Q4 2024 Roblox Corp Earnings Call

Good morning, My name is John and I will be your conference operator today at this part I would like to welcome everybody to the roadblocks for quarter and fiscal year 2010 before earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' opening remarks, there will be a question and answer session. If you will.

Speaker Change: To ask a question during that time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question simply press Star. One again. Thank you I would now like to turn the call over to Stephanie you know Tony you May now begin your conference.

Stephanie: Thank you John and good morning, everyone. Thank you for joining our Q&A session to discuss roadblocks as Q4 and full year 2024 results with me today is roblox cofounder and CEO, David <unk> and CFO, Mike Guthrie, our shareholder letter press release, SEC filings supplemental slides and our.

Stephanie: Replay of today's call can be found on our Investor Relations website. Our commentary today may include forward looking statements, which are subject to risks uncertainties and assumptions that could cause actual results to differ materially from those described in our forward looking statements. A description of these risks uncertainties and assumptions are included in our SEC filing.

Stephanie: 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, 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.

Dave: Found in our press release and supplemental slides with that I'll turn the call over to Dave.

Stephanie: Thank you.

Dave: Good morning, Hey, Thank you all for joining us today.

Dave: We're excited to share our outstanding results from Q4, and once again I want to highlight our surpassing all of our guidance metrics.

Dave: Everything we provided on our Q3 earnings call and our 2023 Investor day goals.

Dave: And then we're going to lead you through a bit of our continued journey on moving to a goal of having 10% of the gaming content ecosystem running through our platform, but let's start a bit with some of our results once again high growth rates across really all of our key financial and operating metrics.

Dave: And surpassing our guidance in every single data point, where we provided guidance in our Q3 earnings call Q4 revenue 988 million up 32% year on year ahead of our high end of guidance of 960, <unk> Q4 bookings one three years.

Dave: Six 2 billion up 21% year on year ahead of the top end of our guidance, which was at 136 1 million.

Dave: Dia using Q4, $85 3 million up 19% year on year, one of the highlights once again in Japan, and India, two very large markets for us growth over 50% year on year.

Dave: Also highlighting as we continue to expand the range of ages on our platform.

Dave: Over 61% of our total da user over 13 and over 13 saw 26% year on year growth hours 18, 7 billion hours of engagement in Q4 up 21% year on year, similar plus 50% in India and Japan one.

Dave: Again strong growth over 13.

Dave: On the cost and cap expenses expenditures side, we've continued to be very diligent.

Dave: And one area that <unk> was up 25%, we shared over $922 million with the developer community in 2024 and in Q4, we shared 280 million through <unk>, which was up 27% year on year.

Dave: As in all high all time high and it's really part of our commitment of moving as much money through our platform to creators.

Dave: On trust and safety and infrastructure. This is our whole cloud. This is all of the AI supporting safety and stability. This is all of our live ops. This was up 2% year on year.

Dave: And down 2% versus Q3 I want to highlight this is all because of efficiency.

Dave: Proving quality on all metrics. This is as we increase the way, we drive quality and efficiency with AI and the way we run lean infrastructure.

Dave: That was 13% of revenue and 9% of bookings, which decreased to the last year and I just want to highlight a lot of AI driven modernization with quality that will share a bit more on personnel costs, not including stock based compensation $200 million once again driving on.

Dave: <unk> excellence, we were at 20% of revenue and 15% of bookings this decreased relative to the previous year, both as a percentage of revenue and bookings.

Dave: On operations Q4 cash.

Dave: It was up 29% year on year to 180 $184 million <unk> free cash flow Q4, $120 million up 54% once again all of our metrics above guidance free cash flow above the high end of the guide at $1 $15 million for the year.

Dave: Year of free cash flow over five X from $1 24 in 2000 $23 million to $641 million in 2024.

Dave: Less pop into our roadmap in 2024 really at the start of the year in our first earnings call. We shared our commitment to quality live ops discovery and economy.

Dave: All of these initiatives, we believe contributed to our continued growth and want to highlight once again up and down our stacked throughout the year App launch time crash rates frame rates overall app quality, all we believe contribute to higher engagement and spending.

Dave: And a little highlight on infrastructure quality in December our uptime hit $5 999, 999% uptime, which is really a new high point for us and once again signifies our commitment to engineering excellence.

