Matthew Cost

Matthew Cost of Morgan Stanley inquired about the drivers behind Roblox's strong Q4 gross margins, specifically asking if it was due to a shift towards direct payments or other factors, and requested an update on the direct payment initiative. He also asked for Roblox's response to market concerns about potential disruption from other companies' AI advances, seeking clarification on Roblox's differentiating factors, particularly its multiplayer cloud technology.

Answer

Naveen Chopra, CFO, attributed the Q4 gross margin improvement to two factors: a tailwind from COGS due to better-than-anticipated steering of Robux purchases to lower-cost platforms, and powerful leverage against fixed costs from higher-than-expected bookings growth. Mr. Chopra expects continued, though not necessarily linear, COGS rate improvement from shifting business to lower-cost platforms. David Baszucki, CEO, reframed the AI discussion as an opportunity for Roblox to disrupt and expand its vision beyond gaming into interactive entertainment. He emphasized Roblox's multiplayer cloud technology, instant loading, and bite-sized content consumption as key differentiators, blurring the lines between gaming and entertainment, and highlighted their internal world models for creation and interactivity.

Matthew Cost from Morgan Stanley asked CFO Naveen Chopra about the drivers behind the strong Q4 gross margins, specifically inquiring if it was due to a shift towards direct payments and for an update on that initiative. He also asked CEO David Baszucki to address market concerns about potential disruption from other companies' AI advancements, seeking clarification on Roblox's differentiating factors, particularly multiplayer technology.

Answer

Chief Financial Officer Naveen Chopra attributed the Q4 gross margin improvement to a tailwind from COGS, driven by better-than-anticipated performance in steering Robux purchases to lower-cost platforms, and leverage from strong bookings growth. Co-founder and CEO David Baszucki reframed AI advancements as an opportunity for Roblox to expand its vision beyond gaming and entertainment, emphasizing the company's unique multiplayer technology, 3D cloud synchronization, and communication-focused platform as key differentiators against potential disruption.

Matthew Cost asked about Roblox's AI infrastructure plans, how they will shape the user experience and games on the platform, and the impact of Cube 4D and real-time content generation on experiences and engagement over the next few years.

Answer

David Baszucki (CEO, Roblox) outlined a vision for AI-driven real-time generation of complex objects in multiplayer experiences, supporting diverse visual styles and player counts across all devices. He emphasized AI's role in modifying worlds in real-time and enabling new genres, citing 'Dress to Impress' as an example of unexpected gameplay emerging from core technology.

Matthew Cost asked how the new creator rewards program changes developer incentives and inquired about the timeline for a more aggressive rollout of sponsored tiles in discovery.

Answer

Founder and CEO David Baszucki explained that the creator rewards program is shifting from rewarding raw engagement time to rewarding creators who drive organic, viral user acquisition, better aligning incentives with long-term platform health. Regarding sponsored tiles, he noted the current focus is on improving targeting and optimization before a wider push. CFO Naveen Chopra added the rewards program change is not expected to have a material short-term financial impact.

Matthew Cost asked about the new creator rewards program's impact on incentives and DevEx, and also inquired about the timeline for a more aggressive push into sponsored tiles for discovery.

Answer

CEO David Baszucki explained that the creator rewards program shifts incentives from raw engagement time to rewarding creators who drive organic traffic, aligning with long-term platform health. Regarding sponsored tiles, the current focus is on improving targeting and optimization before a broader push. CFO Naveen Chopra clarified the rewards program change will not have a material short-term financial impact.

Matthew Cost asked about the key drivers behind the successful expansion into new genres and growth from smaller developers, and what steps Roblox is taking to sustain this momentum. He also inquired about the margin impact of differential pricing and the potential effects of the Epic lawsuit on direct payment strategies.

Answer

CEO David Baszucki explained that genre expansion is driven by a multi-pronged strategy focusing on technology, economics, and discovery to support genres like RPG, sports, and racing. He highlighted plans for higher rev shares for certain experiences. CFO Mike Guthrie noted that differential pricing is in the 'top of the first inning' with early results being positive but not yet significant. Baszucki added that users are organically discovering better value on the web, and the company is monitoring legal developments.

