Q4 2023 Summary
Published Jan 15, 2025, 6:52 PM UTC- Roblox achieved 25% year-over-year bookings growth in Q4 2023, reaching $1.127 billion, demonstrating strength across all geographies, driven by user base growth, increased engagement, better content, and platform scaling.
- The proportion of daily active users over 13 years old has grown to 58%, with older users tending to monetize better, indicating potential for increased revenue as this demographic expands.
- Roblox is focused on accelerating monetization through innovative initiatives, including AI applications and advertising in the virtual economy, with the economy team having more compelling initiatives than ever, generating optimism about improving monetization.
- Despite aiming for margin improvement, Roblox's operating margin guidance for Q1 2024 is only 8% at the midpoint, indicating persistent low margins.
- Capital expenditures are expected to be $180 million for 2024, which is considerable and includes investments in real estate, potentially impacting free cash flow.
- Any reductions in app store fees due to changes like the EU ruling may not significantly benefit Roblox's profitability, as the company plans to pass most savings to creators rather than improving its bottom line.
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Advertising Monetization Progress
Q: How is advertising contributing to bookings growth?
A: Advertising contributed to real bookings in Q4, and while it's not yet material, the company is focused on maturing this market throughout the year, including adding more measurement capabilities for partners. They have hired Stephanie Latham to drive the brand partnership team, which is growing and ready to go to market. -
Growth from Older Users
Q: What's driving growth and monetization among older users?
A: The growth in users over 13 has been strong, now comprising 58% of DAUs, attributed to improvements in platform quality, search and discovery, and content appealing to older players. Older users tend to monetize better, boosting overall monetization. -
Expense Management and Margins
Q: How are expenses and margins improving?
A: Infrastructure, trust, and safety expenses have decreased to 11% of bookings, and with higher efficiency and use of AI, they expect this to reach high single digits over the next few years. This has been a good source of leverage recently. -
2024 Guidance Drivers
Q: What are the key metrics in the 2024 guidance?
A: The 2024 guidance is driven primarily by user growth, with conservative assumptions on engagement and conversion to payer. They are cautious on monetization improvements but optimistic due to compelling initiatives from the economy team. -
Capital Allocation and Excess Cash
Q: How is the company viewing excess cash and capital allocation?
A: They like having a strong balance sheet and don't view the cash as excess. Capital allocation focuses on investments in infrastructure, engineering, and product, funded by operating cash flow. -
Impact of App Store Changes
Q: How might App Store changes in the EU affect Roblox?
A: All guidance assumes no change in store systems, but they are examining the EU ruling to see if it makes sense for them. Any future fee adjustments would aim to benefit both creators and the bottom line. -
Developer Exchange Fees
Q: Will DevEx fees rise as a percentage of bookings?
A: Developer exchange fees remained around 20% of bookings, similar to last year. While there is some seasonality, they are always looking to push more economics to developers, especially as they become more efficient in other costs. -
Subscriptions as Monetization Tool
Q: Are subscriptions important for monetization and developers?
A: Subscriptions align with their vision of providing developers with monetization options. Many top creators are adopting in-experience subscriptions, creating recurring revenue streams and potentially boosting retention. -
Platform Expansion to New Devices
Q: Thoughts on augmented reality and new platforms like Quest 3 and Vision Pro?
A: They are proud to be on Quest and PlayStation, aiming to have immersive 3D experiences on all devices, including phones, tablets, computers, VR headsets, and consoles. Vision Pro and other platforms are logical candidates for future expansion. -
Network Effects and Voice Tools
Q: How are voice tools affecting user behavior?
A: Voice DAUs grew 161% year-over-year in the quarter. Users of voice show improved retention and engagement, indicating strong network effects as more of the user base adopts voice features. -
Chat Translation and Globalization
Q: Any learnings from real-time chat translations?
A: Real-time text chat translation is now available between 16 languages, enhancing global communication. They are getting good at voice processing and translation, hinting at future voice translation capabilities. -
Prepaid Cards and Payment Providers
Q: What's contributing to bookings per DAU growth in Europe and rest of world?
A: Longer-tenured users spend more, with older users growing globally. Improved payment options and significant progress with prepaid cards have also boosted monetization growth. -
Impact of Video Game Industry Layoffs
Q: Are industry layoffs benefiting Roblox's developer community?
A: While they continue to hire internally and the creator community grows, this growth is natural and not necessarily tied to industry layoffs. The economic opportunity on the platform continues to attract creators. -
Adjusted EBITDA and Deferred Revenue
Q: On adjusted EBITDA, are there adjustments beyond deferred revenue?
A: No other adjustments are made beyond deferred revenue; it is their historical adjusted EBITDA plus the change in deferred revenue. -
CapEx Expectations
Q: What are the CapEx expectations for the year?
A: CapEx is expected to be $180 million for the year, with some related to real estate and not all to infrastructure. Infrastructure investments have decreased significantly.