Dave: On the live op side in 2024, we introduced platform live ops, we saw large content slate from the creators supporting live ops, we've seen a lot of great content breakout this year Fisher emerged as a breakout hit we've seen the NFL universe.

Dave: Pop into the top 25 as far as bookings on the platform, we've seen Spongebob from Paramount pop into the top 25.

More to come on that as we talked about content and finally on the discovery side, we shared with all of you our commitment to transparent discovery that optimizes personalized results for everyone I want to highlight that inexperience hours for experiences.

Dave: Beyond the top thousand grew faster than our top thousand this year and that's a highlight to discovery matching people with great.

Dave: Content.

Dave: An economy, we at the start of the year shared a commitment to driving bookings per hour with a lot of the improvements to our economy, we launched dynamic price floors, we moved our UGC economy for two UGC for all which means we opened up our avatar marketplace to all.

Dave: Creators.

Dave: We launched inexperienced price optimization as well this is driven monetization everywhere bookings per <unk> bookings per hour and bookings per payor all increased in 24 relative to 2023.

Dave: And recently in Q4, we began to offer more robust for users buying on platforms other than mobile essentially giving roebucks out roughly proportional to the cash we get in during the purchase and this is improve the share of economics as well that we.

Dave: Sure with the developer community.

Dave: On ads and brands, we've seen health beauty on the platform Amazon is now buying ads on our platform Mr. Beast.

Dave: In conjunction with <unk> games going live on television and on streaming brought him Mr. Beast experience we.

Dave: We've hired a lot of key leadership in our ads engineering and product words, we're now live with Shopify integration.

A cool cultural moment five of the 10 top grossing 2024 movies had activations on roadblocks, including recently beetle juice and with it.

Dave: In safety constantly shipping improvements, we had over 40 new releases.

Dave: This year, and we launched our party product as well, which brings people together on the platform and made improvements in how we treat people of all ages as part of that.

Dave: On the AI side I, just got a recent update on the number of AI pipelines and systems were running in the on the platform. It's over 200 now we've been doing this for over four years behind the scenes on our safety and civility side and an example of the innovation.

Dave: We're making these are voice safety model, there's been we open sourced it on hugging phase because we want other people to take advantage of our expertise in voice safety.

Dave: Been downloaded over 20000 times, we launched Avatar auto setup in Q4, which takes any.

Dave: It really industry <unk> avatar model and turns it into a fully functional roadblocks avatars skinning boenning, adding facts to the face making it support facial animation. This is a real early signal.

Dave: And the ability of roadblocks to use AI to ingest text images three D objects.

Dave: Convert them really into functioning roadblocks objects and also roblox assistant is fully launched in Q4.

Dave: It allows conversational creation inside roadblock studio stay tuned because a lot more of that is coming.

Dave: At <unk>, we shared a vision that we believe we're going to see 10% of all gaming content running on the roadblocks platform today, our market share is two 4%, which speaks a bit to the available headroom, we have as we drive our platform.

Dave: <unk>.

Dave: We see a fundamental shift incurring in the gaming ecosystem driven by our vision of technology and that's the vision of <unk> streaming supporting instant connection with <unk> content.

Dave: It's instant connection on any device anywhere in the world, it's enabling developers to publish once to a cloud and once again have their content lives any language any platform and ultimately powered by AI and finally this is not video streaming this is.

Dave: <unk> streaming with very low latency local simulation of avatar and very responsive <unk> interactions.

Dave: So this is really add a lot of clarity to just for all of you and for how we're working with our creators. So stay tuned on this I want to share a bit of what we got planned for 2025 and beyond as part of this goal really are getting 10% of gaming on our platform, we're really watching.

John Roos: As John Roos on roadblocks some of our genres.

John Roos: Like Avatar stimulation are arguably already pretty huge relative to that gaming ecosystem, but theres a lot of opportunity for us in role playing in sports and racing in action and Battle Royale, we're really going to be driving platform tech, including perf and quality.

John Roos: We are we've announced an affiliate program to support on and off platform acquisition and supplement the organic growth on our platform, we're continuing to expand our economy.

John Roos: And we've shared more about this with paid access games in our AD economy.