Matthew Cost of Morgan Stanley questioned the reasons for the slight sequential DAU decline from Q3 to Q4 and asked if the new differential pricing model would be accretive or dilutive to gross margins in its first year.

Answer

CFO Mike Guthrie attributed the DAU trajectory to lapping the very strong PlayStation launch and a significant Xbox update from the prior year, as well as slower growth in Eastern Europe. CEO David Baszucki framed differential pricing as a positive economic policy that lowers COGS and allows more money to flow to developers. Mike Guthrie added that while they are optimistic about COGS leverage, current guidance is based on OpEx leverage, suggesting a carefully managed initial margin impact.

Matthew Cost asked about the breakthrough success on console, particularly with the PlayStation launch, and also inquired about the drivers behind the significant increase in payer conversion.

Answer

CEO David Baszucki attributed the console success to Roblox's 'create once, run anywhere' strategy, which made a vast content library instantly available to a new market. On payer conversion, he highlighted that dynamic pricing can lead to lower prices, potentially broadening participation. CFO Mike Guthrie credited the creator community and better discovery algorithms for the conversion lift and expressed optimism for continued improvement.

Matthew Cost asked about Zynga's ability to sustain its mobile gaming outperformance, inquiring whether this is driven by new game launches or growth in existing titles. He also explored opportunities for further mobile gaming M&A to build on Zynga's current momentum.

Answer

Strauss Zelnick, Chairman and CEO, attributed Zynga's outperformance to strong leadership (Frank Gibeau), execution, and creative teams, emphasizing a honed approach of focusing on winners and being disciplined with new titles. Regarding M&A, he stated a highly selective approach, prioritizing strategic alignment, cultural fit, and immediate accretion, citing a strong balance sheet and the successful Gearbox acquisition as examples of their disciplined strategy.

Matthew Cost asked about the sustainability of the mobile and Zynga business's strong outperformance relative to the broader mobile gaming market, attributing it to new game launches versus existing titles. He also inquired about opportunities for further M&A in the mobile gaming space to build on Zynga's momentum.

Answer

Strauss Zelnick, Chairman and CEO, attributed Zynga's outperformance to strong leadership and execution across all studios, focusing on live services and new title launches. He expressed confidence in sustaining this through a disciplined approach, focusing on winners and being economically careful. Regarding M&A, he emphasized a selective approach based on strategic alignment, cultural fit, and immediate accretion to management or cash flow, highlighting the company's strong balance sheet.

Matthew Cost asked about the specific drivers behind the continued strength in the NBA 2K franchise and how recent court rulings on app stores impact the company's direct-to-consumer (D2C) opportunity.

Answer

President Karl Slatoff attributed NBA 2K's success to the development team's relentless focus on quality, innovation, and listening to consumer feedback, which has driven engagement up significantly. CEO Strauss Zelnick added that the recent court rulings are positive signs that support the company's long-held view that the mobile business would open up, enhancing their already significant D2C business.

Matthew Cost inquired about the attractiveness of distribution partnerships like the one with Netflix for WWE and asked for clarification on media reports about a new ad mediation partner and a related payment for Zynga.

Answer

CEO Strauss Zelnick stated that partnerships are evaluated based on consumer benefit, aiming to be on all relevant platforms. CFO Lainie Goldstein addressed the mediation partner question by stating that while not commenting on specifics, any such payments are typically recognized over the life of the agreement.

Matthew Cost asked if the 50% week-on-week growth metric is what AppLovin is managing to for general availability, and what other factors are needed. He also inquired about the timing and potential magnitude of increased paid marketing, given the Q3 marketing budget.

Answer

Adam Foroughi, Co-Founder, CEO, and Chairperson, AppLovin, stated that while spend growth is exciting, the key is optimizing the conversion funnel (sign-up to go-live), improving client communications, and enhancing dashboard tools/AI bots. He confirmed active testing with small paid marketing budgets, which won't be a large line item relative to revenue potential, aiming for sales force automation.

