Roblox Corp Q3 FY2024 earnings call

• Mission: To connect 1 billion people with optimism and civility, with a focus on safety and civility, having invested heavily in safety systems with over 30 improvements shipped year-to-date.
• Q3 Results: Revenue and bookings exceeded guidance, with record DAUs and hours engaged. Cash from operations was $247.4 million, up 120% y-o-y, and free cash flow was $218 million.
• Key Initiatives: Focus on search and discovery with AI-powered algorithms, improvements to the virtual economy including dynamic price floors and UGC for everyone, continued system performance improvements, and LiveOps events like The Haunt. Partnerships with DoubleVerify, WPP, and Shopify, and goals related to capturing 10% of the world's gaming software market.
• AI: Central to safety systems and other aspects, with a 3D foundational model and open-source 3D AI generative model in development, used in areas like Code Assist and material/text generation.

In Q3 2024, Roblox reported revenue of $919 million, which was a 29% year-on-year increase. Bookings were $1.129 billion, up 34% year-on-year. Record DAUs stood at 88.9 million, a 27% year-on-year growth, with strong performance across all regions, including Japan (59% y-o-y growth) and India (55% y-o-y growth). Hours engaged reached 20.7 billion hours, a 29% year-on-year increase. Developer exchange fees were $231.5 million, an all-time high, up 36% year-on-year. Infra, trust and safety costs were up 4% year-on-year. Personnel costs (exclusive of stock-based comp) were $202.2 million, 22% of revenue.

• Q3 revenue and bookings exceeded previous guidance. Cash from operations and free cash flow were better than guidance. Confidence in long-term growth of the Roblox platform, with focus on top line growth, operating leverage, and converting leverage to free cash.

Q: Tom Champion from Piper Sandler asked about new initiatives and learnings in the virtual economy, like dynamic pricing.

A: David Baszucki mentioned that price optimization experiments showed reducing prices could drive revenue for developers, and they plan to launch paid access experiences in December where developers earn 70% at $49.99. Mike Guthrie added bookings per daily active user grew 6% y-o-y.

Q: Drew Crum from Stifel asked about console impact on monetization growth and monetization's role in 20%+ growth.

A: David Baszucki said they focus on increasing users, time spent, and monetization, with console contributing but being a small part. Mike Guthrie noted console monetizes well but growth was broad across all platforms.

Q: Clark Lampen from BTIG asked about monetization growth drivers and advertising.

A: David Baszucki said they drive users, time, and monetization, with Q3 seeing increases in both. Mike Guthrie mentioned console is a small part and monetization is driven by economy team's work on users and engagement.

Q: Andrew Marok from Raymond James asked about LiveOps cadence and experience distribution.

A: David Baszucki said LiveOps frequency may be higher than once per quarter, and experience distribution is flatter and wider with more new entrants in top charts.

Q: Matthew Cost from Morgan Stanley asked about console impact on behavior and payer conversion.

A: David Baszucki said console launch allowed more content availability, and Mike Guthrie noted payer conversion is improving due to better search and discovery and creator content.

Q: Brian Pitz from BMO Capital Markets asked about paid access games and viral games.

A: David Baszucki talked about paid access potential and Dress To Impress being a viral game due to platform conditions like spontaneous experience and device compatibility.

Q: Omar Dessouky from Bank of America asked about AI revenue model.

A: David Baszucki discussed AI's role in 3D experience creation, with monetization tied to improving 3D experiences for creators and users.

Q: Jason Bazinet from Citigroup asked about parsing outsized growth.

A: David Baszucki said growth is a synergy of platform quality and creator expression, creating a fertile environment for amazing creations