John Roos: And then finally I wanted to just.

John Roos: Give a little highlight of the future of AI on our platform.

John Roos: Just like in the early days of roadblocks. When this immersive three D online multi player stimulation that we created starting to support new genres of gaming that have been popping up on roadblocks. We believe AI will continue to do that our expectation is in Q1.

John Roos: We're going to be shipping tax generation available inside roblox experiences that means creators will be able to take advantage of this and make.

John Roos: My base characters. So we can imagine a virtual George Washington, teaching roadblocks in history, driven by text Gen. As a service. We have also shared that we have so much three D data, we're going to be making available at three D foundational model.

That is <unk> native and state of the art transformer based that has been trained with our data.

John Roos: To make this available in studio and in Q2, we expect to extend three the creation and three D generation inexperience that means a fashion creation game will start to allow everyone not just to mix and match.

John Roos: But to generate <unk> outfits with a text prompt so stay tuned for that finally on safety. The foundation of our company, we have huge ambitions for the year.

John Roos: I don't want to highlight the safety and stability at roadblocks isn't just under 13, when we think of sapiens ability. We're talking every single age on the platform and building that in so stay tuned on that we continue to produce more and more operating leverage even as we bring in world class talent.

We're expanding and improving infrastructure trust and safety systems, and we're driving the economics.

Speaker Change: I'll hand over to Mike, but I do want to highlight we continue to drive topline growth at 20% plus well, we increased cash flow and while we're on to really this goal of 10% of gaming, which is almost a forex for us as available headroom with that over to Mike. Thanks, Dave.

Mike: Good morning, everyone I'm, just going to make three quick comments before we do.

Speaker Change: Jumping to Q&A just to make some clarifying statements number one.

Speaker Change: Is that 2024, it was really an important year for us from a financial standpoint. This is really the year when bookings caught up with the investments that we've made post COVID-19 and into early 2023.

Speaker Change: Talked about scaling margins and scaling cash flow and free cash flow and in 2024, we really delivered on those and have generated very very high operating and free cash flow across the course of the year. So we're really happy with that importantly, what that means is for days earlier comments as we pursue our plan to get to 10%.

Speaker Change: Of the market.

Pretty high growth rates of bookings, we have an ability to invest very consistently in the things that drive value at roadblocks, which is engineering excellence trust and safety and infrastructure and the developer community and so while we had a real step function in margins. This year, we delivered about two to three years' worth of <unk>.

Speaker Change: Improvement per our guidance in November 'twenty, three we can continue to do that while making really significant investments and so from an operating standpoint that feels good to us and as a leadership team and.

Speaker Change: A real consistency in those investments to drive continue to drive growth with margin.

Speaker Change: Number two I want to make sure that the fourth quarter, we have clarity on two.

Speaker Change: Two things first would be bookings.

Speaker Change: In Q4 last year, we launched a new platform, which is Playstation we always want to launch new platforms. We're excited to do that.

Speaker Change: And typically that grows the overall size of the market and is positive for the business at the same time. We also had a significant update on Xbox So console for us in October and November last year in particular was very strong and we lap that in the fourth quarter. So just a little bit of clarity, we touched on a little bit of this in the letter.

Speaker Change: In the fourth quarter mobile and desktop bookings grew 26%.

Speaker Change: So very high growth in the things that we're not lapping the difficult compares.

Speaker Change: For the entire for the month of December exclusively mobile and desktop bookings were 27% growth and prepaid in console were 22% growth. So prepaid in console, we lapped the launch of Playstation The October and November impacts there. We also lapped a large prepaid card purchase in November.

Speaker Change: But by December and as we exited the quarter and into the first quarter very high growth in mobile and desktop which has persisted across Q3 and Q4 and prepaid in console then started to pick back up into the 20% range. So we we had a very healthy exit to the growth rate once you take into consideration lapping place.

Speaker Change: Station and again that continued into the first quarter.

Speaker Change: So that's number two.

Speaker Change: Number three just as it relates to consensus and in our guidance we.

Speaker Change: I just want to remind everybody in the fourth quarter, we have Joe <unk>.

Speaker Change: Of course of the year, let's just say working capital is not a big it doesn't really have a big impact on the business, but in Q4 and Q1 working capital actually has a very large impact on the business. So there is a in your models. There is a difference between your EBITDA.

