Q1 2024 Roblox Corp Earnings Call
Tamika: Good morning, my name is Tamika, and I will be a conference operator. At this time, I would like to welcome everyone to the Roblox First Quarter, 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.
Good morning, My name is tamika and I will be a conference operator at this time I would like to welcome everyone to the rubber Blacks first quarter 2024 earnings conference call.
Tamika: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, press star one on your telephone keypad. If you would like to withdraw your question, press star 0.
Speaker Change: All lines have been placed on mute to prevent any background noise after the.
Speaker Change: The speaker's remarks, there will be a question answer session if you'd like to ask a question during that time press star one on your telephone keypad.
Speaker Change: If you watch the enjoy your question press Star one.
Tamika: As a reminder, today's call is being recorded. I will now hand today's call over to Stefanie Notaney. Stefanie, you may begin.
Stefanie Notaney: As a reminder, today's call is being recorded I would now hand todays call over to Stephanie notary.
Stefanie Notaney: You may begin.
Stefanie Notaney: Good morning, everyone. Thank you for joining our Q&A session to discuss Roblox's first quarter 2024 results. With me today is Roblox co-founder and CEO, David Baszucki, 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.
Stefanie Notaney: Good morning, everyone. Thank you for joining our Q&A session to discuss boardwalks. Its first quarter 2024 results with me today is robots co founder and CEO, David <unk> and CFO, Mike Guthrie as a reminder, our shareholder letter press release, SEC filings supplemental slides and a replay of today's.
Stefanie Notaney: 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 future financial results and strategy.
Stefanie Notaney: Our commentary today may include forward-looking statements, including but not limited to expectations about our business, future financial results, and strategies. Such 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 is included in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q. You should not rely on our forward-looking statements as predictions of future events.
Stefanie Notaney: <unk> 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 are included in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q, you should not rely on our forward looking statements as predictions of future.
Stefanie Notaney: 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 supplemental slides. With that, I'll turn the call over to Dave.
Stefanie Notaney: The events, we disclaim any obligation to update these statements except as required by law. During this call. We will also discuss certain.
Dave: 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 Hey, Thank you Hey, welcome all roadblocks investors, new investors and long time investors.
David Baszucki: Hey, thank you. Hey, welcome all Roblox investors, new investors, and longtime investors. And we're pleased to be here with you to report on our Q1 2024 results. We continue on our mission to connect a billion people every day with optimism and civility around the world. And we'd like to report on our progress. In Q1, our DAUs came in at over 77 million daily people on our platform with year-on-year growth of 17%.
David Baszucki: And we're pleased to be here with you to report on our Q1 2024 results. We continue on our mission to connect 1 billion people every day with optimism and stability around the world and we'd like to reporting on their progress.
David Baszucki: In Q1, our da use came in at over 77 million daily people on our platform with year on year growth of 17% or over 13, Dia use were particularly strong growth at 22% year on year and we continue to highlight the <unk>.
David Baszucki: Our over 13 DAUs showed particularly strong growth at 22% year-on-year. And we continue to highlight the growth of our platform around the world with Japan, which is a key gaming market, growing at 50% year-on-year, and India, which is a huge market, growing at 58% year-on-year. Our hours engaged were $16.7 billion in the quarter.
David Baszucki: Growth of our platform around the world with Japan, which is a key gaming market growing at 50% year on year in India, which is a huge market growing at 58% year on year.
David Baszucki: That's 15% year-on-year growth. And once again, very strong growth, over 13, and very strong growth in countries around the world, including Japan and India. Revenue was $801 million, which is 22% year-on-year, and that was higher than our guidance range of $755 to $780 million. Our bookings were 923.8 million, which was in the middle of our guidance range of 910 to 940 million.
David Baszucki: Our hours engaged or 16 7 billion in the quarter, that's 15% year on year growth and once again very strong growth over 13, and very strong growth in countries around the world, including Japan and India.
David Baszucki: Revenue was $801 million, which is 22% year on year and that was higher than our guidance range of $7 $55 million to $780 million.
David Baszucki: Our bookings were 923.8 million, which was in the middle of our guidance range of $910 million to $940 million, but I do want to highlight we wanted that number and expected that number to be higher and we're going to dive into that a bit in a year that represents $19 four person.
David Baszucki: But I do want to highlight that we wanted that number and expected that number to be higher, and we're going to dive into that a bit in a year. That represents 19.4% year-on-year bookings growth. And one of the big focuses that we've had, which is on our operating efficiency, came to light with our cash and consolidated net loss. Our net loss of 272, based on gap accounting, was relatively flat with Q1 of last year.
David Baszucki: <unk> year on year bookings growth and one of the big focuses that we've had which is on our operating efficiency came to light with our cash and consolidated net loss or net loss of $2 72 based on GAAP accounting was relatively flat with Q1 of last year.
David Baszucki: And our guidance was a net loss of 347 to 342, so this was remarkably less of a gap loss on that. We continue to operate extremely efficiently and to manage our CapEx, our cash flow. Net cash flow from operations in Q1 was $238 million, which was up 37% year-on-year, and our free cash flow in Q1 was up 133% at $191 million. This is 50% more free cash than we generated in all of 2023.
David Baszucki: And our guidance was a net loss of $3 47 to $3 42. So this was remarkably less of a GAAP loss on that.
David Baszucki: We continue to operate extremely efficiently and to manage our capex, our cash flow net cash flow from operations in Q1 was $238 million, which was up 37% year on year and our free cash flow in Q1 was up 133.
David Baszucki: 3% out of $191 million.
David Baszucki: This is 50% more free cash than we generated in all of 2023.
David Baszucki: The past three quarters on infrastructure, trust, and safety, while the platform is performing better and better in all of these areas and the quality is going up through the use of AI, internal efficiency, the way we've optimized our infrastructure and our trust and safety, we've actually made huge efficiency gains there, and we've reduced these costs. On the personnel side, we've been very thoughtful in how we're hiring and how we're growing our head count. We've been relatively consistent over the last three quarters in the size of our head count.
David Baszucki: The past three quarters on infrastructure Trust and safety.
David Baszucki: Well.
David Baszucki: Platform, performing better and better and all of these areas in the quality going up through the use of AI internal efficiency. The way, we've optimized our infra and our trust and safety, we've actually made a huge efficiency gains there and we have reduced these costs.
David Baszucki: On the personnel side, we've been very thoughtful in how we're hiring and how we're growing our head count.
David Baszucki: We've been relatively consistent over the last three quarters and the size of our head count well, we continue to focus on growing our economy ads team, our AI safety team and our live operations events team I just wanted to highlight what we on the theme we started three quarters ago, which is.
David Baszucki: Well, we continue to focus on growing our economy ads team, our AI safety team, and our live operations events team. But I just want to highlight the theme we started three quarters ago, which is getting bookings growing faster than other areas. We continue down that path. Once again, Q1 bookings 19.4%, trust and safety infrastructure, well increasing quality, 4% less year on year, and personnel at 20% growth. So we'll continue this. But those of you watching us, you can see that our bookings in Q1 grew faster than DAUs and ours. I want to make a few comments on this.
David Baszucki: Getting bookings growing faster than the other areas. We continue down that path. Once again, Q1 bookings 19, 4% trust and safety infrastructure, well, increasing quality, 4% less year on year and personnel at 20% growth. So we'll continue this.
David Baszucki: So, but those of you watching US you will see you can see that our bookings in Q1 grew faster than da use in hours I want to make a few comments on this first we continue to see as a general number of people on our platform being very strong we don't report the number.
