Roblox Corp Q4 FY2024 earnings call

• High growth rates across key financial and operating metrics, surpassing Q3 earnings call guidance. Q4 revenue, bookings, DAUs, hours all exceeded guidance.
• DevEx in Q4 was $280 million, up 27% y/y, with $922 million shared with developers in 2024.
• AI initiatives: Over 200 AI pipelines/systems on the platform, voice safety model open sourced, avatar auto-setup launched in Q4, Roblox Assistant fully launched.
• Live ops: Introduced platform live ops, saw large content slate from creators like Fisch, NFL Universe, SpongeBob.
• Discovery: Experiences beyond the top 1,000 grew faster than top 1,000, indicating improved personalized discovery.
• Economy: Launched dynamic price floors, opened avatar marketplace to all creators, inexperienced price optimization, and adjusted Robux pricing to improve developer economics.
• Ads and brands: Saw e.l.f. Beauty, Amazon ads, Mr. Beast Experience, Shopify integration, and 5 of the top 10 grossing 2024 movies had activations on Roblox.
• Safety: Over 43 releases this year, launched party product, and constantly shipped improvements.

Q4 revenue was $988 million, up 32% year-on-year, ahead of the high end of guidance of $960 million. Q4 bookings were $1.362 billion, up 21% year-on-year, ahead of the top end of guidance. DAUs in Q4 were 85.3 million, up 19% year-on-year. Hours of engagement were 18.7 billion hours, up 21% year-on-year. DevEx in Q4 was $280 million, up 27% year-on-year, an all-time high. Trust and safety, infrastructure, etc. were up 2% year-on-year but down 2% versus Q3. Cash in Q4 was up 29% year-on-year to $184 million. Free cash flow Q4 was $120 million, up 54%, with full year free cash flow up over 5x from $124 million in 2023 to $641 million in 2024. Revenue contribution: Q4 revenue was 32% y/y growth, bookings 21% y/y growth, DAUs 19% y/y growth, hours 21% y/y growth.

• In Q1, expected to ship text generation available inside Roblox experiences.
• Plan to make available a 3D foundational model in studio.
• Expect to extend 3D creation and generation in experiences in Q2.
• Bookings guidance for first quarter is about 22% to 24.5% growth.
• Margin guidance implies continued improvement, more like 300 to over 400 basis points improvement.
• January expected to be the highest growth month of the quarter, but comps get tougher in March due to lapping Easter.

• Working capital has a large impact on the business in Q4 and Q1, with negative working capital in Q4 and positive in Q1.
• Lapping the launch of PlayStation and significant Xbox activity in prior periods can impact growth comparisons.
• Competing against Easter timing in March which can affect quarter-over-quarter growth.

Q: Help us think of a framework of how you're going to get to 10% of the video game market.

A: David Baszucki discussed genre by genre approach, focusing on battle royale on low-end Android and high-end PC, puzzle games, and technical breakthroughs in 3D streaming without compromising quality, complemented by economics and discovery.

Q: Wanted to ask on advertising. Frame your plans for the ad business this year and any help you can give on quantifying the ad contribution you're expecting in '25.

A: David Baszucki mentioned adding ad products like streaming video ads, user-initiated video, sponsor tiles, shopping ads, with 5 top movie releases using Roblox for engagement. Mike Guthrie added they're not ready to break out ad contribution yet but are building the portfolio.

Q: On personalization and discover, any signs of developer burnout?

A: David Baszucki said creators value transparency in algorithms and are encouraged to iterate in a healthy engineering way, not burnout.

Q: On margin improvement, how much of the improvement might be a result of direct cost leverage this year rather than OpEx leverage?

A: Michael Guthrie said based on top line growth expectations, can hire aggressively, add headcount costs mid- to high teens and still have good cost leverage, with infra and trust and safety continuing to drive cost improvements.

Q: On the DAU trajectory and ad contribution, what are the puts and takes?

A: David Baszucki talked about moving money to developers, rationalizing Robux pricing increasing developer flow. Michael Guthrie discussed Q4 DAU lapping PlayStation and Xbox launches, and ad plans are about building the portfolio.

Q: What are you hearing from developers about the cost and time to develop new game features with AI tools?

A: David Baszucki said AI is a quadruple whammy, increasing economic opportunity, with creators adopting tools like Roblox Assistant, and the job market in experience creation growing.

Q: Insights into paid access games and age up thesis?

A: David Baszucki said paid access is accretive, not cannibalistic, and Michael Guthrie stated they continue to age up and will keep building content attractive to older users, expecting the same question in 12 months.