Speaker Change: And our cash from operations that is working capital in Q4 negative working capital. So there's a big spread and then in Q1 positive. So as we collect all the activity that happened in.

Speaker Change: In Q4, especially around the holidays. So just vis vis your consensus which is at the high end of our implied guidance I think we were about 9% ahead of your your EBITDA numbers. So I just want to make sure everybody understands the working capital flow and how that works and youre going to see a lot of course that cash flow is going to come back into the company in the first quarter.

Speaker Change: Those are my three comments just to put everything into context, and now we will love to take your questions.

Speaker Change: Ladies and gentlemen, who will now begin our question and answer session. If you have dialed in and would like to ask a question. Please press star followed by the number one and your telephone keypad.

Speaker Change: Likely killed your question simply press Star one again.

Speaker Change: You ask everyone to limit themselves to one question and one follow up we will pause for a moment to compile the Q&A roster.

Speaker Change: Yeah.

Speaker Change: Your first question comes from the line of Omar <unk> with Bank of America. Please go ahead.

Speaker Change: Alright, Hey team. Thanks for taking my question here.

Speaker Change: I wanted to maybe get.

Speaker Change: Help us help us think of a framework.

Of how youre going to get to 10%.

Speaker Change: The video game market. So if we were to think about the existing video game markets.

Speaker Change: In tears, Okay, obviously, there's mobile and PC console.

Speaker Change: But we're seeing for example, you see consoles there are different levels of production value like AAA double a single a indeed.

Speaker Change: Which which of those tiers of production value would you expect roadblocks developers two to start to emulate.

Speaker Change: So that you could.

Speaker Change: Potentially take share and the reason I say take shares because it's well known that the videogame market hasn't been growing very rapidly where youre growing 20%. So it would seem that.

Speaker Change: Roblox developers would essentially take share from the existing video game market just help us think about the future direction of content, that's going to help you get to that 10%.

Speaker Change: Hey, Omar Thanks for highlighting this and let's take a step back I want to share how we have been thinking of it and theres various lenses on this <unk>.

Speaker Change: First off when we think about people, creating three D games and experiences.

Speaker Change: You mentioned, taking share we actually just want many of them, creating on roadblocks there, creating in other places and so this isn't necessarily taking from them, we're seeing more and more license platforms. Once again like NFL universe, our Spongebob tower to sense from Paramount just showing up.

Speaker Change: On our platform side by side, the rest of the game industry.

Speaker Change: Financially the way we see this going is a internal model genre by genre and.

Speaker Change: And the size of each of those genre and our penetration in each genre, leading to ultimately 10% of the market running on our platform I'll give you. One example, battle Royale on low end mobile is a good.

Speaker Change: Sizeable chunk of this and we could real off the top four to five battle Royale as around the world. We shared AD already see and we continue to share that we're driving the technical innovation to support Battle Royale on our low end two gigabyte Ram Android device.

Speaker Change: Three difficult networking market like India with no compromise, we believe battle Royale ultimately on roadblocks needs to launch faster run at higher fidelity and work better than a bad networking condition than a traditionally pre compiled monolithic battle Royale, so stay tuned on that but simultaneous.

Speaker Change: Lee the architecture, we're developing which is the <unk> streaming architecture very closely connected to the cloud also leads to the notion that that same battle Royale, that's running on two gigabyte Android should run on a high end gaming PC and stream higher quality assets with the exact same code base.

Speaker Change: So we are not going to compromise either on low end, Android perf, which is the mobile segment or the high end PC quality, because cloud is going to be ultimately very important and dynamically adjusting the qualities. These experiences and then I would say in a third segment. We are also starting to see.

Speaker Change: Even more puzzled take games on the platform. So we believe it's imminently important for us to make the technical breakthroughs that support which has traditionally been monolithically downloaded experiences in a <unk> streaming context without any compromise for quality. This is complement.

Speaker Change: <unk> by a roadmap on economics, you saw with paid access games is moving all the way up to 70% in certain situations. This is complemented by search and discovery to help bring these these features forward and then I would say behind the scenes Youll see us working with high end developers who traditionally.

Speaker Change: <unk>.