David Baszucki: First, we continue to see the general number of people on our platform being very strong. We don't report the number, but we did see less growth in Q1 than we expected, and we wanted to highlight where we believe this is coming from. First off, we shipped a bunch of new tech in the second half of last year. We rolled out Dynamic Heads, Layered Clothing, Anti-Cheat, Expanded Voice, and we believe, especially in low-end Android, even near the end of Q4, we were starting to see some drag with this. This started to show up in Q1, and we spent the last three months analyzing and really improving this up and down the stack. We'll talk about this a bit more.
David Baszucki: But we did see less growth in Q1 that we expected and we want to do to highlight where we believe this is coming from.
David Baszucki: First off we shipped a bunch of new tech in the second half of last year, we rolled out dynamic heads layered clothing anti cheat expanded boys.
David Baszucki: And we believe especially in low end Android even near the end of Q4, we are starting to see some drag with this.
David Baszucki: It started to show up in Q1, and we spent the last three months analyzing and really improving this up and down the stack and we will talk about this a bit more the other thing is we believe.
David Baszucki: The other thing is that we believe, once again, in the midst of a great Q4, our velocity of new content and our velocity of highlighting just the amazing amount of new content bubbling up on our platform was not optimal. And once again, over the last three months, we've made a lot of expansions and enhancements in our search and discovery system that we'll talk about with you. We've also taken a lot of steps on live operations and content that we'll talk about.
David Baszucki: Once again in the midst of a great Q4.
David Baszucki: Our velocity of new content and our velocity of highlighting just the amazing amount of new content Bubbling up on our platform was not optimal and once again over the last three months, we've made a lot of expansions and enhancements in our search and discovery system that we'll talk about.
David Baszucki: Hugh.
Hugh: We've also taken a lot of steps on live ops and content that we'll talk about we've done a lot of stuff around our economy in the last three months and I want to highlight over the last really the last half of April and the first half of May we've seen USA and Canada booking.
David Baszucki: We've done a lot of stuff around our economy in the last three months. And I want to highlight that over the last, really, the last half of April and the first half of May, we've seen USA and Canada bookings, DAUs, and hour growth come back to north of 20%. Now, that's not showing up in our full Q1 numbers. And as for those of you that have read our letter, you will see that we are going to be more conservative on our guidance, primarily because we only have three weeks of data from these improvements.
Hugh: <unk> da use and our growth come back to north of 20% now that's not showing in our full Q1 numbers.
Hugh: And as for those of you that have read our letter you will see that we are going to be more conservative on our guidance, primarily because we only have three weeks of data from these improvements. So we are going to be looking at lowering our guidance in 2020 for a bit.
David Baszucki: So, we are going to be looking at lowering our guidance in 2024 a bit. Mike will highlight that. That said, we have a lot of operating efficiency going on. We're not going to be changing our implied guidance on free cash flow for the year.
Hugh: Mike will highlight that.
Michael Guthrie: That said, we have a lot of operating efficiency going on we're not going to be changing our implied guidance on free cash flow for the year.
David Baszucki: And we'll continue going forward with conservative hiring growth once again in the economy and ads, AI safety and content, and live apps, our live operations. And I also want to highlight internally that our advertising plan, which we'll talk about a bit more, is on track. So hey, some more detail on discovery.
Michael Guthrie: And will continue going forward with conservative hiring growth once again in economy, and ads AI safety and content and live apps, our live ops and also want to highlight internally our advertising plan.
Michael Guthrie: Which we'll talk about a bit more is on track.
Michael Guthrie: So he has some more detail on discovery.
David Baszucki: We really have done a lot of work here over the last three months. And the highlight here is that we're optimizing and want to be optimizing, not just short-term improvements in bookings and DAUs but long-term platform health as well. For those of you that are watching our homepage, you've seen over the last three months an addition of curation to the homepage, which we call Top Picks.
Michael Guthrie: We really.
Michael Guthrie: <unk> done a lot of work here over the last three months and the highlight here is we're optimizing and want to be optimizing not just short term.
Michael Guthrie: Improvements in bookings in <unk>, but long term platform health as well for those of you that are watching our homepage you've seen over the last three months.
Michael Guthrie: In addition of curation to the homepage, which we called top picks you've also seen that we've moved sponsored which is for those creators who want to purchase traffic on our platform start to be a much bigger share of impressions and we've also continue to make adjustments to our core ml.
David Baszucki: You've also seen that we've moved sponsored, which is for those creators who want to purchase traffic on our platform, to start to be a much bigger share of impressions. And we've also continued to make adjustments to our core ML algorithm as well. We believe over the last three months this is increasing the discovery and velocity of new and upcoming content. And the mix of new creations on our platform is increasing by a month. It is a much stronger position than it was three months ago.
Speaker Change: Ill go rhythm as well.
Speaker Change: We believe over the last three months this is increasing the discovery and velocity of new and upcoming content and the mix of new creations on our platform is in a much stronger position than it was three months ago.
David Baszucki: And more to come there. The other thing you've probably seen over the last three months is the first introduction of a more aggressive live ops philosophy. We ran the hunt, our first live ops event of 2024, for the few weeks before and during Easter. And we saw incredible engagement, a lot of reactivation there, and we're going to continue this.
Speaker Change: And more to come there.
Speaker Change: The other thing you've probably seen over the last three months is the first introduction of a more aggressive live ops philosophy. We ran the hunt our first live ops events of 2024 over the few weeks before and during Easter and we saw on <unk>.
Speaker Change: Incredible engagement a lot of reactivation, there and we're going to continue this the community loves the notion of bringing together all of the diverse content into a rolled up event.
David Baszucki: The community loves the notion of bringing together all of the diverse content into a rolled-up event. For those of you interested in seeing the interest, if you look at my Twitter feed, I think I would say I hinted at our next event. And this is probably, by 2 to 3x, my most engaged tweet I've ever done.
Speaker Change: For those of you interested in seeing the interest if you look at my Twitter feed I I think I would say I hinted at our next event and this is probably by two to three X that my most engaged tweet I've ever done.
David Baszucki: On the – on our virtual economy, I want to highlight that as we've gone – to a UGC economy. Our economy team has been hard at work, working through how to optimize both utility from our users as well as utility from our creators and utility from our platform. And in February, we launched dynamic price floors in our marketplace, which has really driven a much healthier economy as far as pricing is concerned.
Speaker Change: On the on our virtual economy I want to highlight that as we've gone to a UGC economy or economy team has been hard at work working through how to optimize both utility from our users as well as utility from our creators and utility from our platform.
Speaker Change: And in February we launched dynamic price floors in our marketplace, which has really driven a much healthier economy as far as the pricing of those items and this is starting to contribute once again to that 20% last three weeks.
David Baszucki: And this is starting to contribute once again to that 20% last three weeks of USA and Canada bookings growth that we've seen. We've also launched on the tooling side, some adjustments to our economy. We really want as many people creating as possible. And so, in our creator store, we've just decided that for all of the people building tools, plugins, messages, meshes, images, fonts, 100% of the net proceeds will go to them. because there's really no need for us to try to make a profit there.
Speaker Change: USA and Canada bookings growth that we've seen.
Speaker Change: We've also launched on the tooling side.
Speaker Change: Adjustments to our economy, we really want as many people, creating as possible and so when our creators store. We've just decided for all of the people building tools plug ins message meshes images funds, 100% net proceeds to them because we there's really no need for us to try to make a prop.
Speaker Change: <unk> there.
David Baszucki: Finally, the long-term vision of everything in our marketplace being UGC, we call that UGC for all. Over the last few weeks, we have launched that. We've opened our market to more creators. It's a big step forward for brands to create avatars, clothing, and accessories, as well as the rest of our creator community.
Speaker Change: Finally, the long term vision of everything in our marketplace being UGC, we'd call that UGC for all over the last few weeks, we have launched that we've opened our market to more creators.
Speaker Change: It's a big step forward for brands to create avatars clothing, and accessories as well as the rest of our creator community.
