Roblox Corporation

to Roblox second quarter 2024 earnings conference call. All lines have been placed on mute. After the speaker's opening remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I'd like to turn the conference to Ms. Stephanie Notani the head of financial communications. You may now begin your conference. Thank you. Good morning, everyone.

Thank you for joining our Q&A session to discuss Roblox's Q2 2024 results. With me today is Roblox co-founder and CEO, David Buzuki, and our CFO, Mike Guthrie. Our shareholder letter, press release, SEC filings, supplemental slides, and a replay of today's call can be found on our investor relations websites. Our commentary today may include forward-looking statements which are subject to risk, uncertainties, and assumptions that could cause actual results to differ materially from those described in our forward-looking statements. A description of these risks, uncertainties, and assumptions are included in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q. You should not rely on our forward-looking statements as predictions of future events. We disclaim any obligation to update these 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 can be found in our press release and supplemental slides. With that, I'll turn the call over to Dave.

Hey, thank you. Hey, welcome everyone to our Roblox Q2 2024 earnings call. Overall, it was a solid quarter for Roblox. We'll validate this as we kick off with the numbers. I'm going to touch base a bit on the dialogue we started with our earnings call three months ago, and then I'll give an update on why we're optimistic about our future growth prospects. Starting with the numbers for the quarter, all metrics are back on north of 20% year-on-year growth rates and strong margin improvements. Our revenue in Q2 was $893.5 million. That's a 31% year-on-year gain, and that beat our guidance, which was in the range of $855 to $880 million. Our bookings were $955 million. That's year-on-year 22%. That beat our guidance range of $870 to $900 million. We had a record number of DAUs at 79.5 million. That's year-on-year 21%. And our over 13 DAUs were particularly strong with 26% year-on-year growth. And our over 13 are now 58% of our total DAUs. Strong across all regions. U.S. and Canada saw their fastest growth since Q1 2021. James Heitinger, Japan, one of the largest gaming markets in the world, we have our da us growing there at 56% year on year and India. James Heitinger, da user growing at 57% year on year that's an enormous potential market for us our hours engaged hit a record 17.4 billion year on year that's 24%. Similar to DAUs, that was our strongest growth in over 13 with 30% year-on-year growth in hours. And similar trends in the U.S., Japan, and India with Japan engagement hours growing 66% year-on-year and India growing 60%. Our consolidated net loss was 207 million. That compared to our guidance of 267 to 265. We were roughly 60 million better than what we guided to. And in addition to the strong top line, we continue to show a lot of fixed cost discipline. A couple highlights there, net cash flow operations in Q2, 151 million, up 433% year on year. And our Q2 free cash flow was 112 million versus a year ago where it was negative 95.5 million. We're continuing to see benefits from all of our investments. The quality of our platform continues to go up well at the same time. We're keeping costs under control. Importantly, our infra and trust and safety expenditures were 8% lower year on year. The efficiencies are coming to a lot of infra efficiency initiatives. We are continuing to add AI efficiency to our safety and moderation platform. And we'll note on the personnel expenses, that was flat year on year. But we would note that we've consolidated a number of employees to work in our office in San Mateo rather than remote. And unfortunately, not all of them were able to make the move. That contributed to our flatness year on year. We do continue to hire, especially in areas that are key growth areas for us, including our AI platform, our safety group, areas that are driving perf and quality on the platform, and our economy and ads team. Okay, three months ago, we shared with you on the earnings call steps we were taking to offset unseasonable growth rates that we had seen in Q1. And we shared that we were seeing early signs of positive impacts that have continued, as we can see by the numbers, into Q2. We highlighted a focus on four key areas. One was live ops, including bringing back platform-wide events in March, which kicked off with our hunt. Subsequent to that, we've done the classic, and we're just going live now with our next event called The Games. We talked a bit about ecosystem health. I'm going to talk about that and improvements in search and discovery. We talked about economy improvements, and we also talked about just raw perf and quality. We've really been executing on those four big initiatives in addition to everything else we do in the company. On the search and discovery side, we've taken a lot of steps to drive the diversity and help our users discover awesome new content. In addition to our