Speaker Change: Launched in other ways on the roadblocks platforms. So we're taking this very seriously internally, we are watching the metrics quarter by quarter genre by genre to make this happen.

Speaker Change: Well great. Thanks for the comprehensive answer I think that gives me a great clear direction for research here I appreciate it.

Speaker Change: Thank you Omar.

Cory Carpenter: We'll go next to Cory Carpenter with Jpmorgan. Please go ahead.

Cory Carpenter: Thanks, Good morning wanted to ask on advertising you didn't touch on it much in your prepared remarks, you talked about 23 five initiatives. So hoping you could just maybe frame your plans for the AD business. This year and any help you can give on quantifying the AD contribution you're expecting 25, that's embedded in your outlook. Thank you.

Speaker Change: I'll go first.

Speaker Change: Sure that when we feel advertising is big enough, we'll break it out I'll, let Mike talk about it.

Mike: We're just in the middle of adding to our portfolio of AD products, including streaming video ads and possibly user initiated video we are already building and increasing business on sponsored trials on our homepage. We are alive with shopping ads I want to highlight the potential.

Speaker Change: <unk> here with five of the top 10 movie releases user.

Speaker Change: Using roadblocks to boost engagement and understand what's coming of course.

Speaker Change: We want to say, whether that's correlation our causality, but we do think it's it's really exciting.

Speaker Change: I do feel we're on a great track the team we supplemented with amazing talent. It's I think it's simply we're not ready to break it out yet Mike correct.

Speaker Change: And there is very little in the numbers that we produced today in terms of our guidance for 2005.

Speaker Change: Okay helpful. Thank you.

Clark: Your next question comes from the line of Clark.

Speaker Change: Please go ahead.

Clark: Good morning, and thanks for taking the questions I have two.

Speaker Change: Dave on personalization and discover you guys at all.

Speaker Change: Obviously, you've been very successful in rolling this out over the course of the year end.

Speaker Change: Objectively, even accretive to the player experience your business bookings growth.

Speaker Change: Have you seen as a consequence of this though any signs from a developer standpoint that the community is maybe being taxed a little bit by a higher life services burden I guess said differently is there any way for you to monitor and potentially avoid burn out as the pace of content creation potentially picks up.

Speaker Change: Second question, Mike as we're thinking about the rate of margin improvement that's sort of baked in and what is forecasted for 2025 is there any way of framing for us how much of the improvement might be a result of direct cost leverage this year, rather than opex leverage since.

Speaker Change: You didn't hire a whole lot in 2020 for I would imagine that that's going to pick up in 2025.

Speaker Change: Thank you both.

Speaker Change: Yes, I'll start on search and discovery first I want to highlight a couple of things.

Speaker Change: The creator community, who we meet with personally and talk about this a lot really values transparency in our search and discovery algorithms. So they can see what we're rewarding we've made a commitment at our D C to be hyper transparent in that and stay tuned because we believe we can be very.

Speaker Change: And what we're rewarding for organic discovery as well as how we run organic search.

Speaker Change: Thats complemented with live ops, where we do at times feature updates.

Speaker Change: I want to highlight we encourage all roadblocks creators to iterate and make many small updates rather than giant monolithic ones. It's the way we build roadblocks were shipping many times a day, we ship safety advancements 40 times a year.

Speaker Change: So I don't actually think we're encouraging burn out I think were encouraging a healthy way to do engineering.

Speaker Change: Clarke I'm going to answer your question want to make sure I get it right. So.

Speaker Change:

Speaker Change: This year coming up as I said earlier in my opening comments, we're in a position now where growth in expenses contract much more closely with growth in the top line because we have such a step up in margins.

Speaker Change: This year.

Speaker Change: Based on the topline growth that we expect we can hire pretty aggressively vis vis the last couple of years, we can add.

Speaker Change: Head count costs in the mid to high teens and still have.

Speaker Change: Very good cost leverage this year over last year.

Speaker Change: So thats number one thats on the fixed cost side number two and for trust and safety, we continue to drive down cost to serve.

Speaker Change: And we still believe there is pretty.

Speaker Change: A significant amount of improvement that we can drive in that cost line. So just those two you were seeing direct versus opex or both operating expenses and more fixed costs.

