Q3 2024 Roblox Corp Earnings Call
Amy: Good morning. My name is Amy and I will be your conference operator for today. At this time I would like to welcome everyone to the Roblox 3rd Quarter 2021 earnings conference call.
Amy: All lines have been placed on mute to prevent any background noise. 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 the star, followed by the number one on the telephone keypad.
Amy: Please place it into the queue.
Speaker Change: If you would like to withdraw your questions, again, may press star in the number one. It is now my pleasure to turn the call over to Stefanie Notaney. You may begin your conference call.
Stefanie Notaney: Thank you Amy, good morning everyone. Thank you for joining our Q&A session to discuss four blocks of Q&A, 2024 results.
Stefanie Notaney: with me today is Robots Co-founder and CEO David Baszucki and CFO Mike Guthrie.
Stefanie Notaney: Our shareholder letter, press release, SEC filing, supplemental slides and a replay of today's call can be found on our Investor Relations website.
Stefanie Notaney: Our commentary today may include forward-looking statements.
Stefanie Notaney: which are subject to risk uncertainties and assumptions that can cause actual results to different material from those described in our forward-looking statements.
Stefanie Notaney: A description of these risks, uncertainties and assumptions are included in our SEC filings, including almost recent reports on Form 10K and Form 10Q.
Stefanie Notaney: You should not rely on our forward-looking statements as predictions of future events.
Stefanie Notaney: We just claim any obligation to update these statements, except as required by law. During this call, we will also discuss certain non-gap financial measures, reconciliation between gap and non-gap metrics can be found in our press release and supplements of slides. With that, I'll turn the call over to Gabe.
Gabe: Thank you.
Gabe: Good morning everyone and thank you for joining us today.
Gabe: We're excited to share our outstanding Q3 results, but before we get into our numbers which are included in our shareholder letter and in our 10 Q that we filed today, I want to take a step back and talk about what we're trying to accomplish at the roadblock.
Gabe: Our mission is to connect 1 billion people with optimism and civility.
Gabe: We believe this is an admirable mission and over the years I've had an untold number of parents, users and developers reach out to share the enormous impact that Roblox has had on their lives.
Gabe: This is personal to me because I've had several people share with me that their kids are literally alive today because of the connections they've made on Roblox.
Gabe: Contributing the online civility is challenging, but it's very much needed and we believe we can have an outsized impact.
Gabe: and this is even more important today. Since the earliest days of Roblox, it was clear to Eric and to me that safety would be paramount and so building safety into our product has been a huge effort for almost 20 years.
Gabe: We have every incentives to prevent bad behavior on our platform.
Gabe: Our approach to safety includes multiple proactive measures as well as parental controls. And we partner with leading safety organizations around the world.
Gabe: Even one person having a bad experience at our platform is too many, and thus we continue to invest heavily.
Gabe: We've shipped over 30 improvements to our safety and policy systems this year to date.
Gabe: and for example in Q3, we reduce toxicity toxicity in voice chat through our improved nudging models. We gave our developers improved tools to moderate their own experiences.
Gabe: We launched major improvements in agent training to improve accuracy of our moderation for voice chat and image moderation. And we entered as numerous improvements in our internal tooling to increase the overall quality and throughput of our moderation and support systems.
Gabe: and Hansen moderation and safety systems with artificial intelligence is an exciting tool we have to combat bad actors.
Gabe: For example, our internally developed voice safety model, which we have now open-source to the world on hugging phase, has been downloaded over 10,000 times, and is being adopted by numerous other organizations.
Gabe: As part of achieving our mission, we'll never stop working to make Roblox as safe and civil as possible. And this goes all the way to the core of our values.
Gabe: One of our core values is respect to community.
Gabe: We consider our impact on the world. We strive to make decisions with everyone's best interest in mind and to communicate authentically.
Gabe: We prioritize our community, including users and investors above the company. And when we report our results to investors, we strive to be accurate, consistent, and transparent. So that investors have the information they need to make decisions.
Gabe: We also do our best to make that communication as clear as possible to everyone.
Gabe: And as you very well know, another core value of Roblox is to take the long view.
Gabe: This means we drive innovation by setting a long term vision.
Gabe: We do our best to optimize the long term in accordance with driving enterprise value. And as a result, we're willing to focus on hard problems if these can lead towards significant longer-term gains.
Gabe: We announced at RDC in September our goal of 10% of the world's gaming software market running on roadblocks. We believe this is achievable and we're now mapping our plan towards supporting the content that will drive this.