Matthew Cost inquired about the timing and potential magnitude of increased paid marketing for the Axon Ads platform, given the marketing budget in the third quarter.

Answer

Adam Foroughi, Co-Founder, CEO, and Chairperson, AppLovin, confirmed active testing of paid marketing, noting that while the budget won't be large relative to revenue potential, it's crucial for automating sales and scaling advertiser acquisition. He emphasized AppLovin's performance marketing expertise and commitment to cost discipline.

Matthew Cost inquired about Applovin's strategic decision to begin paid marketing to acquire new advertisers and asked for details on the sources of the strong supply-side growth in the Max marketplace.

Answer

Co-Founder, CEO & Chairperson Adam Foroughi explained that paid marketing is a new initiative to accelerate the growth of their Axon platform, leveraging their own performance marketing expertise and lucrative financial model to reach a vast, untapped market of small businesses. Foroughi clarified that supply growth is driven by technological improvements and increased demand, which expands the entire in-app advertising market, rather than just by taking mediation share. He noted the audience base within Max is growing at a double-digit rate.

Matthew Cost from Morgan Stanley inquired about the new strategy to use paid marketing for advertiser acquisition, a shift from the historical word-of-mouth approach, and asked for the primary drivers behind the strong supply-side growth in the MAX marketplace.

Answer

Co-Founder, CEO & Chairperson Adam Foroughi explained that with a highly lucrative financial model, Applovin can effectively use performance marketing, including on its own inventory, to reach a vast, untapped market of small businesses. He clarified that supply growth isn't from taking mediation share but from the rapid, double-digit expansion of the audience base within the MAX marketplace, which benefits the entire ecosystem.

Matthew Cost of Morgan Stanley inquired about the company's expansion into new advertising categories beyond gaming and the primary pain points for new advertisers. He also asked about the plan for automated ad creation and its potential cost-benefit.

Answer

Executive Adam Foroughi stated that while there is a line of customers waiting, they are not actively pushing into new categories until the self-service tools are deployed to automate onboarding. The current focus is on improving the web advertising model and integrations. Regarding ad creation, he explained the goal is to use generative AI to dynamically create more ad variations, which is a significant lever for improving campaign performance by enhancing personalization and response rates.

Matthew Cost of Morgan Stanley asked if the success of the e-commerce pilot implies the AXON model can be expanded to other verticals beyond e-commerce. He also questioned if the significant year-to-date stock appreciation has changed the company's view on the attractiveness of share buybacks and inquired about the potential for M&A on the advertising side.

Answer

CEO Adam Foroughi stated a long-term vision where any advertiser with a transactional model, across all categories, can use their platform, confirming the technology is not limited to gaming or e-commerce. CFO Matt Stumpf addressed capital allocation, stating the stock price does not impact their buyback strategy as they still see it as a great investment. He also reiterated that the company's focus is on organic growth with no current plans for M&A on the advertising side.

Matthew Cost asked whether the strategy of bringing established third-party IP onto the platform conflicts with Webtoon's goal of being a primary destination for native, user-created content and fostering a path for amateur creators to become professionals.

Answer

David Lee (CFO & COO) and Yongsu Kim (CSO) both asserted that the strategies are complementary, not conflicting. Lee explained that well-known IP attracts new users who are then introduced to the platform's original content through recommendation features. He also highlighted that the Disney deal includes creating new, original series based on their IP, which will involve Webtoon's creator ecosystem. Kim added that such partnerships increase overall user consumption, benefiting all creators on the platform.

Matthew Cost requested more details on the Wattpad security update that affected search indexing, including its specific nature, the scale of its user impact, and the resolution progress. He also sought clarification on the product changes slated for May.

Answer

David Lee, CFO and COO, stated that the Wattpad security issue, along with a country ban, accounted for the vast majority of the Rest of World MAU decline. He emphasized that Wattpad is not a significant contributor to paid content revenue. Lee confirmed the security issue has been addressed, but its impact may persist through Q2. Regarding the product roadmap, he clarified that the company is excited about the back-half rollout but only provides financial guidance for Q2, and the highlighted features are part of a larger, ongoing portfolio of global product innovation.