Speaker Change: That's how I think of it and then I just wanted to add sort of embedded in what I said at the beginning.

Speaker Change: We have had variable costs in the business that have been.

Speaker Change: <unk> exchange and our cost of goods sold and for quite a long time, we talked about the potential of unlocking operating leverage and cost of goods sold.

Speaker Change: We're still early in that journey, but differential pricing is certainly a first move towards that and so while what you see in our guidance is driven really by hiring and TNF and for trust and safety.

Speaker Change: Operating leverage just investing at a slightly lower growth rate than what we expect on the top line. There is the possibility that we start to see some real operating leverage in Cogs and that allows us to do a few things that we've talked about for years, one is sharing a little bit more of the developer community, while sharing incremental margin and effective in fact effectively with investors and in our.

Speaker Change: On our P&L as we report cash flow. So that's why we really feel like we're in an enviable financial position did I answer your question.

Speaker Change: Yes, you did I think.

Speaker Change: The question was essentially gross margin leverage relative to Opex and it sounds like if I have it right a lot of what you're modeling in here as opex leverage you'll sort of wait and see whether there is cogs leverage over the course of the year or incremental Cogs leverage is that correct.

Speaker Change: Correct.

Speaker Change: Okay. Thank you.

Operator: Your next question comes from the line of Matthew cost with Morgan Stanley. Please go ahead.

Matthew Cost: Great. Good morning, everyone. Thanks for taking the question. The first one is just on the da U trajectory I think there is a slight step down from <unk> to <unk> it seemed to be across most of the region. So what were the puts and takes.

Operator: In the DJ you stepped down from <unk> to <unk> in your regions to call out our contents that drove that platform.

Operator: Worth, noting and then just secondly, I think just building on <unk> question a little bit.

Operator: As I understand it I think there would be some benefit to the amount of delta exchange fees going out to the developers, which means a higher cost to roadblocks as a result of <unk>.

Operator: <unk> pricing.

Operator: Over time, I would imagine as you get more consumers to shift to that payment model. That's a good guy photogs. It probably is a good guy for your margin, but in year. One as you look at the guidance for 2025.

Speaker Change: Differential pricing good for gross margin this year or poor bad at that initial first 12 months. Thank you.

Speaker Change: Hey, I'm going to start.

Speaker Change: Big picture on this and just share what you may be seeing hints of in our results over the next four to five years as we move to 10% of the gaming content space running through our platform, we want to move as much money as we can through to the developer community as part of it it's great economics. It helps.

Speaker Change: Drive growth on the platform you will see us relentlessly work on Cogs as a percent of bookings on personnel cost as a percent of bookings and infra trust and safety without compromising quality as a percent of bookings because what that leaves behind that is cash and.

Speaker Change: What we can move to our developers so the more we drive this the better the move to rationalizing roebucks pricing, where we roughly correlate the amount of roebucks given to the amount of raw cash we received is great economic policy.

Speaker Change: It's really increased the.

Speaker Change: The amount of money ultimately flowing through developers because it drives our cogs down and we've seen consumers respond in a rational way in a way that has also contributed to growth. So.

So on that side I would hope at the Big picture, you would see <unk> as a percent of bookings might be if you can comment just continue to slowly March upwards. If we do our job right. That's right and that doesn't mean margins will go down at the same time, we're talking about efficiency in the cost structure.

Speaker Change: That allows us to do both.

Speaker Change: Guidance implies that we are still.

Speaker Change: In the 100 to 300 basis points range that we talked about back in late 'twenty. Three obviously this year 24, the number was quite a bit higher than that.

Speaker Change: But embedded in that to get specific it primarily.

Speaker Change: The operating expenses that we talked about another way of saying that is where we're sort of carefully watching cause leverage we're optimistic about cogs leverage we're not modeling it in and guiding to it today, but.

Speaker Change: But it's exciting to have that lever, we haven't had that in the past on the on the user side.

Speaker Change: In Q4, again lapping the launch of Playstation and a pretty significant step up in Xbox is the platform that we sell a lot of sign up activity, we saw a lot of new.

Speaker Change: Da use and so we have to we have to really lap that come.

Speaker Change: Coming into January.

Speaker Change: I'm, sorry, Q1 of 25.

Speaker Change: In addition, just as a call out specifically, we've talked about a little bit in the letter east.