David Baszucki: Highlighting some of the work we've done around performance and quality, a lot of which showed up especially in low-end Android devices that we've been diving into, there's been a huge focus on analyzing metrics and performance in a much more granular set of cohorts around the performance of our platform. We've made significant frame rate improvements. We've made significant stability improvements, especially on our most difficult devices. Once again, that's low-end Android.
Speaker Change: Highlighting on.
Speaker Change: Some of the work we've done around performance and quality.
Speaker Change: Lot of which showed up especially in low and Android devices.
Speaker Change: We've been diving in on.
Speaker Change: Theres been a huge focus on analyzing metrics in Perth in a much more granular set of cohorts around the proof of our platform.
Speaker Change: We've made significant frame rate improvements, we've made significant stability improvements, especially in our most difficult devices. Once again thats low end Android.
David Baszucki: Also on Windows, these results, some are directly measurable in DAUs and spend, and we've also enhanced the quality of graphics on higher-end devices. So we believe this effort, which we've really been heads down on, has contributed to that last three weeks US Canada back to north of 20%. On advertising, which will not be material this year, and that's why we haven't shared the forecast, we are on track with our forecast. And we have done a few things that have been exciting in April. We announced our partnership with Pubmatic in April, and we did our first real-world shopping test with Walmart on April 29th.
Speaker Change: Also on Windows as well.
Speaker Change: These results.
Speaker Change: Our directly measurable and da use in spend and.
Speaker Change: And we've also enhanced the quality of graphics on higher end devices. So we believe also this effort, which we've really been heads down on his contribute to that last three weeks U S. Canada back to north of 20%.
Speaker Change: On the advertising, which will not be.
Speaker Change: Material this year and Thats why we havent shared the forecast we are on track with our forecast.
Speaker Change: And we have done a few things that have been exciting in April we announced our partnership with programmatic in April.
Speaker Change: We did our first real world shopping test with Walmart on April 29th we have a lot more of these tests rolling out and finally on May 1st we announced that video ads would be available to all of our advertisers through self serve on our ads manager.
David Baszucki: We have a lot more of these tests rolling out. And finally, on May 1st, we announced that video ads would be available to all of our advertisers through self-serve in our ads manager. And we're really excited about the opportunity for video on Roblox, in addition to our portal and, you know, site visit type units, just because there's so much supply there. On the measurement side, we've started independent measurement, which is critical to our advertisers.
Speaker Change: And we're really excited about the opportunity of video on roadblocks. In addition to our portal and.
Speaker Change: Site visit type units, just because theres so much supply there.
Speaker Change: On the measurement side we've.
Speaker Change: Darted independent measurement, which is critical to our advertisers we've had some really lovely results on that.
Speaker Change: We brought in a brand lift solution with Cantor and our direct sales team has been attending events like play fronts and new fronts. We have had by the end of this quarter over 370 cumulative brand Activations and also just want to welcome more talent to our AD team on the engineering product.
David Baszucki: We've had some really lovely results on that. We've brought in a brand lift solution with Cantor, and our direct sales team has been attending events like Playfronts and Newfronts. We have had, by the end of this quarter, over 370 cumulative brand activations.
David Baszucki: And also, just want to welcome more talent to our ad team on the engineering product, on the live ops side. We could welcome David from Google, David Vespi, who built a lot of engineering ad tech at YouTube. On the creation side, For those of you that are tracking AI, more and more, we're seeing that data for training is critical. And there are some companies out there that have certain types of data that allow them to train, optimize, distill, and build their own AI solutions that really leverage our data.
Speaker Change: On the live ops side could welcome David from Google, David <unk>, who built a lot of engineering AD Tech at Youtube.
Speaker Change: On the creation side.
Speaker Change: For those of you that are tracking AI more and more we're seeing that data for training is critical and there's some companies out there that certain types of data that allows them to train optimized its still and build their own AI.
Speaker Change: Solutions that really leverage our data.
David Baszucki: We have an enormous amount of data at Roblox. We have a lot of trust and safety data. We have a lot of people writing code and building 3D objects and creation data, and we're more and more starting to lean into really building our own AI platform built on this proprietary data in concert with all of our users. We rolled out in Q1 a tool we call Avatar Auto Setup, which was in open alpha.
David Baszucki: We have an enormous amount of data at roadblocks, we have a lot of trust and safety data. We have a lot of people writing code and building three D objects and creation data and we're more and more starting to lean into really building our own AI platform built on this proprietary data in concert.
Speaker Change: With all of our users I want to just highlight a few of those things.
Speaker Change: We continue to rollout generative AI assistant tools on AI stacks that we built.
David Baszucki: Earlier this year, we launched our texture generator, which is an AI tool to help creators efficiently texture objects, it's absolutely amazing.
David Baszucki: I believe we went live yesterday or a day ago, which allows standard industry avatar models, which are not necessarily ready for 3D simulation or facial animation, to be automatically rigged and turned into full 3D interactive Roblox avatars.
David Baszucki: We rolled out in Q1.
David Baszucki: A tool we call Avatar auto setup, which we were in <unk> I believe we went live yesterday or day ago, which allows standard industry Avatar models, which are not necessarily ready for <unk> simulation or facial animation to be automatically rigs and turned into full three D.
David Baszucki: Interactive roadblocks avatars and finally code assist.
David Baszucki: And finally, Code Assist is our own in-house code optimization and code generation tool. This continues to get better and better as well, and we have quotes from developers who are mentioning a 5% increase in efficiency. And this is still very early.
David Baszucki: Is our own in house code optimization and code generation tool. This continues to get better and better as well and we have quotes from Debs, who are mentioning a 5% increase in efficiency.
David Baszucki: And this is still very early.
David Baszucki: Finally, our safety platform, which has been the foundation of really everything we've done since we got started, continues to get better and better. We're using AI up and down the stack. As we mentioned, we built and run on our own infrastructure increasingly high-performance voice models that are helping us really keep all the voice on our platform safe, as well as using AI to help in the moderation of every asset type on the platform.
David Baszucki: Finally, our safety platform, which has been the foundation of really everything we've done since we got started continues to get better and better we're using AI up and down the stack as we mentioned, we built and run on our own infrastructure increasingly high performance voice models that are <unk>.
David Baszucki: <unk> us really keep all the voice on our platform safe as well as using AI to help in the moderation of every asset type on the platform.
David Baszucki: So synopsis, in Q1, we saw less growth than we expected. That said, we exceeded our margins on cashflow targets the last three weeks in the US and Canada with all the work we've done in Q1, which is in response to this. We are back to north of 20% growth on bookings, hours, and DAUs. But we wanna be very transparent, conservative, and responsible, and that is why we made the very difficult internal decision to adjust our booking guidance.
David Baszucki: So synopsis.
David Baszucki: Q1, we saw less growth than we expected that said, we exceeded our margins on cash flow targets.
David Baszucki: Last three weeks in U S and Canada with all the work we've done in Q1, which is in response to this we are.
David Baszucki: We're back to north of 20% growth on bookings hours NDA use.
David Baszucki: But we want to be very transparent conservative and responsible and that is why we made the very difficult internal decision to adjust our bookings guidance.
David Baszucki: And we believe we'll continue to deliver the same operating free cashflow that we implied in our guidance last quarter while making judicious hiring in our economy, AI content, live operations, and safety groups. With that, I'm gonna turn it over to Mike, and then we will have Q&A. Thanks, Dave.
David Baszucki: We believe we will continue to deliver the same operating free cash flow that we implied in our guidance last quarter.
David Baszucki: Well, making judicious hiring in our economy AI content live ops and safety groups with that I'm going to turn it over to Mike and then we will have Q&A. Thanks, Dave I, just wanted to turn everyone's attention to pages 24, and 25 in our supplement.