Speaker Change: And now, turning to Guthrie results, I'm really pleased to share our cheese race.
Speaker Change: We delivered high growth across our key financial and operational metrics.
Speaker Change: and we surpassed the guidance we provided on our Q2 earnings call. Revenue in Q3 was 919 billion. That was up 29% year on year and ahead of our guidance, we gave last quarter of between 860 and 885.
Speaker Change: Our Q3 bookings were 1.129 billion. This grew even faster at 34% year on year. This was a head of our guidance of 1.025 billion.
Speaker Change: We have record DAUs at the 88.9 million. This is up 27% year on year.
Speaker Change: and Strong Across.
Speaker Change: All Regions.
Speaker Change: We had huge improvements year on year in US and Canada up 26% year on year.
Speaker Change: and an APAC of 37% year on year. A few countries will call out Japan, D.A.U.s. Group 59% year on year. India D.A.U.s. Group 55% year on year.
Speaker Change: Over 13 DAUs were particularly strong with 34% year on your growth and now over 60% of our total DAUs are over 13.
Speaker Change: We also had record hours engaged at 20.7 billion hours in the quarter. This was up 29% year on year.
Speaker Change: Biggest growth improvements included U.S. and Canada up 28% year on year, A pack up 45% year on year. Japan hours engaged grew 69% year on year and India grew 57% year on year.
Speaker Change: We also managed costs in Q3 at 2024.
Speaker Change: Our developer exchange fees were 231.5 million. This was an all-time high reflecting our commitment to creators. This increased 36% year on year.
Speaker Change: are in for a trust and safety cost, we're up 4% year and year and 6% vs Q2.
Speaker Change: I want to highlight that this increase, VERSCII, is driven by investments in AI.
Speaker Change: and this includes migrating more and more of our safety infrastructure to AI, where possible and where responsible to do so.
Speaker Change: In the process, we are continuing to improve the quality of both our content and communication safety systems.
Speaker Change: 14% of revenue and 11% of bookings went to infrastructure and safety compared to the previous year. And it showcases the ability to put leverage into our strong top line.
Speaker Change: Personal Cost exclusive stock-based comp or 222.2 million. This was 22% of revenue and 18% of bookings. This decreased compared to the previous year as both a percent of revenue and bookings.
Speaker Change: Through this combination of thoughtful, cost management and robust topline growth.
Speaker Change: are Q3 cash from operations was 247.4 million. This was up 120% year on year. This is better than our guidance of 147.662 million.
Speaker Change: RQ3 cash flow was 218 million free cash flow up to 66% and better than our guidance of 105 to 120 million.
Speaker Change: We're confident in our strategy and the long-term growth of the Roblox platform.
Speaker Change: I want to highlight a few key initiatives that field the quarters of standing performance.
Speaker Change: Since Q1, we've been highlighting our focus on search and discovery. We've made enhancements to our AI power discovery algorithms. We've improved personalization and we continue to show more relevant experiences to our users.
Speaker Change: We've continued to improve our virtual economy and marketplace. We've introduced dynamic price floors, UGC for everyone on the platform, and we've launched inexperienced price optimization for all creators now just in the last month.
Speaker Change: On overall systems performance, continued improvements in our app launch times, continued reduction in cross rate, and we continue to increase frame rate and app quality across all platforms.
Speaker Change: And finally, happy to have a lean everyone. We're in the middle of the hunt, one of our live ops events that are attracting new users. And really in the case of the hunt, showing off new technology, including image capture inside of real blocks.
Speaker Change: As we go through our shareholder letter, I want to just...
Speaker Change: Sheriff's View developments we're seeing on the platform.
Speaker Change: First is our dev community is publishing more significant content updates compared to last year and we believe this is further driving DAUs. We're seeing more content updates.
Speaker Change: and a faster T-Dem for content.
Speaker Change: We're also seeing experiences that are continuing to go viral relief.
Speaker Change: in Q3 of 2024, we saw experiences like rivals.
Speaker Change: and Dress to Impress rivals as a team based shooter. Dress to Impress is a dress up experience. Really go viral around the world and we're seeing success as we see more experiences in emerging genres show up on the platform.
Speaker Change: We've also seen a distribution of experience and spending on the platform. Spending growth is more evenly distributed among the top experiences in Q3.
Speaker Change: A relative to brands on the platform.
Speaker Change: We welcome the NFL. They license their IP on NFL Universe Football. This was the 30-second highest experience by spend from their launch in September 13 and it's continuing to rise in October.