AI-driven algorithm, we have brought forward really intelligent curation of up and coming content and content with new releases that we call today's picks. We have also increased the ability for our creators to launch and boost their properties with the ability to buy sponsored tiles on our homepage. And we've seen an increase in variety of content bubbling to the top of our marketplace. We are continuing to optimize and refine our economy. One of the initiatives we shared with you was improving the pricing dynamics of our avatar accessory marketplace. That's really paid great dividends. Our developer community is also working with the launch of price optimization, which will help developers around the world And on the perf and quality, up and down our stack in a bunch of metrics that affect everything from very low end Android devices throughout devices on our platform, we've continued to make improvements in raw performance, stability, quality, join times, frame rates, all things that contribute to our growth rate. Hey, looking ahead, when we went public, we shared for growth vectors that we believe will take us ultimately to a billion daily active users, including growing around the world, growing amongst users of all ages, expanding the use case of Roblox to include gaming, social communication, shopping, entertainment, and learning, and expanding the diversity and power of our economy Those are all continuing to show growth, and I want to just take a quick look just within the gaming segment right now. We have a very, very small portion of that, and we have enormous headroom in that one segment. Our UGC approach brings with it an extremely long tail of content. We have well over 20 experiences now on the platform with north of 20, sorry, north of 1 million DAUs. Our creators are pushing to any device in any language. We have our users bringing their expressive and personalized avatars from experience to experience with a vibrant social graph and immersive 3D communication built in. And we're putting all of this on top of an extremely high performance and increasingly efficient infra platform that in addition to supporting 3D simulation is and will more and more support AI inference as well. A couple highlights just in the gaming segment. Dress to Impress has come out of nowhere. It's an exciting property on the platform. It has doubled in DAUs from Q1 to Q2 of this year. It's a social sensation on TikTok, and it's really loved by users of all ages on our platform. Dusty Trip, a new release just released in March, is solidly into the millions of daily active users. and fifa on june 1st fifa launched a major update to fifa world including a new tycoon style game and since the update they've seen uh bringing their total they brought their total visit count to over 22 million and the 18 and up users have increased 20 in the last 90 days in the Advertising and shopping domain, just want to highlight the continued growth and progress we've seen there. We've launched our video ads product. We've enhanced our self-serve ad manager. We've introduced third-party integrations with IAS and Pubmatic. We are now testing real-world shopping in Roblox with partners at Walmart and Elf Beauty. And in Q2, the total brand activations to date went north of 400, which is almost double the cumulative from a year ago. A couple really fun new brand partners. You might have read about IKEA's coworker, a virtual IKEA store, where they hired real life employees to work in the virtual IKEA store. Netflix launched their persistent IP hub, Next World. And we've seen also activations from Shrek, Despicable Me, and even Six Flags. New artists on the platform, Rolling Stones, Ice Spice, and we had a concert from Post Malone from the Louvre as part of the Olympics with our partner Visa. We'll share a lot more of these updates in September at our developer conference. One other note, I'm in the room with Mike Guthrie, and we're smiling at each other. I wanted to share that Mike, our chief financial officer, has decided to move on from Roblox to pursue his personal interests and focus on his next chapter. And together, Mike and I are going to begin the succession process. Mike's going to stay on as our CFO through the search for a new leader and transition period. which we do anticipate will take some time. Just want to highlight Mike joined the company in 2018, and over the past six years with Mike's leadership and contribution, we've had quite an impact throughout the company. Real part of our journey helped us go public, helped the investors, employees, and board members understand how the business works, helped us explain really how we run our business based on cash and bookings. And that's really contributed to driving our growth. And the team that Mike has built is absolutely amazing and contributes a lot to our growth. So, hey, Mike, before I hand it over to you, just want to say on a personal note, you know, it's going to be fun to still keep working together as we do this search and we're We're also thankful for you and glad that we have a little more time to work together. So thanks, Mike. And I'm going to hand it over to you.