Michael Guthrie: Thanks, Dave. I just want to turn everyone's attention to pages 24 and 25 in our supplemental materials, which are on the IR website, and just to reiterate a couple things that Dave said. So on a booking number of about 19.4% growth, we continue to generate really good cash flow dynamics. On page 24, you'll see cash from operations. This really reflects operating leverage, primarily in infratrust and safety, as Dave mentioned, more of using artificial intelligence requiring less and less manual moderation and also leverage across head count by keeping head count flat over the last three quarters.
Michael Guthrie: Supplemental materials, which are on the IR web site and just to reiterate a couple of things that Dave said, so on a bookings number about 19, 4% growth. We continue to generate really good cash flow dynamics on page 24, you'll see cash from operations. Israeli reflects operating leverage primarily in infra Trust and safety is Dave <unk>.
Michael Guthrie: Mentioned.
Michael Guthrie: More using artificial intelligence.
Michael Guthrie: Requiring less and less on.
Michael Guthrie: On manual moderation and also leverage across the head count by keeping headcount flat over the last three quarters.
Michael Guthrie: Operating cash flow for the quarter was almost $240 million, up significantly over last year. Again, that's all operating leverage. Also on page 24, just the shape of the curve that shows how we, how this metric moves during the course of the year.
Michael Guthrie:
Michael Guthrie: Operating cash flow for the quarter was almost $240 million up significantly over last year again Thats all operating leverage also on page 24, just the shape of the curve that shows how we how this metric moves.
Michael Guthrie: During the course of the year. So Q1 is normally our highest quarter, we have a big working capital cash flow inflow from the Christmas holidays that comes in in Q1, So collections are high.
Michael Guthrie: So Q1 is normally our highest quarter. We have a big working capital cash flow inflow from the Christmas holidays that come in Q1, so collections are high. Q2, that number goes down. But you can see our guidance, which we'll talk about in a minute, is for good year over year growth. But the shape of the curve will stay roughly the same.
Michael Guthrie: And we're expecting solid growth in Q3 and Q4 as well. If you turn to page 25, what you'll see is the same number, less capital expenditures. free cash flow in Q1, 191 million versus 82 million this time last year. That is both a combination of the operating leverage that we talked about as well as a significant reduction in capital expenditures now that our infrastructure, you know, second data center is all in place.
Michael Guthrie: Q2 that number goes down you can see our guidance, we'll talk about that in a minute is for good year over year growth, but the shape of the curve will stay roughly the same and we're expecting.
Michael Guthrie: Solid growth in Q3, and Q4 as well.
Michael Guthrie: If you turn to page 25, what Youll see is the same number less capital expenditures and free cash flow in Q1 $191 million.
Michael Guthrie: So we're going through a CAPEX cycle. We talked about this at Investor Day in November. So really strong free cash leverage. This is significantly more cash flow than we generated last year. And if you look at our guidance, we put a big dent in what we need to produce for the rest of the year to be on target. As it relates to guidance, we are guiding to revenue bookings, consolidated net loss, and now adjusted EBITDA rather than what we had referred to before as covenant adjusted EBITDA.
Michael Guthrie: First is $82 million. This time last year that is both the combination of the operating leverage that we talked about as well as a significant reduction in capital expenditures now that our infrastructure.
Michael Guthrie: Second data center are all in place. So we're through a capex cycle, we talked about this at Investor day in November So really strong free cash leverage this is.
Michael Guthrie: Significantly more cash flow than we generated last year and we can look at our guidance we.
Michael Guthrie: Put a big dent in that what we need to produce for the rest of the year to be on target.
Michael Guthrie: As it relates to guidance.
Michael Guthrie: We are if you look at the shareholder letter and.
Michael Guthrie: We are guiding to revenue bookings consolidated net loss and now adjusted EBITDA, rather than what we had referred to you before as covenant adjusted EBITDA, but we're giving everybody all the constituent parts.
Michael Guthrie: But we're giving everybody all the constituent parts so that in your models, what you have to do here is take the adjusted EBITDA number and add back the change in deferrals, and that will line up with your prior adjusted EBITDAs in your model. We're happy to talk about that on calls. We have good growth forecasted in cash from operations, again, moderated CAPX, and solid free cash flow on a year-over-year basis, and looking strong for the full year. And with that, we'll stop the comments and turn it over over to questions. Thank you. If you would like to ask a question, please use the Q&A box on your screen.
Michael Guthrie: So that in your models.
Michael Guthrie: You have to do here is take the adjusted EBITDA number and add back the change in deferrals that will fit with your prior adjusted EBITDA is in your model, we're happy to talk about that on calls.
Michael Guthrie: We have good growth forecasted in cash from operations again, moderated capex and solid free cash flow on a year over year basis and.
Michael Guthrie: Looking strong for the full year.
Michael Guthrie: And with that we will.
Michael Guthrie: The comments and ill turn it over to questions.
Tamika: Thank you. If you would like to ask a question, press star 1 on your telephone keypad. If your question has been answered and you would like to remove yourself from the queue, press star 1. We'll pause for just a moment to compile the Q&A roster, and our first question will come from the line of Bernie McTernan. We need him accompanied.
Speaker Change: Thank you.
Speaker Change: I'd like to ask a question Thats star one on your telephone keypad.
Tamika: If your question has been answered.
Tamika: Yourself from the queue Press star one well pause for just a moment to compile the Q&A roster.
Bernard Jerome McTernan: And our first question.
Bernard Jerome McTernan: Come from the line.
Bernard Jerome McTernan: Any mccarry with Needham <unk> company.
Bernard Jerome McTernan: Great. Thank you for taking the questions. Just two for me.
Bernard Jerome McTernan: Great. Thank you for taking the questions.
Bernard Jerome McTernan: Two for me first.
Bernard Jerome McTernan: First, I understand the commentary on search and discovery, but are you seeing any changes in the pace or quality of content that's hitting the platform? And then, for LiveOps, Dave, you suggested that there is a next event coming, but you know, how many events are you doing a year? How much makes sense for the platform? And maybe what's the pipeline of good ideas that it would have? you know, the accretive benefit that the hunt had. Thank you. Yeah, I'd say first the distribution.
Bernard Jerome McTernan: I understand the commentary on search and discovery, but are you seeing any changes in the <unk>.
David Baszucki: Yeah, I'd say first, the distribution of content in Q1 is, I'd say, more balanced than we saw in Q4 in a general way, which highlights new content granting more market share. In Q1, we also, I believe, saw more velocity of new experiences entering our top 20 than we saw in Q4. So, this is, I believe, working.
David Baszucki: On the events, we have to be thoughtful in announcing the full schedule, but I would say between every one and two months, we expect to do one. The next event, you can, if you dig into Twitter, you can figure out what it's going to be, and it's going to be awesome. So, we do think these are ways of highlighting the key strengths of our platform, which is a wide range of distributed content, with many, many of these pieces of content hitting north of a million daily actives. And so, yeah, I think this is more good stuff to come with our events.
David Baszucki: We expect to do one the next event you can if you dig into Twitter you can figure out what it's gonna be and it's gonna be awesome. So we we do think these are ways of highlighting.
David Baszucki: The key strength of our platform, which is a wide range of distributed content. Many many of these pieces of content hitting north of a million daily active and so yeah. I think this is like mortgage stuff to come with our events.
Andrew Edward Crum: Your next question is from the line of Drew Crum with Cefel.
David Baszucki: Your next question, what's your line of <unk> <unk>.
Andrew Edward Crum: Thanks. Hey guys, good morning.
Andrew Edward Crum: Okay. Thanks against good morning. So you mentioned in a performance recent performance for Kpis training around 20 per cent year on year, but at least for.