Speaker Change: As far as our partnerships double verify for standard measurement is live now. We've added WPP to accelerate brand education and we have announced our integration with Shopify.
Speaker Change: At RDC in September, we highlighted our goal of 10% of the world's gaming software market revenue, flowing through Roblox, and we shared this with our community. This is a market we currently estimated at $180 billion dollars.
Speaker Change: We have enormous headrooms here. We're currently at less than 3% of our time in the gaming market space.
Speaker Change: and we shared our strategy for getting there. We shared our mapping of genres on the platform. We have great traction in genres like simulation roleplay and action.
Speaker Change: But we also have the opportunity for enormous growth in genres like sports and racing.
Speaker Change: Shooters and Open World RPG. We'd like to double our market share in sports and racing on our platform, triple it in shooters, including Battle Royale and Double it in Open World and RPG, share for example.
Speaker Change: The roadmap for doing this is evolving our platform tech to support all of these genres really at higher performance and fidelity.
Speaker Change: in increasing our developers' opportunities for economics, including rewarded video and other expansions of our e-consystem.
Speaker Change: and Amplifying Creator Growth through Off-Clap Form, organic and Pay-Dact position. In addition to the organic growth that's driven our platform.
Speaker Change: I want to highlight where we're going with AI. It's really at the heart of our safety systems and more and more at the heart of everything we're doing on Roblox.
Speaker Change: We announced a 3D foundational model that we're building at RDC.
Speaker Change: and an open source 3D AI Genitive Model.
Speaker Change: We're going to be starting with inexperienced object creation and evolving to seeing creation and we're already using AI on our Roblox Assistant, Code Assist, and our Material and Text Generation.
Speaker Change: We also use, of course, AI extensively for safety and discovery throughout the platform.
Speaker Change: Finally, our keynote from the RDC Roblox developer conference last month is available online and for anyone who would like to see our technical roadmap, I invite you to go check out our RDC keynote.
Speaker Change: with that all handed over to Mike.
Mike Guthrie: Thanks Dave and good morning everyone. I just want to make a few quick comments. First, I do think this is the best quarter in our history, highlighted by fantastic top line growth. In addition, I just want to call out.
Mike Guthrie: the strength of the operating leverage improvement in margins.
Mike Guthrie: and Cast Generation at the company.
Mike Guthrie: I really think this quarter we laid the foundation five quarters ago in Q2 of 2023. That was when we had started to see sustained 20 percent plus growth on the platform, but we had made significant investments in infrastructure in people in the prior years.
Mike Guthrie: to in effect catch up to the demand that we saw during COVID.
Mike Guthrie: We had several conversations with many of you at the time and try to ensure everyone that.
Mike Guthrie: We did, in fact, have the ability to manage those costs as we started to see the benefit of those investments. And this quarter really highlights that. Five quarters ago, the operating cash flow of the company was 28.4 million today. It was 247.4 million.
Mike Guthrie: Five quarters ago, free cash flow was negative 95.5 million today, it was 219 million. So the business has, in fact, great unit economics. And this year we have made incredible progress, not just on top on growth, but on driving really significant growth in cash flow.
Mike Guthrie: We made further comments in November at our investor day where there were three things that we highlighted. We continued to grow the top line at over 20%.
Mike Guthrie: We would continue to drive operating leverage and finally we would turn that operating leverage into free cash. I think this is another quarter where we achieved on all of those things and we really pleased to see that cash balances as a result of all that, set now, set it for billion dollars. We have three billion of net cash.
Mike Guthrie: Moody's upgraded our senior notes this quarter from BA2 to BA1. That matches what S&P did last quarter. We have no need to go into the markets again, but if and when we go back to the credit markets, we want to make sure that at that moment we're an investment grade credit.
Mike Guthrie: So all in all, an incredibly strong quarter, and now we want to open it up for questions.
Mike Guthrie: [inaudible]
Speaker Change: Thank you, before is now open for questions. At this time I would like to remind everyone in order to enter the queue. Please press star and the number one on your telephone keypad. We do request for today's session that you please limit to one question and one follow-up. We'll pause for just a brief moment while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Tom Champion with Piper Sandler. Your line is now open.
Speaker Change: I've been working on the really nice results.
Speaker Change: I'm wondering if you could just talk about some of the new initiatives and learnings in the virtual economy, you know, things like dynamic pricing and earlier there was a blog post about.
Speaker Change: New K-D access experiences where developers earn larger payouts. What are your learnings here and what are the initiatives that you think are really beneficial to to Roblox and your developer base? Thank you.
