Roblox Corporation (RBLX) Earnings

Management highlights

- Progress towards capturing 10% of global gaming content market. - Safety initiatives like global age checks for chat, rollout of age-based accounts in June. - AI advancements including use by top creators, Roblox Reality Project, and enhancements to creator tools. - Increase in DevEx rate for age-checked 18 and up users in the U.S. and initiatives with well-known game studios for novel games.

Guidance

Full-year revenue guidance lowered to 20-25% and bookings growth guidance to 8-12% due to safety headwinds. DAUs expected to contract between Q1 and Q2 then return to sequential growth in Q3.

Segment performance

In Q1, Roblox had revenue of $1.4 billion, growing 39% year over year. Bookings were $1.7 billion, up 43% year over year. Operating cash flow was $629 million, up 42% year over year, and free cash flow was $596 million, up 40% year over year. Monthly unique payers increased to 31 million, up 52% year over year. DAUs were 132 million, up 35% year over year. Hours of engaged were at 31 billion, up 43% year over year.

Risks & headwinds

- Safety measures impacting engagement, bookings, and app store ratings. - Need for continued adoption of age checks and improvements to comms features for long-term growth.

Analyst Q&A

• Q: With respect to incenting the development of out of the 18 plus community. I wanna know if you'd go a little bit deeper into what signal you were getting in terms of that type of content from developers in terms of what it might mean for the long-term health and compounded growth longer term for the business. And second, with respect to the change on DevEx, maybe just help us better understand why that was the right number to move to in terms of higher DevEx.

  A: Hey, great question. There's a big invention on Roblox a while back when we moved from a platform without Roblox and DevEx to DevEx, and we saw immediately that the incentive of creating a closed-loop ecosystem where Roblox could be used by our users, devs could build interesting experiences, they could then cash those out, created a virtuous cycle, really, that's been somewhat of a machine driving Roblox ever since. and we've seen massive organic behavior from that virtual economy. We've been very careful in increasing the creator DevEx rate over time, but we have slowly increased it as we did at RDC recently. The 18 and up market, now that we have age check, we can know quite accurately who's a real 18 and up player. And in addition, that market globally is roughly 80% of the global gaming market, which is somewhat astounding given our low actual penetration, although quickly growing penetration. Those users also, as we shared, monetize at 1.5x where we are today. And that's a big part of our future in addition to our existing U18 base. So we know systems drive behavior. We want to see novel games on our platform. We want to make it very profitable for creators to make amazing content. We want them to trust our discovery systems will organically reward experiences with long-term retention. And so this is just a continuation of Roblox being a systems company focusing on this big area we're moving towards.

• Q: Naveen, maybe we could just dive one step deeper into the reduction in the guidance. I think you gave a lot of really helpful detail about the behavior of people related to age check. Is the entire guide down driven by the change in behavior versus February that you've observed because of age check, or are there other material factors that are worth calling out That's question one. And then the second is just on Roblox Reality. Are there any increased cloud expenses or CapEx that you're expecting to support that going forward?

  A: Yeah, thanks, Matt. So with respect to the guidance, the way that I would characterize that, excuse me, the change in guidance, the way that I would characterize that, it is largely safety related. You know, there are a number of aspects to that, as we spoke about. It's age checking. It has a follow-on impact to comms. And that affects both users that have age checked as well as those that have not. And there's a number of things, as Dave laid out, that we're doing from a product perspective to reignite comms engagement on the platform. We do also believe that some of the dynamics that we saw around discovery being sort of more monetization biased than we would like plays into that. You know, content recommendations were probably not as optimal as we would like to see them. So I'd say it's really the combination of those dynamics, but largely driven by what we're doing from a safety perspective. In terms of Roblox reality, Dave, did you want to comment on that? Yeah, so first off, Roblox reality will not be free. The type of technology we're showing here is going to combine the Roblox hybrid engine and cloud, which I think if we, you look into all of our financial statements, you can see we run at less than a penny per hour, roughly. But simultaneously, what we see is a future We're building close to photoreal or photoreal experiences, especially when multiplayer is very difficult. It takes enormous production budgets. And part of what Roblox is about is democratizing creation for everyone. We do believe this is the ultimate combination of both traditional 3D network multiplayer gaming engines like Roblox, which is somewhat unique given its cloud, with all of the future research we see in video models moving more and more towards real time. We have the opportunity to build a very Roblox specific video world model that we call a super upsampler that can key both on video as well as 3D spatial information to do arguably what we believe is going to be a beautiful job of upsampling under developer control with developer prompts. But I do want to highlight We're right on the edge, really, in the whole AI space of running real-time photoreal video models 2K at 60 hertz. And that's why we say this is a up-and-coming project. When we launch this, this will not be free. This will use cloud compute. We will have some kind of way of subscribing or paying for this. And because of that, I think we will offset the real-time inference side of it. On the training side, we may have additional things. I don't think we are fully showing them this year. Naveen may have a compliment on that. Yeah, just to put a finer point on the expense side of it, we have not changed our expectations for CapEx this year. We think that, you know, a lot of what we're doing in terms of landing GPUs in our data centers will cover what we intend to or what we're going to need this year. There is some cloud training that we will be doing. I mentioned that that is now factored into the updated margin guidance. And as this technology continues to develop, you know, we will use a combination of cloud as well as our own data center capacity to execute both training. And as Dave said, inference will be something that will be funded by usage.