David Baszucki: So you mentioned the recent performance for KPIs trending around 20% year-on-year, but at least for 1Q, this was the second consecutive quarter in which year-on-year bookings growth has outpaced the year-on-year rate of change for some of your other KPIs like DAUs and hours engaged. Any sense as to what's driving this? Is it a trend you expect to continue going forward? And then, you know, lastly, you'd previously endorsed a 20% growth rate for bookings for 2025 through 27. You know, I know it's only one quarter, but with the adjustments you've made for 24, is 20% still an appropriate longer-term target? Thanks.
David Baszucki: <unk>. This was the second consecutive quarter in which year on your bookings growth has outpaced.
David Baszucki: You're on your rate of change for some of your other K P is like Ta use an hour's engage uhm any sense as to what's driving this is it a trend do you expect to continue going forward.
David Baszucki: And then lastly, you'd previously endorsed the 20 per cent growth rate for bookings for 2025 to 27, Yeah. I know, it's only one quarter, but with the adjustments you've made for 24 is 20 per cent stolen appropriate longer term target. Thanks.
David Baszucki: Yeah, I'll comment first on one, which is that we want all of those numbers marching in step at 20% DAUs, hours, and bookings. And one of the signs in Q1 that really things weren't where we wanted them to be was that drift between bookings, engagement, and hours, and we also saw that in numbers, just internal numbers, which we generally refer to as general people on the platform versus DAUs and our hours. So, you know, in the last three weeks, we've seen all of those numbers in arguably our most mature market, which is the USA and Canada. All three of those numbers are north of 20%. We want the DAU number, not that we're guiding to it, to be north of 20% as well. And I'll kick it over to Mike.
Speaker Change: Yeah, I'll I'll comment first on one which is I I highlighted that we.
David Baszucki: We want all of those numbers marching in step 20 per cent to you use hours and bookings and one of the signs in Q1.
David Baszucki: Uhm really things weren't where we wanted was that drift between bookings engagement an hour and we also saw that.
Mike: Numbers, just internal numbers, which we generally refer to as in general people on the platform versus D I use and our hours so.
David Baszucki: The last three weeks, we've seen all of those numbers in arguably our most mature market, which is the USA and Canada.
Mike: Three of those numbers north of 20 per cent, we want the the D. A U number not ever guiding to it to be north of 20 per cent as well and that'll kick it over to my.
Michael Guthrie: Yeah, Drew, over the last couple of quarters, the bookings per DAU and bookings per payer have gone up, which is good. So, monetization has been higher than, and has driven bookings to grow higher than a thousand hours. And generally, that's a pretty healthy trend. The movement isn't enormous.
David Baszucki: Yeah.
Mike: Over the last couple of quarters the bookings per da you in bookings prepare have have gone out which is which is good so monetization.
Michael Guthrie:
Michael Guthrie: It's a couple of percent, 3 percent, this past quarter. There's always a little bit of flux in that number as payers, by season, tend to spend more on the platform. So there's always a balance between how many new payers or how many new payers are coming in versus how many payers are maturing and becoming longer term payers. But the numbers are relatively close on a year over year basis. So to Dave's point, generally, we think those numbers will move pretty much in lockstep. But in any given quarter, you know, dows and hours can grow faster than bookings, or bookings can grow faster than dows and hours. But our goal is for them to be pretty much in lockstep.
Michael Guthrie: Has been higher than it is driven bookings grad higher than a thousand hours and generally that's a pretty healthy trend. The movement is an enormous it's a couple of percent 3%. This past quarter, there's always a little bit of a flux in that number as pairs.
Michael Guthrie: Uhm season, they tend to spend more on the platform. So there's there's always a balance between how many new pairs or how many new players are coming in verses, how many pairs are seasoning and becoming longer term payers, but the numbers are relatively close on a year over year basis. So today's point <unk>.
Michael Guthrie: <unk>, we think those numbers and we are pretty much in lock step, but in any given quarter down.
Michael Guthrie: <unk> hours can grow faster than bookings are bookings grow faster than thousand hours, but our goal is for them to be pretty much in lockstep and then if you look at it roblox far out there you can see.
Michael Guthrie: And then if you look at Roblox far out there, you can see both within the U.S. as we layer in advertising and other forms of monetization, it's conceivable to imagine our bookings per hour go up in the U.S. and Canada because right now we're not really fully tapped into the advertising market. That's complemented by some countries that are going to have enormous DAU growth, like India, that may monetiz So we have both some forces driving bookings per hour and other forces driving our DAU numbers, and they'll complement each other.
Michael Guthrie: Within the U S. As we layer in advertising and other forms of monetization is conceivable to imagine our bookings per hour goes up in the U S and Canada, because right now we're not really fully tapped into the advertising market. That's complemented by some countries that are gonna have enormous India.
Michael Guthrie: Growth like India that may monetize less so we have both some forces driving bookings per hour and other forces driving our numbers and no complement each other.
Omar Dessouky: Your next question is from the line of Omar Dessouky, Bank of America.
Speaker Change: Your next question is from the line up online, it's ASCII Bank of America.
Omar Dessouky: Hi, it's Omar Dysoki, not Dysalski. I thought the prior analyst had asked about the 20% kind of outlook that you talked about on investor day, for 25 to 27. Were you guys, did you answer that question in the response? I'm sorry if I didn't hear it.
Omar Dessouky: Hi, it's <unk> not the south ski.
Omar Dessouky: I thought I thought the prior analysts had asked about the 20% kind of outlook that you talked about and the Investor day.
Omar Dessouky: For 25 to 2070, where you guys did you answer that question and the response I'm sorry, if I didn't hear it.
Michael Guthrie: No, we didn't. We forgot to answer it. Yeah, we still believe the business has that kind of growth potential, without a doubt. What we're seeing right now at the beginning of Q2 is encouraging, and we absolutely still believe the business has that kind of growth potential.
Speaker Change: No we didn't we didn't.
Speaker Change: We forgot to answer it and yeah, we still believe that the business has that kind of growth potential without a doubt I'm like what we're seeing right now in the beginning of Q2 is uhm is encouraging and we absolutely still believe the business has that kind of growth potential.
Omar Dessouky: Okay, so then we should kind of think about calendar 24, the lowered guidance as a one-off due to the factors that you mentioned, such as lapping, PlayStation, and EASTER. Is there any more color you can give on, like, in 25, like how much of that growth would be driven by, you know, core versus advertising? I think you've said in the past that north of 20%; is that still kind of the outlook, north of 25%? And as you're thinking of advertising versus core, does that change at all for those out years?
Michael Guthrie: Okay. So then it's kind of think about counter 24, the lower guidance as a one off.
Omar Dessouky: Due to the factors that you mentioned such as lapping Playstation.
Omar Dessouky: And and the Easter.
Omar Dessouky: Is there any more color you can give on like in twenty-five like how much of that growth would be driven by.
Omar Dessouky: Core versus for his advertising.
Omar Dessouky: I think you've said in the past that north of 20% is.
Omar Dessouky: Is that still kind of the the.
Omar Dessouky: The outlook North of 25% and has your thinking of like advertising versus core changed at all you know for those out years.
Michael Guthrie: Thanks, Omar. No, I don't think the out-year thinking on ads versus the core business has changed. We will give early next year, when we give guidance on 25, we will give guidance on advertising for the first time, so we're going to do that. We believe we have enough of a foundation and momentum to guide on that number for next year. In the second half of this year, really, what we've done is taken the growth rate that we believe is implied by our guidance for the first half of the year and applied it to the second half of the year with a.
Speaker Change: Okay. Thanks, Omar no I don't I don't think the out year.
Michael Guthrie: <unk> adds versus the core business has changed we're gonna we will give.
Michael Guthrie: Early next year, we give guidance on 25, we will give guidance on advertising for the first time, so we're going to do that.