Matthew Cost asked about the accelerating advertising business, its scaling versus expectations, and key growth initiatives. He also sought to confirm the divergence between webcomic and webnovel app MAU and the reasons for the webnovel decline.

Answer

David Lee, CFO and COO, confirmed advertising's strength, with 27.4% constant currency growth in Q4, calling it a nascent opportunity with significant room to grow. He affirmed the 6.7% growth in webcomic app MAU, explaining this metric best reflects the health of the paid content business. He attributed the overall MAU decline primarily to a government ban on the Wattpad webnovel platform in a single country.

Matthew Cost from Morgan Stanley inquired about the potential to apply Unity Vector's successful technology across the entire Grow portfolio and the expected pace of Vector's performance improvement before the 2026 integration of runtime data.

Answer

CEO Matthew Bromberg confirmed that Unity Vector is a highly modular system, allowing its technology to be used to improve other ad products. He added that Vector's new neural network platform is at the very beginning of its journey and will continue to provide performance lifts for years, with improvements already exceeding the 15-20% lift seen last quarter, even before leveraging unique runtime data.

Matthew Cost of TD Cowen inquired about the Unity Vector rollout, asking if the reported performance lift is translating into increased advertiser spending and whether customers are shifting budgets from legacy products. He also questioned if the strong subscription revenue growth was driven by recent price increases or by an increase in subscribers.

Answer

CEO Matthew Bromberg explained that Vector's strong performance is leading to increased spending from advertisers, who operate on flexible ROAS-based budgets. He emphasized that the focus is on overall segment growth, not optimizing the internal mix. He also clarified that the impact of recent significant price increases won't be seen until the second half of the year, so current subscription growth is from the core business and older price adjustments.

Matthew Cost asked for a breakdown of the Q1 guidance reduction and questioned the drivers behind the 15% subscription growth in the Create segment, given that new price increases have not yet taken effect.

Answer

CEO Matthew Bromberg stated the guidance reflects prudence around the timing of revenue lift from the new Unity Vector ad platform. CFO Jarrod Yahes added that the subscription growth was driven by a prior round of price increases and renewed deal velocity after resolving uncertainty around the Unity 6 launch.

Matthew Cost asked for the reasons behind the renewed enthusiasm for non-gaming opportunities and inquired if the transition from Plus to Pro subscriptions would create a revenue tailwind in the fourth quarter.

Answer

CEO Matthew Bromberg highlighted impactful non-gaming applications from customers like KLM and Deutsche Bahn as a source of excitement. He noted a new, more focused strategy on 3D visualization and a disciplined go-to-market approach. Regarding pricing, he confirmed the Pro transition is an advantage, but stated its financial impact would materialize slowly over time with renewal cycles, not as a sudden Q4 tailwind.

Matthew Cost of Morgan Stanley asked for a breakdown of the 85% customer growth between core mid-sized and newer small customers. He also asked if MNTN is becoming more efficient at acquiring and serving customers as it moves down-market.

Answer

COO Chris Innes explained that while small advertisers constitute a larger portion of the 85% customer count growth, the majority of revenue still comes from mid-sized brands. Both he and CFO Patrick Pohlen confirmed that the company has become much more efficient, with tools like self-serve developed for smaller clients now creating operating leverage across the entire business. CEO Mark Douglas added that headcount is now shifting strategically toward engineering, which is over 40% of the company.

Matthew Cost of Morgan Stanley asked for clarity on the future of the declining SLOTOMANIA franchise and inquired about other cost factors, besides marketing, that could affect financial phasing for the rest of the year following the Super Play integration.

Answer

Robert Antokol, Co-Founder and CEO, addressed SLOTOMANIA, stating its stabilization is a top priority alongside launching a new slot game to regain market share. Craig Abrahams, President and CFO, added that beyond marketing, the main financial 'puts and takes' will be the margin benefits from the growing D2C business offsetting declines in the slot portfolio, with no other major cost impacts expected from Super Play.