Speaker Change: I'll share one learning we had with Christ's optimization for developers and we did an experiment with this where we started with an early subset of our creators.
Speaker Change: to do dynamic price optimization for the items in their experience.
Speaker Change: Something super interesting we found.
Speaker Change: is that generally when we are optimizer pointed to reducing prices rather than increasing prices.
Speaker Change: To drive over all revenue for individual developers, the second thing our price optimizer is showing is that it is not a zero-sum gain. We believe that every developer can optimize their prices independently without pulling from one and pushing to the other.
Speaker Change: The other thing in exploring the efficiency of our infrastructure and trust and safety systems, once again getting better as they're powered by AI.
Speaker Change: This is enabled us to launch. We believe we'll be launching in December. Payed access experiences where at 49.99 developers will be earning 70% so stay tuned for that. And Tom, I just want to add, if you look at some of our metrics.
Speaker Change: Looking for daily active user grew year over year by 6%. Sometimes these...
Speaker Change: Changes in the economy take a while to flow through. Obviously we're always growing the user base quite rapidly as well, but we did see very strong growth in looking for a daily active user at 6% and looking for a pair of your 4%
Speaker Change: The benefit of changes in the economy and the monetization, which is the core metric that that team focuses on.
Speaker Change: Thanks guys.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Drew Crum with Spifel. Your line is now open.
drew Crum: Okay, thanks guys. Good morning. Dave, just following up on your preamble concerning the new content, moderation tools and adjustments to parental controls.
drew Crum: When will these go live? Should we anticipate any step change and investment stand? And do you see these impacting user behavior? And then Mike, I'm booking the 34% increase in three Qs.
drew Crum: Well ahead of your longer term emotional model in your shareholder letter, you highlighted bookings of exceeded 20% and 6th of last day quarters, but it sounds like you're not ready to endorse the higher rate of growth.
drew Crum: Over the longer term, I guess what's holding you back and what do you need to see in order to get more comfort with the fast rate of growth? Thanks guys.
Speaker Change: I'll go first.
Speaker Change: We don't see a step change because safety is already the top priority and the biggest really area in the company where we focus and we always allocate to safety whatever they need to build our excellent systems.
Speaker Change: Safety and Instance are shipping and improving constantly. This is several times a month rather than step changes.
Speaker Change: and we anticipate several more releases before the end of the year, around a verifiable parental consent, improvements to our filters.
Speaker Change: Things like that. So we don't see a step change or constantly improving and you'll see a lot of releases in the next two months.
Speaker Change: and Drew on your question, yeah, we're very happy with booking's growth as quarter at 34%.
Speaker Change: as we mentioned in the letter.
Speaker Change: The non-console business grew at 28% also fantastic, also well ahead of the guidance in terms of longer term growth that we laid out for the first time in last November at investor day.
Speaker Change: What we're looking for really is just more time and consistency and we just don't want to get out of ourselves, but there are a lot of things in the investor letter that we talk about that we are really excited about in the dynamics, look really strong, but for us it's just a little more time.
Speaker Change: To make sure that we see consistent growth above that target before we change.
Speaker Change: Okay, appreciate it, thanks guys.
Speaker Change: Thanks.
Speaker Change: Your next question comes from the line of Clark Lampin with BTIG, your line is now open.
Speaker Change: Thanks for morning.
Clark Lampin: I wanted to talk about the monetization growth that we saw in the quarter. It was helpful to have the sort of console and non-console, a console called out in the shareholder letter.
Clark Lampin: Did the console impact have did that swing or sort of contribute to the 6% number? I know that's not a perfect way of looking at it, but that's the fact that the rate of monetization growth that we've seen.
Clark Lampin: Tencent of business was basically 70% smaller than the current level during COVID. So it would just be curious, I guess, what sort of contributing and how maybe we should think about.
Clark Lampin: Advertising the other sort of components of this and how maybe monetization more importantly is going to factor into sort of 20% plus growth moving forward. Thank you.
Speaker Change: I'll do an intro and Michael probably have the more detail thing. Key point to remember is we're always...
Speaker Change: Driving several things were always trying to increase the number of people on our platform. We're always trying to increase the amount of time they spend and then.
Speaker Change: We're driving monetization as well and
Speaker Change: We track monetization and booking for our...
Speaker Change: which has you seen in Chris. So in Q3 we had two things going on, and Chris is in monetization as well as introduction of playstation which has gotten better over time. So I think both of those are occurring. Mike I don't know if you want to comment on this 6%.
