Roblox Corporation

Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Roblox Q3 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Stephanie Notani, Director, Financial Communications. Please go ahead.

Good morning, everyone, and thank you for joining our Q&A session to discuss Roblox's Q3 2022 results. With me today is Roblox's CEO, David Bezouki, and CFO, Mike Guthrie. Before we start, I want to remind everyone that earlier this morning, we published a shareholder letter and earnings results on our investor relations website at ir.roblox.com. On this call, we will make some brief opening remarks and reserve the rest of the time for your questions. For our webcast participants, please note the question icon at the bottom of your screen where you can type in your questions. We'll do our best to take as many questions as possible in the time we have allotted today. On today's call, we may be making forward-looking statements, including but not limited to our expectations of business, future financial results in business, and financial strategy. Forward-looking statements are subject to risks and uncertainties that can cause actual results to differ materially from those described in our forward-looking statements, and such risks are described in our risk factors, including in our SEC filings, including our most recently filed Form 10-Q. You should not rely on our forward-looking statements as predictions of future events. We disclaim any obligation to update any forward-looking statements except as required by law. During this call, we will also discuss certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our press release issued, as well as in our supplemental slides, copies of which can be found on our IR website. Finally, this call is being webcast, and it will be archived on our website shortly afterwards. With that, I'll turn the call over to Dave.

Thank you, Stephanie, and welcome, Roblox investors, Roblox community. Some quick bullets before we dive into your Q&A. We had a wonderful October, as we mentioned in our letter, 701 million bookings in Q3, up 10% year on year, and on a currency-adjusted basis, up 15%. Also, we've shared October 27-day numbers, so you can do compares to last year. And the first 27 days of October on a bookings basis were up 13% on adjusted basis. I want to really highlight to the Roblox community on the revenue side, where in Q3 we showed up 2% at $517 million. that we follow GAAP accounting principles and we defer revenue over the life of our payers. And in our letter, we highlighted we've increased that lifetime from 25 to 28 months. That is a very, very good thing that relates to the retention of our player basis. And we would ultimately want that number to be as large as possible the more we retain our customer and user base Without that increase, our Q3 revenue gap accounting would have been $628 million, $111 million larger. So actually watch us continue to try to increase that lifetime to increase retention. On a DAU basis in Q3, our DAUs were at $58.8 million, which is a 24% year-on-year growth rate. And highlighting October, those numbers in the first 27 days were 57.8 million, up 14% year over year. I want to note we still have difficult compares relative to opportunistic regions from last year. But you're seeing our core and strategic users with the bookings start to lap COVID. Our developer community, once again, number of developers with experiences gathering over 100,000 hours up 54%. And number of developers with experiences with over a million hours up 47%. A couple things for our large Roblox and investor community I really want to highlight. As you look at our business, We run the business internally as 30 separate cohorts. That's five age ranges. We look at gender and we also look at region around the world. And we have a lot of headroom in many of these cohorts and I'm going to comment on that a bit. I also want to comment that we run the company as seven product groups and we have product groups directly responsible both for retention for frequency for engagement and for monetization i'm going to highlight a few of those numbers as well before we even went public we've been sharing with all of you our vision of building a platform that optimistically brings people together around the world of all ages and for wide ranges of uses, including playing, learning, and working together. And I'll highlight a few of those as well. Around the world, in the U.S. and Canada, we're showing 17% DAU growth in what has historically been our most early and saturated region, just showing the amount of headroom we have in our core market there. In Europe, our DAUs are up 30% year-on-year. In APAC, our DAUs are up 40% year-on-year. Talking about aging up, highlighting that our over-13 segment grew 34% and now accounts for 54% of our DAUs, and also 17% through 24% is our fastest growing cohort, growing at 41% year on year. There is a lot of room for us in both our 17 through 24 cohort, as well as our 24 and up cohort. And that is why, once again, we ask all of our investors to look at us as a wide range of businesses across all of these cohorts based on age and region. I also want to share some of the drivers of our business that highlight our optimism around Roblox's ultimate evolution to be a utility that is used very frequently. We started to share some signal on frequency, which is the ratio of our DAUs to MAUs. And I want to highlight that relative to September 2019, Our frequency is 20% higher, and our frequency is at or above levels we saw in 20 and 21 during peak COVID. The other thing I want to share, the same with engagement. Our engagement levels, which are hours relative to DAUs, are now yearly 20% higher than pre-COVID September 2019. Slightly below peak COVID times, but in a great direction. And then finally, just highlighting the extent to which our brand experiences have started to grow and expand. We're participating with Elton John in a new persistent world called Elton John Presents Beyond the Yellow Brick Road that premiered last Thursday on November 3rd. I think it's just showing the extent to which Roblox brands have become really ubiquitous in the music and brand industry. Finally, we shared a lot around our product progression during Roblox Investor Day. We thank you all for participating. I want to highlight just on one small detail, and that is we have started rolling out early versions of our immersive ad product, and we are testing now with some publishers and brands, and we will keep iterating on that. With that, I will ask Mike Guthrie if he wants to add any other comments, and if so, welcome, Mike. If not, we'll go straight to Q&A.