Matthew Cost of Morgan Stanley inquired about the performance of the upcoming Disney Solitaire game in testing compared to internal benchmarks. He also asked for expectations on the potential revenue contribution from the new game pipeline over the next 12 to 18 months.

Answer

Robert Antokol, Co-Founder and CEO, expressed significant excitement for the Disney Solitaire launch, describing it as a powerful combination of SuperPlay's expertise, the Disney brand, and Playtika's knowledge of the solitaire genre. He projected that the game could become one of Playtika's top 3 or 4 titles within a year, positioning it as a key growth engine.

Matthew Cost from Morgan Stanley questioned the rationale behind the marketing strategy, asking if the pullback in spend was due to disappointing results from the first half of the year. He also asked if Slotomania was the primary reason for the lowered revenue guidance.

Answer

CMO Nir Korczak explained that some offline marketing initiatives in H1 did not meet expectations, prompting a strategic shift back towards performance marketing. He highlighted a positive future catalyst from a Google Ads policy change for social casino games. CFO Craig Abrahams confirmed the lower revenue guide was due to a combination of Slotomania's performance and declines in smaller titles.

Matthew Cost asked about the specific reasons for the temporary slowdown in EA Sports FC during Q3, the successful strategies used to reverse the trend, and how these learnings will influence future franchise releases.

Answer

CEO Andrew Wilson explained the slowdown resulted from lower player migration to the new title and feedback from the core competitive cohort that gameplay was too defensively tuned. He detailed a two-pronged solution: personalized marketing to incentivize upgrades and a major gameplay update developed with community feedback. CFO Stuart Canfield later confirmed that the company's long-term growth profile, including new titles in FY27, remains consistent with the framework presented at their Investor Day.

Matthew Cost noted the significant acceleration in publisher revenue during the quarter and asked for the primary factors driving this strength and new adoption.

Answer

CFO Tania Secor explained that the strong publisher growth was primarily driven by its Publica platform, which accelerated its growth from Q2 due to expanded partnerships with large OEM partners. She also mentioned a modest benefit from political advertising and growth in the non-CTV publisher business. She guided for publisher growth to moderate to mid-teens in Q4.

Matthew Cost inquired about the potential future of the real estate market if the NAR's Clear Cooperation policy were to be eliminated, asking what would fill the void and what the ultimate impact would be for Compass.

Answer

CEO Robert Reffkin argued that the policy's removal would be a significant benefit, positioning Compass as the 'defenders of homeowner value.' He explained that agents and sellers would gravitate to Compass's platform to protect listings from the risks of mass MLS exposure, such as 'days on market' and price drop history. He believes this would strengthen Compass's inventory advantage and brand.

Matthew Cost asked about the go-to-market interaction between Envato and Shutterstock's traditional products, as well as the progress and learnings from expanding the sales force for the Data business.

Answer

CEO Paul Hennessy explained that Envato's unlimited subscription and Shutterstock's traditional packs are complementary, serving different customer needs and creating an incremental, rather than dilutive, effect. CFO Jarrod Yahes detailed that the data sales force is expanding globally with hires in Europe and Asia, and the company is exploring new distribution channels through partnerships with VC firms and service providers.

Matthew Cost asked about the go-to-market interaction between the newly acquired Envato and Shutterstock's traditional content products, and also inquired about the progress and key learnings from ramping up the sales force for the Data business.

Answer

CEO Paul Hennessy explained that Envato's unlimited subscription and Shutterstock's core products serve different customer needs and coexist as an incremental product suite rather than being dilutive. CFO Jarrod Yahes detailed that the data sales force is expanding globally with hires in Europe and Asia, and the company is developing new distribution channels through partnerships with venture capital firms and service providers.

Asked about the common drivers for new customer wins and the reasons for the guided revenue acceleration in the second half of the year.

Answer

The guided acceleration is based on building momentum and strong CTV volume growth. New customers are typically drawn to Innovid's specialized CTV ad server and its neutrality, though some start with measurement or DCO products before expanding their relationship.