Mike Guthrie: Hey Clark, consult does monetize well, it's certainly contributed to the monetization improvements but quite candidly everything contributed to the monetization improvements this quarter growth on all platforms growth in all geographies growth in all ages.
Mike Guthrie: Gross in all gender. It was very strong across the board and control is a relatively small part of the business. So it's hard for it to have outside impact on the contribution. Over time, as we look at longer term growth, we've always believed that.
Mike Guthrie: We would improve monetization. That is the job of our economy team. They're doing a fantastic job.
Mike Guthrie: And yet we continue to grow users and we continue to grow payers. So depending on what your metric is.
Mike Guthrie: It can move up or down in a given period of time. As forecasters, we generally forecast insight to get these small improvements in monetization because we're really focused on growing the base of users and engagement.
Mike Guthrie: But ultimately we think it will contribute right alongside. I don't know that we'll do 6% every single quarter, but we're certainly bullish and optimistic about the ability for the platform to have significantly higher monetization.
Speaker Change: Without a reliance on ads and brands. So I've just quarter business, core micro-transaction business, just primarily what's driving this.
Speaker Change: Brandon Ad will be incremental down the road.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Cory Copp Carpenter, which AP Morgan, your line is now open.
Speaker Change: Thanks for the question. We'll ask more about advertising.
Speaker Change: is hoping for a broader update on your initiative here following your pop-matic and double fairer pie.
Speaker Change: Hernerships and maybe what the next steps from there are.
Speaker Change: to continue building your offering. And Mike has a little follow for you just maybe more specifically around 2025. Is there any way to think about advertising, contribution to your comments around your preliminary 20 to 25 looking spots? Thank you.
Speaker Change: Yeah, I'll highlight the three big systems that are on the platform and continuing to improve on the platform.
Speaker Change: The first is...
Speaker Change: Traffic, and there's three mechanisms of life for traffic that we continue to seek growth in. The first is on our homepage. We've added paid sponsored tiles along with organic discovery and curated.
Speaker Change: That's complimenting our teleporter traffic ads. And we have introduced now search advertising as well. And if you get a Roblox and search either for a term or another experience.
Speaker Change: You can see that creators are now starting to did against that. So that is a robust future mechanism for both brands and developers who are launching their experiences to buy traffic.
Speaker Change: The second is video. We're live with video. We're moving to support rewarded video as well. In experience and that's continuing to do well and then finally we announced our Shopify partnership.
Speaker Change: That allows developers and brands to sell in-game and physically. We're not breaking the numbers out right now. Any of these, and I want to highlight the compliment that grows instead on top of the growth of our current economy.
Speaker Change: and Corey, to your question on 2025, we didn't give obviously a ton of detail on 2025. We just said we're comfortable that we'll continue to grow at the 20% rate that we put forward at the November 23th, investor day. But...
Speaker Change: If you go back to our comments at RDC this year about 10%, getting to 10% of the gaming dollars flowing through Roblox.
Speaker Change: and we are at a very small percentage today.
Speaker Change: that leads us to believe that just in the core business that we have today, we have a very long way to go and we should be able to drive organic growth in our more gaming related business.
Speaker Change: at the kind of growth rates that we talked about.
Speaker Change: Obviously, if you just take the 28 percent growth in the non-console business this quarter, we're growing at a multiple of the overall gaining business. That means we're taking share. We feel really good about that. And so what we're talking about in 2025.
Speaker Change: does not require incremental higher growth revenue streams to drive the kinds of numbers that we're talking about.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Andrew Merock with Raymond James. Your line is now open.
Andrew Merock: Hi, thanks for taking my questions. One of this start with one on live ops. Now that you've gotten a few events under your belt, is this cadence we've seen of about one per quarter, the right frequency? And as we think about assessing specific events, what kind of variables drive differences between engagement? Is it just a selection of included experiences or are there other kind of common factors you've seen stand out?
Speaker Change: Hey great question. I believe the frequency may be slightly higher than one per quarter. So we should check on that. I also want to highlight that we're using our event.
Speaker Change: primarily to highlight the amazing creators on the platform.
Speaker Change: We also in the haunted event to highlight future tech on the platforms. So the event that's live right now is allowing people on our platform.
Speaker Change: to take really screen shots or shots of their costing and then vote on them in a hub. All going through our safety and civility systems. So we are doing both.
Speaker Change: We have a lot of great ideas for future events to highlight this we're trying to...
