.

Brandon Ross: Form are now offering inexperienced subscription highlighting that we've seen good adoption amongst our creator base and these these subscriptions allow an individual creators to create a recurring revenue stream, whether the user is using mobile payments or credit card or <unk>.

Brandon Ross: Other recurring type payments.

Brandon Ross: We believe this will contribute to long term monetization on the platform, we're not sharing the breakout Mike I don't know if you have any no. We also think it will contribute to retention and the developers obviously, they're free to implement as they want I don't think there is a brand into your second question I don't think Theres any.

David Bazzucchi: No, we also think it'll contribute to retention, and the developers, obviously, they're free to implement it as they want. I don't think there's, I'll bring it to your second question. I don't think there are any.

Mike Guthrie: Pat answer on time it takes developers to absorb things that we've created for them. They all will do that at their own pace based on how they think that works for their own business. Ultimately, our job is to give them the visibility and the tools to build, and they will roll them out as they see fit. And then, obviously, Apple made some changes in the EU to the App Store, take rates, and such. Does that impact you at all?

Brandon Ross: Pat answer on time, it takes developers to absorb things that we.

Brandon Ross: Created for them. They all will do that at their own pace based on how that they think that works for their own.

Brandon Ross: Their own business ultimately our job is to give them the visibility and the tools to build and they roll them out as they see fit.

Brandon Ross: And then Avi.

Brandon Ross: Apple made some changes.

Brandon Ross: In the EU to App store.

Brandon Ross: Take rates and such does that impact you at all.

David Bazzucchi: A couple of highlights on this across all of our store partners, whether it's Microsoft, Google, Apple, Amazon, and others. One is that all of the guidance we're giving is assuming no change in those systems. The second is that they all continue to be great partners. Third, we are examining the EU ruling to see if it makes sense for us.

Brandon Ross: A couple of highlights on this.

Brandon Ross: All of our store partners, whether it's Microsoft Google Apple Amazon and others.

Brandon Ross: One is all of the guidance, we're giving is assuming no change in those systems. The second is they all continue to be great partners. Third is we are examining the EU ruling to see if it makes sense for us and the fourth is we have always hinted that.

David Bazzucchi: And the fourth is that we have always hinted that as much as possible any adjustment in future fees, we would want to distribute as much as possible both to our creator community and judiciously some to our bottom line. So if and when possible changes happen, we think that can help drive our creator community. We will move next to the line of Bernie McTernan with Needham & Company. Please go ahead.

Brandon Ross: As much as possible any adjustment in future fees, we would want to distribute as much as possible both to our creator community and judiciously some to our bottom line. So.

Brandon Ross: If and when possible changes happen, we think that can help drive our creator community.

Speaker Change: Thank you.

Speaker Change: We will move next to the line of Bernie Mcternan with Needham <unk> Company. Please go ahead.

Bernie Mcternan: Great. Thank you for taking the question. Just two on bookings.

Bernie Mcternan: Great. Thank you for taking my question just two on bookings first the booking acceleration that happened in the U S. Just any thoughts in terms of what's driving that remember last year. There are some thoughts that.

Mike Guthrie: First, the booking acceleration that happened in the U.S., just any thoughts in terms of what's driving that? I remember last year there were some thoughts that there could have been some outperformance last year because of gift cards, so if that played out in a similar way. And then 3 million new payers were added in the quarter. Where are those coming from, just from a geographic or age demographic perspective, and any shifts that are going on that are seen? You Bernie on the second question: no big geo shift.

Bernie Mcternan: The Caribbean some outperformance last year because of the gift card. So if that played through in a similar way and then 3 million new payers added in the quarter, where are those coming from just from a geo or age age demographic perspective, and any shifts that are going on leather significant.

Bernie Mcternan: Hey, Bernie on the second question.

Bernie Mcternan: No big shift.

Mike Guthrie: We're seeing strong payer growth really everywhere. Part of the reason monetization has gone up is older users in places like us in Canada have grown at a really nice clip, and as we said earlier, they monetize a little bit better. In terms of the question, why was booking so strong in the fourth quarter? We like to think it's growing our user base. They're more engaged.

Bernie Mcternan: We're seeing strong payer growth really everywhere.

Bernie Mcternan: Part of the reason monetization has gone up as older users in places like U S and Canada have grown at a really nice clip and as we said earlier, they monetize a little bit better.