Michael Guthrie: We believe we have enough of a foundation and momentum to to guide on that number for next year.
Michael Guthrie: The back half of this year really what we've done is we've taken the growth rate that we believe is implied by our guidance for the first half of the year and applied it to the second half of the year with a.
Michael Guthrie: A small decline just based on Q4 of last year, which was obviously our highest growth quarter and had things like PlayStation, which will be lapping this year. So, ultimately, the back half of the year is about a hundred and 100 basis points of growth lower than what is implied by guidance in the first half of the year. On the other hand, going forward, again, based on what we're seeing today, we believe that we can continue to grow the core business at the kind of rates we talked about last November.
Michael Guthrie: A small decline just based on on Q4 of last year, which was obviously, our highest growth quarter and had things like Playstation which will be lapping this year. So.
Michael Guthrie: Really the back half of the year is about 100 and.
Michael Guthrie: 100, 150 basis points of growth lower than what is implied by guidance in the first half of the year.
Michael Guthrie: On the other hand going forward again based on what we're seeing today, we believe that we can continue to grow the core business at the kind of rates. We talked about last November so that is still how we're thinking about 2025, and we're thinking about advertising and twenty-five is a nice increments of the business, but not one that is substantially driving the overall growth rate of.
Michael Guthrie: So that is still how we're thinking about 2025. And we think about advertising in 2025 as a nice increment to the business, but not one that is substantially driving the overall growth rate of the company. It'll eventually be a contributor to the overall growth rate, but that'll be more 26, 27.
Michael Guthrie: The company it'll it'll it'll eventually be contributed to the overall growth rate, but that'd be more 26 27.
Omar Dessouky: Thanks. I have just one more question for you. So if I just do the quick math on the calendar 24 top line guide, it looks like it came down by a little less than $200 million, yet the EBITDA margin, like for like, seems not to have changed, and you don't appear to have lost cost leverage. Has your investment plan changed, or have you pulled back on your plans to make fixed investments? Is that why the EBITDA margin is staying about the same as you've said before?
Speaker Change: Thanks, and just one more question for me. So if I just do the quick math on the calendar twenty-four topline guide it looks like it came down by a little less than $200 million yeah.
Speaker Change: Yes, the EBITDA.
Omar Dessouky: March and like for like seems not to have changed and you don't appear to have lost cost leverage.
Omar Dessouky: Has your investment plan changed or have you pulled back on your plans to to make fixed investments.
Omar Dessouky: Is that why the kind of EBITDA margin is Saint staying about the same as you said before.
Michael Guthrie: So, Omar, yeah, the top line guide numbers are down by about 4%, and you're right, the profitability and EBITDA cash flow numbers remain unchanged. That is just because we have operating leverage in the business, and we've had that for a while. If you look at the last four quarters, we've been getting leverage on our fixed costs, which are infrastructure, trust, and safety, as well as on headcount. And we expect to continue to see that by being
Omar Dessouky: So yeah. The top line guide numbers down by about 4% and you're right. The the profitability EBITDA cash flow numbers remain unchanged.
Michael Guthrie: That is just because we have add operating leverage in the business and we've had that for a while if you look at the last four quarters.
Michael Guthrie: We've been getting leverage on our fixed costs, which is infrastructure trust and safety as well as a head count and we expect to continue to see that by being very careful about what we're doing but.
Michael Guthrie: Very careful about what we're doing, but we had already forecasted that we were going to have operating leverage. And then on the free cash flow side, it's because CAPX is coming down, and that's something we talked about last November, and we are certainly seeing that flow through this year. So we've said the unit economics and the cash flow generating ability of the company are very high. And we are in a good place in that we have enough cushion in the operating expenses and the capax to be able to deliver the same amount of cash flow on a forecast or guidance right now that's about 4% below.
Michael Guthrie: But we had already forecasted that we're gonna have operating leverage and and then on the free cash flow side is because capex is coming down and that's something we talked about last November and we are certainly seeing that flow through this year. So we've we've said the unit economics and the cash flow generating ability of the company are very high and.
Michael Guthrie: And we are in a good place and that we had enough cushion in the operating expenses and the cat backs to be able to deliver the same amount of cash flow on a forecast or guidance right now that's about 4% lower.
Omar Dessouky: Okay, thanks guys. I appreciate the response.
Speaker Change: Okay. Thanks, guys I appreciate the response.
Speaker Change: Yeah no problem. Thanks.
Corey Carpenter: Your next question is from in line for Corey Carpenter with J.P. Morgan.
Omar Dessouky: The next question is from in line of code I Carpenter with J P. Morgan.
Corey Carpenter: Hey, thank you. I was hoping you could expand a bit on what you think drove the engagement declines in 1Q. I know you mentioned potentially low-end Android slowness, but anything else to call out? And as a follow-up for Mike, you mentioned U.S. and Canada bookings north of 20% to start the quarter. I think the 2Q guide implied 13% bookings growth. Could you just help us bridge the gap there? Thank you.
Cory Alan Carpenter: Okay. Thank you Uhm I was hoping you could expand a bit on with <unk>.
Corey Carpenter: Q I know you mentioned potentially little in Android subordinates, but anything else to call out and and as a follow up for Mike you mentioned, the U S and Canada bookings north of 20% to start the quarter.
Corey Carpenter: If you keep your Hiney planet, 13% bookings growth could you just help us average that the gap there. Thank you.
David Baszucki: Yeah, I'll go first on Q1. And we, just to be clear, we believe this is a combination of several factors that were, you know, below the measurement threshold in Q4 and started to show up in Q1. The biggest driver, or arguably one of the biggest growth drivers on our platform is raw performance. The time to join an experience, the frame rate of an experience.
Speaker Change: Yeah, I'll I'll go first on Q1 and.
David Baszucki: We just to be clear. We believe this is a combination of several factors that were.
David Baszucki: Below the measurement threshold in Q4 and started to show up in Q1.
David Baszucki: The biggest driver or arguably one of the biggest growth drivers on our platform is raw performance the time to join and experience the frame rate of an experience the ability to play for a long time without interruption on our platform the speed of finding.
David Baszucki: the ability to play for a long time without interruption on our platform, and the speed of finding friends. These are all huge growth drivers, and we shipped a lot of stuff in the second half of Q4, our second half of the year. We also started rolling out a lot of stuff. Once again, dynamic heads that track the camera, more and more of our users with avatars and complex collections of layered clothing. We, and more and more of our users, are using voice on the platform.
David Baszucki: These are all huge growth drivers and reshaped.
David Baszucki: Re shipped a lot of stuff in the second half of Q for our second half of the year. We also started rolling out a lot of stuff. Once again dynamic heads that track the camera more and more of our users with avatars with complex collections of layered clothing, we more and more of our users.
David Baszucki: Using voice on the platform.
David Baszucki: And also, we've arguably tuned one of the best anti-cheat systems with our acquisition of Hyperion in Q4 and the second half of the year in the industry. A lot of our users use high-end devices, but a lot of our users use low-end mobile devices as well, and performance is just critical on all of these things.
David Baszucki: And also we've arguably tuned one of the best anti cheat systems with our acquisition of Hyperion over Q4 in the second half of the year in the industry.
David Baszucki: A lot of our users is high end devices, but a lot of our users use low and mobile devices as well and performances is critical on all of these things. So we have a large focused effort on <unk> up and down our stack, it's been happening in our.
David Baszucki: So we have a large focused effort on Perf up and down our stack. It's been happening in our creator tooling group, and it's been happening in our user client group. It's been happening in our core engine simulation group. We're measuring finer cohorts. We're measuring more specific users, and we believe this has been contributing to the recovery we saw in Q1. At the least, what I would say is the last three weeks being U.S. and Canada go north of 20%. And now, Mike, if you could refresh the second half of the question, Mike, you can handle that. Yeah, great.