Speaker Change: Eastern Europe growth was quite a bit slower on da use driven primarily by by Turkey, which is the first full quarter, where Turkey has been off.

Speaker Change: Look at the growth in users in Europe versus the bookings growth in Europe, it's pretty significantly different so where we have had a hit on da use in eastern Europe.

It is fortunately.

Speaker Change: Part of the World economic impact is just not nearly as large as the impact on users, so where we're going to work hard to be live and compliance around the world.

Speaker Change: That will ultimately help user growth to grow but.

Speaker Change: Overall.

Speaker Change: Healthy user growth and the rest of the world and certainly we're seeing strong engagement and strong monetization, which turns into strong bookings growth.

Speaker Change: Once again, thank you so much.

Speaker Change: I wanted to just highlight.

Speaker Change: Little we are penetrated in India, right now with north of 50% <unk> growth, which youll see complementing as that market grows.

Speaker Change: Got it thanks, a lot guys.

Ken: We'll move next to Ken <unk> with Wells Fargo. Please go ahead.

Ken: Thank you and good morning, two if I may 1st one.

Ken: What are you hearing from developers about the cost.

Ken: And the time to develop new game features with all the AI powered tools that you discussed at length on this call.

Ken: How should we think about the adoption of <unk>.

Ken: How should we think about the adoption rates of these tools is it is it significant already is at very early days and do you expect an acceleration there.

Ken: <unk> is the greater impact on the overall roadblocks ecosystem better earnings for developers.

Ken: Our enhanced game development or is it really both maybe that's my first one and the second one.

Ken: As more just.

Speaker Change: Maybe Mike if you could walk us through kind of the puts and takes as we think about the first quarter guidance.

Speaker Change: You talked about in the letter some of the dynamics between early in the quarter or later in the quarter, but can you just talk I'll talk about it maybe a bit more extensively just so we understand.

Speaker Change: The different dynamics in that <unk> bookings guidance. Thank you.

Speaker Change: Yes.

Speaker Change: First I'll start with developers and their economics and I do want to highlight people are taking note of what we believe is the economic opportunity a very large property on roadblocks breakeven was just acquired.

Speaker Change: By a very I think thoughtful and smart kind of.

Speaker Change: Property owner, so I want to highlight that.

Speaker Change: Hey, This is I think these all multiply together.

Speaker Change: We achieve our goal, which we believe we will have routing 10% of the gaming market content ecosystem.

Speaker Change: And that in itself multiplies to Forex roughly the money flowing through developers I, just said about 15 minutes ago, we would like to increase the share of bookings flowing to our creators as well so those two things multiply together.

Speaker Change: And then I think the Triple Whammy is we're already in a position where many top experiences created on roadblocks are much more efficient than the traditional gaming space and this is because our cloud is integrated with our engine. Our auto translation is integrated with our engine.

Speaker Change: Creators, who launch and share experiences like Brookhaven, which is arguably one of the largest avatar stimulation experiences in the world much bigger than most standalone to avatar simulation experiences is really was created and run by a very very small team and was running.

Speaker Change: Around the world translated on every device so it's really as a triple whammy.

Speaker Change: Our AI adds to that on top of that and so it's really a force multiplier, we're seeing more and more creators adopt our assistant in studio, we're going to see more and more of that I do want to say that we're optimistic that the overall market for jobs in the experienced creation space if any.

Speaker Change: We believe we will grow not shrink with AI. We're optimist about this we think for example, I'm going to buy next week to talk about the opportunity for really a creation of economy. There because the jobs supported by our platform are going to continue to grow. So I think it's actually a quadruple whammy with AI acceleration over to.

Speaker Change: Okay.

Speaker Change: And what is embedded in guidance for the first quarter. So the bookings guidance is about 22 to 24 24, 5% top line bookings growth.

Speaker Change: That's informed by really the exit rate.

Speaker Change: Q4, and what we saw across the quarter as we adjust for the launch of Playstation and some of the other things that we've already talked about.

Speaker Change: <unk>.

Speaker Change: On the margin side.

Speaker Change: Continued growth in.

Speaker Change: And whats implied here is again better than the 100 to 300 basis points that we've come to talk about it's more like.