Bernie Mcternan: In terms of the question is why was looking so strong in the fourth quarter.

Bernie Mcternan: We like to think it's growing our user base, they're more engaged the content continues to get better and better the platform continues to scale.

Mike Guthrie: The content continues to get better and better. The platform continues to scale. We were on a couple of new platforms in the fourth quarter, so that clearly had an impact, but overall, a lot of the things that continue to drive the growth of the business over a very long period of time. The math with 58% right now for DAUs over 13%.

Bernie Mcternan: We were on.

Bernie Mcternan: A couple of new platforms in the fourth quarter, so that clearly had an impact.

Bernie Mcternan: <unk>.

Bernie Mcternan: But overall.

Bernie Mcternan: A lot of the things that and continue to drive the growth of the business over a very long period of time.

Bernie Mcternan: The math with 58% right none of our da use over 13% when we look at the overall market size of gaming immersive communication and social connection that 13 and over market.

David Bazzucchi: When we look at the overall market size of gaming, immersive communication, and social connection, that 13 and over market, you can all do your own computation on the size of that TAM relative to the under 13. And that's why growth there is so important to us. Understood. Thank you both. Thanks, Bernie. Next, we'll move to the line of Matthew Kost with Morgan Stanley. Please go ahead. Hi everyone. Thanks for taking the questions. I have two, probably both from Mike.

Bernie Mcternan: You can all do your own computation on the size of that Tam relative to the under 13 and Thats why growth, they're so important to us.

Speaker Change: Understood. Thank you both.

Speaker Change: Thanks Bernie.

Matthew Cost: Next we'll move to the line of Matthew cost with Morgan Stanley. Please go ahead.

Matthew Cost: Hi, everyone. Thanks for thanks for taking the questions I have two probably both for Mike. So just on some of the expense lines for the certain.

Matthew Kost: So just on some of the expense lines, for certain infrastructure trust and safety, it got down to a really high level of efficiency this quarter, 11% of bookings. I guess when you think about that internally, do you think about that figure on a per user basis, on a per hour basis, on a per dollar bookings basis? And how do you think about where that can go over time? And then I have a follow-up question.

Matthew Cost: Infrastructure Trust and safety it got down to just a really high level of efficiency. This quarter, 11% of bookings I guess when you think about that internally do you think about that figure on a per user basis on a per hour basis on a per.

Mike Guthrie: Dollar bookings basis, and how do you think about where that can go over time, and then I have a follow up thank you.

Speaker Change: I mean, how we look at them at.

Mike Guthrie: I mean, how we look at all of the above, ultimately, cost to serve is the metric that we use. And it's the metric that the team owns the infrastructure the team owns. And so they're, they're working hard to drive that down. It is, like you said, it's about 11% now. With higher efficiency and more use of artificial intelligence, we see that as a high single-digit number over the next few years.

Speaker Change: All of the above ultimately its cost to serve is the metric that we use and it's a metric that the team.

Speaker Change: <unk> owns the infrastructure team homes and so there they are working hard to drive that down.

Speaker Change: It is like you said is about 11% now ultimately with higher.

Speaker Change: <unk> see more use of artificial intelligence, we see that as a high single digit number over the next few years, it's been a good source of leverage recently and.

Mike Guthrie: It's been a good source of leverage recently, and we still think there's more to do there. Great, thanks. And then on the developer exchange fees, you gave some good color just a few minutes ago about sort of reinvesting any savings on the cost of revenue side into DevEx, so that's clear. But just DevEx on its own, I think, was below 20% of bookings this quarter, very slightly for the first time in over two years. I guess anything you can say about the drivers there, and then, you know, all else equal, do you expect it to still be a number that increases the percentage of bookings, even if nothing changes on the app store fee side? Yeah, I mean, DevEx is almost exactly where it was this time last year in the fourth quarter.

Speaker Change: And we still think there's more to do there.

Speaker Change: Great. Thanks, and then on the developer exchange, Steve you gave some good color just a few minutes ago about sort of reinvesting any savings on the cost of revenue side into that backs that thats clear, but just <unk> on its own I think was below 20% of bookings this quarter very slightly for the first time in over two years I guess.

Speaker Change: Anything you can say about the drivers there and then all else equal do you expect it to still be a number that rises as a percentage of bookings even if nothing changes on the App store.