Speaker Change: Heep the diversity of the types of experiences that we have live. So the cadence is going to be higher than once per quarter. I think it already has been higher than once per quarter.
Speaker Change: Thank you. And that may be following up on that a little bit. In the shareholder, letter, you mentioned you're seeing more diversity in terms of the experiences in the top charts. So I know you normally break that out. Kind of at year end, but is there any way to provide color now in terms of that trend you're seeing that made it worth highlighting on the shareholder letter and kind of what does an ideal distribution look like in that respect? Thank you.
Speaker Change: Hi, I'm a high level big distribution is slightly wider and slightly flatter.
Speaker Change: High level, the distribution has a lot of new entrants into the top 25.
Speaker Change: Highlight, we're seeing once again experiences like rivals and dress to impress.
Speaker Change: Rise quickly and participate in engagement.
Speaker Change: and I wanted...
Speaker Change: So overall I think this shape is getting flatter and wider. I think that should naturally happen as we have.
Speaker Change: A wider age range of people on our platform, and as we have more people around the world.
Speaker Change: We, I think, this is a really healthy sign. Mike, any reporting on...
Mike Guthrie: Distribution. Yeah, just keeping that would add to that. One is recently we have seen...
Mike Guthrie: Spending more broadly distributed among the top 100. So there are periods of time where top 1, top 5 may be very concentrated in spend or more constraints in spend. Right now it's more distributed.
Mike Guthrie: It's not necessarily per se the best or the worst thing. There are times when very, very popular experiences up date and we might be more concentrated but growing very quickly. But ultimately I really go back to the search and discovery algorithms, more content finding an audience.
Speaker Change: There's a higher likelihood that the spending is more broadly distributed. Overall, I think we view that as healthy, especially when as Dave just mentioned, new experiences are able to move in very, very quickly and get to scale and morality.
Speaker Change: The second thing that you didn't ask about, but we're going to start talking more and more about is the breadth of genre on the platform. So we are, you know, gave already talking about sports earlier.
Speaker Change: Tracking the breadth of genres in that top 100 top.
Speaker Change: 1,000
Speaker Change: and there are...
Speaker Change: Still genres that we're not as strong in and so we were really pushing hard to make sure that we're broader there and we'll talk more about that in subsequent calls, but that's starting I think have a real impact. I want to highlight one thing we're doing is we map our progress towards what we believe is possible, which is 10% of the gaming software market running on Roblox.
Speaker Change: And that is as we map out what that looks like and what the specific genres are that participate in that.
Speaker Change: Sports is an example.
Speaker Change: It allows us to put focus on the platform and the technology that will support its experiences on the platform at higher fidelity and higher performance. So this really rolls back into our platform technology strategy.
Speaker Change: [inaudible]
Speaker Change: Your next question comes from the line of Matthew Koss with Morgan Stanley. Your line is now open.
Speaker Change: But...
Speaker Change: Good morning, thanks, David, and the questions.
Matthew Koss: So I know we've talked a little bit over the course of the year about the impact of console, but it's just showing up to so strong in the quarters. I want to double click on the success there.
Matthew Koss: So obviously Roblox has been available on Xbox for a long time, you know, playstations, more recent development. What is the breakthrough that you're seeing in terms of behavior on console? What is it that is caused this big change in uptake as you've gone on to playstation? And then, are people creating content at the same rates when they're engaging with Roblox on content?
Matthew Koss: Or that still cut up, using the kind of more left-hwords other platforms. And I have one follow-up. Thank you.
Speaker Change: I would say the breakthrough is really more going to the origins of Roblox and the foundation of our strategy, which is...
Speaker Change: that immersive 3D content once created can run on any device and any form factors. So, when we launched on PlayStation a year ago,
Speaker Change: There was already amazing content. Content that was being played on, Xbox and PCs and phones and tablets. And arguably there was just a giant market sitting there waiting for that content to become available on PlayStation.
Speaker Change: I would say there's a secondary effect that over the last year.
Speaker Change: Roughly adding playstation in a very, very rough way, doubles the number of players playing on console.
Speaker Change: and what data allows is certain classes of experiences that may slightly nudge to console to have double the economic availability for our creators.
Speaker Change: It was initially just being on all platforms and then second doubling the roughly size of our console market, enabling creators to make double on console. But I think it highlights content on Roblox address to impress, for example.
Speaker Change: is very engaging phone tablet, computer and console across all of those devices.
Speaker Change: I'm not just, oh, I'll just add to that.