Mike: Our creator tooling group, it's been happening in our user client group, it's been happening in our core engine stimulation group, we're measuring finer cohorts, we're measuring more specific users and we believe this has been contributing to the recovery we saw on.
David Baszucki: Q1 at least what I would say is the last three weeks being U S and Canada go North of 20 per cent and then I'll have Mike if you could refresh the second half of the question like you can handle it yeah, great that.
Michael Guthrie: The activity we've seen in the last 3 plus weeks is obviously encouraging. So the back half of April and what we've seen so far in the month of May, our guidance for the quarter reflects a couple of things. One is you have to take into account the first half of April. So, you know, the improvements really did.
Mike: The the activity we're seeing in the last three.
Michael Guthrie: Three plus weeks is obviously encouraging.
Michael Guthrie: To the back half of April and what we've seen so far in the month of May or guidance for the quarter reflects a couple of things. One is you have to take into account the first half of April so.
Michael Guthrie: The improvements really did.
Michael Guthrie: Start right around April the 15th it was it was pretty significant and our numbers. So embedding the first half with the second half.
Michael Guthrie: It gives us the April numbers and then.
Michael Guthrie: Yeah. The three weeks that we've seen we have to be cautious as we roll those through our forecast for the month of May in the month of June and what that means for the quarter. So in the in the context of.
Michael Guthrie: [inaudible] Providing guidance for the quarter Q2 and the growth rates, we felt like it was much more prudent to lower that growth rate and give ourselves some cushion. And same thing with the back half of the year. Again, it's great to see the last three weeks, but extrapolating that into Q3 and Q4 with no sort of discounting just doesn't make sense. It's just not prudent to do that. So we're trying to be very thoughtful and rational about it. And, you know, the overall hit to full-year guidance ends up being about 4%.
Michael Guthrie: Providing guidance for the quarter Q2, and the growth rates, we felt like it was much more prudent to lower that growth rate.
Michael Guthrie: And give ourselves some cushion and same thing with the back half of the year again, it's it's great to see the last three weeks, but uhm extrapolating that into Q3 and Q4 with no sort of discounting just doesn't make sense. It's just not prudent to do that so we're.
Michael Guthrie: We're trying to be very thoughtful and rational about it and the overall hit to the full year guidance ends up being about 4%.
Speaker Change: Does that make sense.
Corey Carpenter: Yes, that's helpful. Thank you both. Okay. Thanks.
Speaker Change: Yes, that's helpful. Thank you okay.
Speaker Change: Okay. Thanks.
Clark Lampen: Your next question is from a line by Clark Lampen with VTIG.
Speaker Change: Your next question instrument nine lamson.
Clark Lampen: <unk> <unk> <unk>.
Clark Lampen: D T I G.
Clark Lampen: Thanks for taking the question. I have two.
Clark Lampen: Thanks for taking the question I have two Dave I wanted to come back to the point around new content, we've got a lot of really good visibility around.
Clark Lampen: Dave, I wanted to come back to the point around new content. We've got a lot of really good visibility around actors on the user side of the platform, a little bit less so on developers. Was that challenge, you know, sort of with new content, a function of both user and developer engagement moderating, or maybe more one versus the other? Just curious if there was, I guess, a little bit of that moderation on the developer side, if you would think about addressing it differently than you would with users?
Clark Lampen: Errors on the user side of the platform a little bit less sell on developers was was that challenge you know sort of with new content a function of both user and developer engagement moderating or maybe more one versus the other just curious if there was I guess a little bit of that moderation on the developer side. If you would think about.
Clark Lampen: Addressing it differently than you would users.
David Baszucki: Yeah, it's... It's really exciting. Yes, we are in the process of having a developer day with some of the top creators on the platform right now. And we really have arguably the foundation, not just a 5, 10, or 20, but hundreds of some of the most creative people creating studios on our platform who arguably are the future CEOs of the interactive entertainment environment. This content is already there.
Dave: Yeah. It's.
David Baszucki: It's really exciting yes, we actually are in the process of having a developer day with some of the top creators on the platform right now and we really have arguably the foundation not just a 510 or 20, but hundreds of some of the most creative people, creating studios on our platform who are.
David Baszucki: Arguably are the future Ceos of the interactive entertainment environment.
David Baszucki: This content is already there we have in our top 300, a huge collection of amazing experiences what we really want to do more and more is optimize the long term health of our platform by making sure. These amazing creators are.
David Baszucki: We have in our top 300 a huge collection of amazing experiences. What we really want to do more and more is optimize the long-term health of our platform by making sure these amazing creators are all seeing the growth they need to continue building their business. And if our content distribution is too focused, some of those, not necessarily the longtail, but some of those in the top 300, for example, are not seeing enough action to supercharge their business.
David Baszucki: All I'm seeing the growth they need to to continue building their business and if our content distribution is too focused some of those not necessarily long tail, but some of those creators in the top 300. For example are not seeing an action to supercharge their business. So.
David Baszucki: So we've seen the content curve in Q1 with the work we did once again, not just with our top picks or not just with the ability to buy sponsored placements, and not just with the adjustments of our algorithm to, I think, focus a little on long-term platform help. We've seen that curve get flatter and more distributed.
David Baszucki: We've seen the content curve in Q1 with the work we've done once again I'm not just with our top picks or not just with the ability to buy sponsored placement and not just with the adjustments of our algorithm. It too I think focus a little on longterm platform Hill.
David Baszucki: We've seen that curved yet flatter and more distributed the other thing is our live events. The Hunt for example featured 100 creators some of the most amazing creators and behind the scenes was also a content discovery event, where as part of the Hon.
David Baszucki: The other thing is our live events. The hunt, for example, featured a hundred creators, some of the most amazing creators. And behind the scenes, there was also a content discovery event where, as part of the hunt, users on our platform experienced all 100 of those experiences. So I think our belief is that there are already amazing creations on the platform. There are a lot of creators out there with five to 20 people already on their team building businesses that are arguably up and coming with great new content. And we're seeing more, I would say, new creators coming into our top 20 in the last quarter than we had in Q4.
David Baszucki: Users on our platform experienced all 100 of those experiences. So I think our belief is there's a already amazing creations on the platform. There's a lotta creators out there with five to 20 people already on their team building businesses.
David Baszucki: That are arguably up and coming great new content, and we're seeing more I would say new creators coming into our top 20 in the last quarter, then we head in Q4.
David Baszucki: understood. Mike, maybe as we think about, I guess, a more prudent approach to sort of forecasting the back half of the year, has there also been, I guess, some sort of commensurate, you know, sort of moderation in any of the sort of pipeline or product launch initiatives that you guys had talked about last quarter, thinking about, I guess, whatever you had maybe planned to provide to the community in terms of economic initiatives? Have those been walked back in any way for 3Q or 4Q? I want to comment on that. We have a lot of stuff in the garage.
Speaker Change: Understood, Mike maybe as we think about I guess I'm more prudent approach to sort of forecasting the back half of the year has there also been I guess sort of commensurate.
David Baszucki: It's sort of moderation and any of the sort of pipeliner product launch initiatives that you guys had that sort of talked about last quarter thinking about I guess, whatever you had maybe plan to provide to the community in terms of economy initiatives have note and walked back in any way for three <unk>.
David Baszucki: I want to comment on that. We have a lot of stuff in the pipeline for advertising and the economy, and we're continuing to drive that. Just as I highlighted, we rolled out dynamic price floors, and we're rolling out more integration of on-the-homepage sponsored advertising. We have other things coming around search advertising on the platform. We just rolled out in-game and in-experience video. So you're going to continue to see velocity there. In other areas of the company, on the raw performance and quality of our simulator, you'll see that drive for quality and performance continue there.
Speaker Change: I want to comment on that the.