Speaker Change: 300, a little over 400 basis points improvement, so we're still seeing pretty high improvement in the.

Speaker Change: And the margin guidance that's implied here.

Speaker Change: What else is implied.

Speaker Change: For the quarter and then for the full year.

Speaker Change: January.

Speaker Change: Of course now we've seen.

Speaker Change: Expectation is thats, probably the highest.

Speaker Change: The growth rate.

Speaker Change: A month for the quarter.

Speaker Change: The comps are a little bit easier of course it really.

Speaker Change: In the quarter as you all remember from last year. It gets tougher in March because we do lap Easter this year. So Easter last year was in Q1.

Speaker Change: We will lap that in March and then we'll have the benefit of having Easter in April and not comping against equal April in Q2, so overall because the exit rates are really good.

Speaker Change: And just what we've seen in January has been very strong.

Ken: That is embedded in the guidance I also look Ken specifically I looked at your model.

Ken: Days ago, and I feel like seasonally you have got it right because during the course of the year. Our current expectation is growth rates in the first half of the year will be higher than in the second half of the year, primarily because of Q3, we just had such a strong third quarter. So we're going to lap that now.

Ken: We knew and we print in Q3 that we're going to lap Q3 12 months from now so we're working on a lot of initiatives that we hope will allow us to drive growth above and beyond what's sort of embedded in the full year guidance in the Q1 guidance, but that will be that'll be the toughest quarter to comp against for <unk>.

Ken: Sure. We're optimistic we can do a good job there and for the overall year growth, we're optimistic and right now I think highest growth in Q1.

Ken: Very good growth in Q2, and Q4 and Q3 is the quarter that we have that we have to lap.

Ken: A very large number and where we are ready for the challenge.

Ken: Thank you.

Ken: Right.

Speaker Change: We have time for one more question from Brian Pitz BMO capital markets. Please go ahead.

Brian Pitz: Great. Thank you two questions. Please one any insights into how much contribution to bookings as expected from paid access games. This year.

Brian Pitz: And thoughts on how they may potentially be cannibalistic to your core business and then two given the biggest question in pushback that we still receive which is around the age up thesis on the platform maybe an update on your thoughts on the latest initiatives there in terms of driving the development of more <unk>.

Brian Pitz: Core hardcore gaming content and could an acquisition actually make the most sense to accelerate the development.

Brian Pitz: Move in that direction. Thank you.

Brian Pitz: Yeah.

Brian Pitz: Wow.

Speaker Change: Hey, we don't see your thesis in our numbers. So I do want to highlight this summer for example, we shared the growth rate ever over 13 and.

Speaker Change: All over universities in the United States people are playing dress to impress while they were in class. So we see continued growth in 13 and up it's growing very very rapidly and we're seeing more and more properties like the NFL universe.

Speaker Change: That are appealing to older experiences on the paid access side. There is a pipeline of creations right now getting lined up to launch on paid access we don't see this once again as cannibalistic, we see the overall $187 billion gaming content market in the world.

Including freemium experiences, including paid access experiences, including experiences that monetize by advertising and we're offering world class systems that cover all of these it's actually inconceivable that we would go after 10% of the world gaming market without a wide range of economic.

Speaker Change: <unk> opportunity so we see it as a.

Speaker Change: Accretive.

Speaker Change: Not as cannibalistic.

Speaker Change: Hey, Brian just one last comment.

Brian Pitz: I appreciate the question and what you described as pushback.

Brian Pitz: That's great because we're now seven at least for me seven years into people pushing back on aging up and we just continue to age up so my.

Brian Pitz: My prediction will be in year, eight we will continue to age out and build our incredible creator community will build a content based on the technology that we're producing that will be increasingly attractive to older users and in 12 months from now we will have the exact same question, but I appreciate you, bringing it up.

Brian Pitz: Great question.

Speaker Change: Thank you everyone for joining us.

Brian Pitz: Hi, Brian.

Brian Pitz: Thank you everyone for joining us today, and I will hand, it off to our operator, John to close out the call.

John Roos: That concludes today's conference call. Thank you for your participation and you may now disconnect.

Brian Pitz: Yeah.

Brian Pitz: Okay.

Brian Pitz:

Brian Pitz:

Brian Pitz: [noise].