Speaker Change: This quarter, Q3, we have the benefit of...
Speaker Change: A very strong Xbox upgrade this time last year so it's now flowed through for four quarters.
Speaker Change: and obviously in Q3 we have a business this quarter that has PlayStation comparing to a quarter when we didn't have PlayStation. So it's really that simple. So the growth in those two in the console business combined.
Speaker Change: was basically at its peak levels in the third quarter.
Speaker Change: and so as we strip out console to make sure the overall business is growing very quickly. We see.
Speaker Change: All the other platforms combined are growing at 28% which is great.
Speaker Change: and you go into the fourth quarter.
Speaker Change: We're generally making assumptions that consult won't grow.
Speaker Change: It might, but we're generally making assumptions that it won't. Part of that is a little bit of the halo effect of the launch.
Speaker Change: But over time, you know, again, Xbox is growing.
Speaker Change: very quickly and...
Speaker Change: We believe going into 25, it should grow like all the other platforms are growing. So we'll get through the fourth quarter of the couple goals and then console will be a part of the business like it's always been a part of the business.
Speaker Change: Great, thank you and then just on the on the pair conversion.
Speaker Change: I think, you know, daily payers with a percentage of DAUs went up quite a bit from like 1.2 to 1.3% in the quarter. I mean, you've talked a lot about...
Speaker Change: merchant discovery and dynamic pricing floors and all these things which are inducing people to spend more money, engage more deeply, find the right experiences. I mean, are those drivers that could potentially push pair conversions further up from here? Or is it more about monetizing people who are already spending money growing the overall audience? Yeah.
Speaker Change: I'll share one friend that I want to highlight our economy team is generally...
Speaker Change: Driven by optimizing enjoyment on the platform and engagement. And we're always that our highest North Star.
Speaker Change: What we shared, one trend that you might expect and we saw this with the experiment that we initially did with dynamic pricing and now we've launched it for all creators.
Speaker Change: is the notion that traders can have a better business in many cases by reducing prices.
Speaker Change: Rather than by increasing prices. And over time, as creators make more money reducing prices.
Speaker Change: One might look to a trend where more people participate in the economy. As a result of that, I'm not saying that contributed to what we saw in the last quarter, but it was the surprising result of our price optimization experiments and what we're going to live with.
Speaker Change: Just a quick add on that. If you look at the overall number of pairs in our supplemental materials, it's, I think, page 16, we really had fantastic growth, peak pairs in the history of the company. So you're absolutely right, conversion to pair is happening at a higher rate.
Speaker Change: Again, I would credit that largely to the creator community and better search in the Skyreauver with the most fitting better content.
Speaker Change: In front of users, more relevant content is just more likely to have a pair conversion.
Speaker Change: and we absolutely expect that there's continued ability to continue to improve that. So, you know, 30% growth in pairs.
Speaker Change: You're on year with partner with a 4% growth in monetization per payer. So both should contribute over time, but...
Speaker Change: I don't think any of us believes that we are at peak conversion. Conversion should continue to grow over time. It may not be linear, but that really is a function of the platform running better and our creator community building better content with bullish on both of those things continuing to happen.
Speaker Change: The next question comes from the line of Brian Piz with BMO Capital Markets. Your line is now open.
Brian Piz: Thanks for the question. How are you thinking about how big paid access games could be to overall bookings mixed over time?
Brian Piz: is a framework that you're kind of thinking about or is it just too early?
Brian Piz: and then secondly, I think my kids clearly help to drive the dress to impress engagement. But is there something different that you're doing with that game? As it seems to be a bit more viral and stickier than most?
Brian Piz: I know you're trying different things with the search I'll go earlier in the year, but maybe you could just talk to if they're new model emerging for the more viral games. Thanks.
Speaker Change: The unpaid access behind one thing if you look at our financial statements.
Speaker Change: You can analyze and see that our infrastructure is extremely efficient. I believe we're below penny per hour right now, including cloud simulation, cloud analytics, cloud 3D streaming on 3D immersive gaming.
Speaker Change: are Safety Infrastructure, our AI Safety Infrastructure and thousands of moderators.
Speaker Change: As that continues to be hyper-efficient.
Speaker Change: We're able to, in the case of paid access experiences as I shared.
Speaker Change: In certain cases, depending on pricing, move 70% to the creators. This is launching in December.
Speaker Change: We're excited about the opportunity, the overall gaming markets space for software which we estimated about $180 billion per year.
Speaker Change: A chunk of that is fixed pricing rather than premium experiences.