Steve: Yes, I mean, <unk> almost exactly where it was this time last year in the fourth quarter. So it's about 20 was about 20% last fourth quarter about 20%. This fourth quarter. So I don't see a major change there is some seasonality in that number but.

Mike Guthrie: So it's about 20, it was about 20% last fourth quarter, and about 20% this fourth quarter. So I don't see a major change. There is some seasonality in that number.

David Bazzucchi: But overall, we are always looking to push more of the economics to the devs. Yeah, and hey, chiming in on what we shared six months ago on our Q2 2023 earnings call. The vision, we want to grow bookings faster year on year than cost of goods. We want to grow bookings faster than infra and certain other expenses.

Steve: Overall.

Steve: We always.

Steve: We're looking to push more of the economics to the deaths at.

Steve: At Hain chiming in on what we shared six months ago on our Q2 2023 earnings call. The vision, we want to grow bookings faster year on year than cost of goods, we want to grow bookings faster than infra and certain other expenses and we want to grow bookings faster.

David Bazzucchi: And we want to grow bookings faster than personnel costs. That leaves two areas, both our bottom line as well as our creators. And the more efficient we are with the first three things, the more we can look to possible future expansion on the last two margins, developers and our leverage. Thank you. That's really helpful. I appreciate it. I think we probably have time for one more call.

Steve: Then personnel costs.

Steve: Two areas, both our bottom line as well as our creators and the more efficient we are with the first three things the more we can look to possible future expansion on the the last two margins developers on our leverage.

Speaker Change: Thank you that's really helpful. Appreciate it.

Speaker Change: I think we probably have time for one more call.

Mike Guthrie: Thank you. Today's final question comes from the line of Andrew Merrick with Raymond James. Please go ahead.

Speaker Change: Thank you today's final question comes from the line of Andrew <unk> with Raymond James. Please go ahead.

Andrew Edward Crum: Thanks for taking my question. Maybe to come back to a question that was touched on in a bit of a different way earlier in the call, I know it's not necessarily an input for you guys rather than an output, but any particular drivers for the average bookings per DAU growth, particularly looking at Europe and the rest of the world, both of which were still pretty strong and both accelerated in. The longer payers are on the platform and users are on the platform, the more they tend We have a very nice mix of older and younger users. With older users growing around the world, they tend to spend a little bit more.

Andrew: Hi, Thanks for taking my question maybe to come back to a question that was touched on in a bit of a different way earlier in the call.

Andrew: It's not necessarily an input for you guys rather than an output, but any particular drivers on the average bookings for <unk> growth, particularly looking at Europe and rest of world both of which were still pretty strong in both accelerated in <unk>.

Andrew:

Andrew: The longer payers around the platform and users on the platform. The more they tend to spend we have a very nice mix of older and younger users with older users growing around the world they tend to spend a little bit more.

Mike Guthrie: And you can never underestimate the importance of great content on the platform. So that's our developers building great stuff that people are paying for. So, it really is a trend that's been moving in the right direction for a while. And as I said earlier, our economy team has a number of initiatives that they're working on to continue to improve that number. Yeah, and complementing that on the economic team angle, there's a lot of hygiene just in payment providers.

Andrew: And you can never underestimate the importance of great content on the platform. So that's our developers building great stuff that people.

Andrew: Are paying for us so it really is a trend thats been moving in the right direction for a while and as I said earlier, our economy team has a number of initiatives that they're working on to continue to improve that number and.

Andrew: Complementing on the economy team angle Theres a lot of hygiene just on payment providers also want to highlight that on a biz Dev sense prepaid cards wherever we can around the world is also made enormous progress in the last year.

Mike Guthrie: I also want to highlight that, in a business dev sense, prepaid cards wherever we can around the world have also made enormous progress in the last year. Great, thank you. Well, thank you for joining us today. And that's all for now. Thank you, everyone. Thank you, everyone, for joining the Roblox fourth quarter and full year 2023 earnings conference call. Thank you for your participation. You may now disconnect.

Speaker Change: Great. Thank you.

Speaker Change: Well, thank you for joining us today and Thats Iraq.

Speaker Change: Thank you everyone.

Speaker Change: Thank you everyone for joining the roadblocks fourth quarter and full year 2023 earnings conference call. Thank you for your participation you may now disconnect.

Speaker Change: Yeah.

Speaker Change:

Speaker Change:

Speaker Change:

Speaker Change: Yeah.