David Baszucki: We have a lot of stuff in the pipeline on advertising and economy, and we're continuing to drive that just as a as a highlighted we rolled out dynamic price lawyers, we're rolling out more integration of on the homepage sponsored advertising, we have other things coming around search ads.
David Baszucki: Retiring on the platform, we just rolled out in game and inexperience video so you're going to continue to see velocity. There in other areas of the company on the raw performance and quality of our simulator, you'll see that that drive for quality and proof continue there.
David Baszucki: So I think it's selective in a in a highlighted on the AI side, we have a lot of work and things.
David Baszucki: So I think it's selective. And I highlighted on the AI side, we have a lot of work and things we'll be bringing to market there. And also on the content and live ops side, you'll continue to see these events. So we're focusing a bit on AI safety. We're focusing a little bit on economy ads, while other areas of the company continue to drive performance and quality.
David Baszucki: Things will be bringing to market there and also on the content and lives upside you'll continue to see these events. So we're focusing a bit on AI safety, we're fucking a little bit on economy ads well other areas of the company continue to drive perfect quality.
Speaker Change: Thank you.
Eric Owen Handler: At this time, we have time for one more question. Your next question comes from Eric Handler on Ross MKM.
Speaker Change: At this time, we have time for one more question.
Eric Owen Handler: Okay. Your next question comes from Air Canada <unk> <unk>.
Eric Owen Handler: Okay. Good morning, Thanks for the question.
Eric Owen Handler: Good morning. Thanks for the question. Two questions, actually. First, you know, over the last 12 to 18 months, you've seen a huge inflow of branded experiences. And I'm curious how the engagement and monetization of those branded experiences compare to, you know, the traditional non-branded content that's on the platform.
Eric Owen Handler: Two questions actually first.
Eric Owen Handler: For the last 12 to 18 months, you've seen a huge inflow of branded experiences and I'm curious how does the engagement and monetization of those branded experiences compare to.
Eric Owen Handler: You know the traditional nonbranded content, that's on the spot on the platform.
David Baszucki: Yeah, I'll, I'll just go anecdotal without metrics. And then Mike, I don't know if you have any. You know, there are experiences on Roblox, any of our top 20, top 100, top 200 experiences, that are played many times a day, week, or month, and sometimes for years and years by some of our players.
Speaker Change: Yeah, I'll I'll I'll.
Speaker Change: All of this go anecdotal high level without metrics and then like I don't know if you have any.
David Baszucki: There are experiences on roblox any of our top 20 top hundred top 200 experiences.
David Baszucki: That are played many times, a day week or month, and sometimes for years and years by some of our players and these are long term engagement with games.
David Baszucki: And these are long-term engagements with games. That's not necessarily our expectation for branded experiences, although over time, more and more branded experiences will have longer playtime and longer dwell time. That said, in our research, there's an interactive movie trailer on our platform, and the engagement of something like that is much deeper than what would typically happen with a video movie trailer. And we do expect the engagement of branded experiences to ultimately be very different than image print or video engagement. These are experiences where friends can shop together, try things on, interact with the brand once again, whether it's Lamborghinis or Adidas or Gucci, and really relate.
Mike: Not necessarily our expectation for branded experiences although over time more and more branded experiences will have longer play time and longer dwell time.
David Baszucki: That said our research we there's an interactive movie trailer on our platform and the engagement of something like that is much more deep than what would typically happen with video movie trailer and we do expect the engagement of branded experiences to ultimately be very <unk>.
David Baszucki: Then image print or video engagement. These are experiences where friends can shop together try things on interact with the brand once again, whether it's lamborghinis are Ivy does or Gucci and really relate. So the engagement is much higher than video Mike I don't know if they're.
David Baszucki: So, the engagement is much higher than video. Mike, I don't know if there's any numbers we would share around that. No hard numbers, Erica, we would share at this time.
Speaker Change: Any numbers wheelchair around that no hard numbers of Eric that we would share at this time I think it's early in the experiences in each of those are.
Michael Guthrie: I think it's early in the experience. And each of those are individual experiences. They're learning how to build content on the platform. So some of them have done an incredible job and created very, very engaging experiences. And others are still learning what our platform is all about, and they're experimenting, and they're not looking at those kinds of metrics yet. So I just think it's early to draw any conclusions.
Speaker Change: Individual experiences, they're learning how to build content on the platform. So.
Michael Guthrie: Some of them have done an incredible job and created very very engaging experiences and others.
Michael Guthrie: Are still learning what our platform is all about and they're experimenting and they're they're not looking at those kinds of metrics yet so.
Michael Guthrie: So I just think it's early to draw any.
Michael Guthrie: Conclusions.
Eric Owen Handler: Okay, so recognizing that it's still very, very, very early. But in the few days that you've been out with Walmart Discover, and knowing that it's, you know, they only have three products in the real world, How's that going?
Speaker Change: Okay. Now you said that you had a second yeah.
Eric Owen Handler: So recognizing it's still very very very early but in the few days that you've been out with Walmart discover and knowing it's you know they only have three in the real world.
Eric Owen Handler: Products to sell.
David Baszucki: And, you know, you did the digital advertising beta that you did for six months. How long do you think this is before you sort of go live on a broader scale? But, hey, we want to, you know, this is the year we're focusing on advertising, portals, and video. We are excited about in-world physical shopping, partially because it's a way for our partners to attribute and measure the success of their ads in addition to buying stuff.
Eric Owen Handler: How's that going in you know you did the the digital advertising.
David Baszucki:
David Baszucki: Beta that you did was six months, how how long do you think this is before you sort of go live on a broader scale, but hey.
David Baszucki: We want to you know this is the year, we're focusing on advertising portal and video we are excited about in world physical shopping partially because it's a way for our partners to attribute and measure the success of their ads. In addition to buy stuff. So.
David Baszucki: So in-world shopping is very early. We're not incorporating that revenue in any of our models for really 24 or 25. But it does point to a future where just as being with friends together on Roblox when you're playing or you're playing hide and seek or you're socializing or whatever, that it's an exciting, new way, we believe, over time, more people will shop together, and we do see a future where, over time, without any forecasts or expected dates, going with friends to shop together in 3D, trying things on, and buying physical items And Eric, I...
David Baszucki: In World Shopping's very early we're not incorporating that revenue in any of our models for really 24 or 25.
David Baszucki: But it does point to a future where just as being with friends together on roadblocks, when you're playing or you're playing hide and seek or you're socializing or whatever.
David Baszucki: It's an exciting what we believe new way over time that more people will shop, together and we do see a future over time without any forecasts are expected dates we're going with friends to shop together in three D trying things on and buying physical items is going to be part of what people think of roadblocks.
Michael Guthrie: And Eric, I just would add that we're really thrilled that the first partner is a company like Walmart. The quality, scale, and brand of Walmart in retail are sort of the perfect partners to start off something like this. So we're really thrilled to be getting the earliest indications and signals of commerce on the Roblox platform with someone like Walmart.
Speaker Change: And Eric I, just would add that we're really.
Michael Guthrie: Thrill that the first partner is a company.
Michael Guthrie: Like Walmart the quality and scale and the brand of of Walmart in retail is sort of the perfect partner.
Michael Guthrie: Start off something like this so we're we're really thrilled to be getting the earliest indications and signals of of commerce on the roadblocks platform with with someone like Walmart.
Speaker Change: Thank you well.
Tamika: Thank you for joining us today, and I'll turn it over to Tameka to close us out.
Speaker Change: Thank you for joining us today, and I'll turn it over to you to make at T requires us out.
Tamika: Thank you. That does conclude today's call. Thank you for participating. You may now disconnect.
Tameka: Thank you that does conclude today's call. Thank you for participating you may now disconnect.
Tamika: [noise].