Speaker Change: We would not comment on where we think that is going to be in real-block, but one way to look at it is what's the percentage in the overall gaining space that is fixed prices rather than premium and other forms of monetization like in-game advertising.
Speaker Change: on Dress to Impress, the way we think about our platform, the way we think about economics, and the way we think about acquisition, which is primarily organic.
Speaker Change: is we need to be creating the conditions for virology.
Speaker Change: We need to be offering a hyper-performant platform that works around the world.
Speaker Change: That can support different types of content.
Speaker Change: that can allow creators to build significant businesses.
Speaker Change: that can allow them to attract new people and when those conditions are right.
Speaker Change: We have more of an opportunity for viral hits. In the case of drugstown press, a couple things that are going on there.
Speaker Change: It's a very spontaneous experience, we've improved launch times on low-end mobile devices, we've improved the frame rate.
Speaker Change: I'm in low-end Android devices specifically.
Speaker Change: One thing to note about Dress to him, Prask.
Speaker Change: is playable in portrait as well as landscape mode.
Speaker Change: We're thinking about that and shows the trend that a lot of younger people are used to portrait rather than landscape.
Speaker Change: And it just kind of goes in what we saw year ago where a couple other experiences were going viral like blocks were in Burkaban. So as we look to sports, as we look to RPG, open world, battle royale.
Speaker Change: That's really where we're going to be going with those genres as well, creating the conditions for virologity in all of the genres that we're targeting in the game and ecosystem.
Speaker Change: Great, thanks very much.
Speaker Change: The next question comes from the line of Omar Desalkey with Thank For America. Your line is now open.
Omar Desalkey: Thanks so much. I think most of the questions I had have been asked already.
Omar Desalkey: So maybe I'll focus on something a little bit longer term. You talked about your foundational AI model with something I think I started calling out two years ago in your invested age. You know, maybe give us a little sense of...
Speaker Change: Some of you are thinking around the revenue model, a direct revenue model, you know, so that technology and high-duccension monetizes it. You know, other than simply giving it to your developers to create content with the links and with the risk rate or low-bots. Thank you.
Speaker Change: Hey, I'm our great question and we've highlighted a little bit of division.
Speaker Change: We're in the future a fashion experience on Roblox rather than creating 3D clothing in a traditional way, with scissors and a sewing machine. Well, migrate to Texton's voice prompts and ultimately, users on our platform.
Speaker Change: will design clothing by describing it and seeing it magically appear in 3D and then get to wear it and put it on their avatar.
Speaker Change: So our model for AI is to build our model.
Speaker Change: Run that inference on our own infrastructure at Megascale and have that AI available, not just in Roblox video.
Speaker Change: But for millions and millions of people at the same time
Speaker Change: for Super Low Cost. So the monetization model for all of our foundational models, whether they're 3D, Steam Generation, Text or Generation Code Gen.
Speaker Change: Even Texas service are all about...
Speaker Change: Increasing the quality, retention, and innovation in the actual 3D experiences themselves.
Speaker Change: We're focused on 3D generation, we expect to be seeing that next year. And this will be something that creators can incorporate in their experiences.
Hopefully for free we'll see, but hopefully because it's going to be so efficient and run on our own platform, we're going to see new types of gameplay and we're going to see AI integrated into many Roblox experiences.
Speaker Change: Thank you very much.
Speaker Change: We have time for one more question from the line of Jason Baszuck with City Group. Your line is now open.
This may be a hard question to answer, but you guys did so well in the quarter. If you had to just take a gander at how much of that was...
Speaker Change: The handful of enhancements that you made to the platform as opposed to things that are going on in the developer world.
Or yes, you create tools but there's a really sort of a breakout hand or something like that. How would you parse out the outside of the road that we saw in the quarter?
I would just say yes, yes, yes, yes, yes, I'm loose. One way to think about robots.
We got to plot a land what we're doing is the quality of the soil, the quality of the weather, the quality of the sun, the quality of all of that.
Speaker Change: Create a fertile platform for creators to express their intent and build amazing things and build great economics.
Speaker Change: Both of those happen in synergy. It's what when we talk about our aspirations for 10% of the gaming software market running on roadblocks.
That defines how we as Roblox build those conditions, so amazing creation can take off. First vote.
Speaker Change: Thank you very much.
Thank you all for joining us today. I will hand it over to Amy to close out the call.
Speaker Change: Thank you, that does conclude today's conference call. Thank you for your participation, you may now disconnect.
Speaker Change: [inaudible]