Roblox Corporation [RBLX] Conference call transcript for 2023 q1
2023-05-10 11:10:25
Fiscal: 2023 q1
Operator: Good morning. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Roblox First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator instructions] Thank you. Stefanie Notaney, you may begin your conference.
Stefanie Notaney: Thank you, Brent. Good morning, everyone, and thank you for joining our Q&A session to discuss Roblox's Q1 2023 results. With me today is Roblox Co-Founder and CEO, David Baszucki; and CFO, Michael Guthrie. As a reminder, our shareholder letter, press release, SEC filings, supplemental slides, and a replay of today's call can be found on our Investor Relations Web site at ir.roblox.com. On this call, we will make some brief opening remarks and reserve the rest of the time for your questions. Our commentary today may include forward-looking statements, including but not limited to our expectations of our business, future financial results and business, and financial strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in our forward-looking statements, and such risks are described in our risk factors, included in our SEC filings, including our annual report on Form 10-K and 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, as well as in our supplemental slides. For our webcast participants, please note that question icon at the bottom of your screen where you can submit your questions. With that, I'll turn it over to Dave.
David Baszucki: Thank you. Hey, and good morning, everyone. We are going to start with a prelude. And I want to talk a bit about bookings acceleration and the generation of cash, which is really exciting for our business. We're going to talk about our future bookings growth rate relative to cost of sales, infrastructure, and compensation expense, which is also a wonderful story. And then, finally, we'll touch base on innovation and what we've done since the start of this year. Our revenue in Q1 grew 22%, to $655 million. Our bookings grew 23% to $773 million. And I want to just highlight bookings is how we run the business. We run the business based on cash. Our bookings growth rate year-on-year over the last five quarters have gone from negative 3%, to negative 4%, to plus 10%, to plus 17%, to plus 23%. We believe this is being driven by eight quarters of innovation and awesome engineering that have expanded our platform. And our platform is growing in all directions, and I'll touch on that. GAAP loss was $268 million, while cash from operations was positive $173 million. We generated over $100 million of free cash and operational cash in the quarter, and this just highlights the difference between cash and our GAAP loss, which is driven by deferred revenue and other factors. Finally, our cash has been steady relatively over the last six quarters, and we have approximately $3 billion of cash with no external financing. On the user side, our DAUs are up 22%, with an all-time high of 66 million DAUs. Our hours are up 23% year-on-year, once again an all-time high of 14.5 billion hours of engagement in Q1. All regions are up, and I want to highlight that our 13-and-up segment is growing 31% year-on-year, which bodes very well for our future growth as that's an amazingly large available market for us. On the developer community, money flowing to our developer community increased 24% year-on-year to a record $182 million in Q1. We have some exciting things happening in our business. Our bookings growth year-on-year is already exceeding our cost of sales growth year-on-year. And we believe, in Q3 of this year, our year-on-year bookings growth will exceed our infrastructure year-on-year growth. This is a testament to the efficiency on our infrastructure spend and the way we have built out our redundant datacenter in [Ash] (ph). I want to highlight that we spent almost $400 million of cash on infrastructure over the last year, and we're still showing positive cash flow in Q1. Finally, we believe, in Q1 of 2024, our year-on-year bookings growth will pass our year-on-year compensation expense growth through just operational excellence. We have not suffered layoffs. We continue to highlight that we're being very thoughtful in hiring the best and growing our headcount efficiently. On the cash side, once again, I highlighted we're in an awesome cash position. And on the innovation side, we continue to innovate. Our vision is to bring together a billion people every day with optimism and civility, and we're very bullish about this vision. We continue to feel very positively about this opportunity. In the last eight quarters, we've driven a lot of innovation. I want to highlight on the innovation we've really executed on, since January 1 of this year. And that innovation falls in categories of cost control, revenue acceleration, AI-generative creation, international ageing up, and our vision of social communication. We've got a 15-year history of innovation. And we believe innovation is once again contributing to our bookings acceleration. On the cost efficiency, we've been using AI and machine learning for quite some time to drive the efficiency of our safety organization, which is really the primary focus of our business. And we've got to the point where we're highly automating reviews of 3D objects, audio, and images. On the revenue side, I want to highlight that our advertising system is now in test. We have over 200 developers that are participating. We're not going to share the number. We will make a small amount of advertising revenue in Q2 of this year. And I'll quote what the NFL shared with our advertising system is that, "Portals have helped the NFL reach and convert a high percentage of new users into their experience." We're really excited about this. It is a new ad format that complements image and video that is very immersive and native to Roblox. We've launched two AI-generative accelerators to help our creators create better and create more quickly. First is a material generator that allows developers to create any type of 3D material purely by using a few words. If a creator on Roblox says, "I would like a brick wall that's a little bit covered with moss," that's enough to generate a 3D material. We're proud that we did this early this year. And we're also launching code generation. Roblox has an amazing repository of Lua code. And we're using this to train a code generator that won't just help people auto-complete, but really helps create and script on Roblox. On the international side, we continue to drive the vision that Roblox is a platform that will work around the world. And also drive the vision that anyone's creation can go live in many, many countries. I want to highlight Japan, which is now growing at over 100% year-on-year on daily active. It's been driven by some advances we've made on semantic search and the quality of our translation. We continue, behind the scenes, to drive the quality, the performance, and efficiency of our Core 3D engine. And we've made enormous strides on our vision of social communication as well. Since the start of the year, voice on Roblox is now being used by almost 10% of over-13 daily users in the U.S.A., 9% to be exact. And we've rolled out lip sync as well on our journey to fully animating avatars on the platform, either using lip-sync or ultimately camera. A fun other thing just to highlight. By day seven, based on all the work we've don't on contacts and friend-finding, people are finding 10% more real-life friends on the platform in the first seven days than they were a year ago. Just want to once again recap, and then we'll start answering questions. Long-term mission is a billion users every day connected with optimism and civility. We're focusing on driving bookings growth with innovation. Behind that bookings growth, we have an enormous focus on operational excellence and efficiency. And once again, we believe, by Q1 of next year, bookings on a year-on-year basis will be growing more quickly than cost of sales, infrastructure expense or headcount compensation expense. And then finally, the cash that we spin-off, as much as possible, we want to really share with the creator community to drive innovation. With that, we'll open up for questions. Thank you.
Operator: [Operator Instructions] Your first question is from the line of Andrew Crum with Stifel. Your line is open.
Operator: Your next question is from the line of Omar Dessouky with Bank of America. Your line is open.
Operator: Your next question comes from the line of Matthew Thornton with Truist Securities. Your line is open.
Operator: Your next question is from the line of Matthew Cost with Morgan Stanley. Your line is open.
Operator: Your next question is from the line of Clark Lampen with BTIG. Your line is open.
Operator: Your next question is from the line of Bernie McTernan with Needham. Your line is open.
Operator: Your next question is from the line of Andrew Uerkwitz with Jefferies. Your line is open.
Operator: Your next question comes from the line of Tom Champion with Piper Sandler. Your line is open.
Operator: Your next question is from the line of Jonathan Kees from Daiwa. Your line is open.
Operator: We have time for one more question from the line of Brandon Ross with LightShed Partners. Your line is open.
Stefanie Notaney: Thank you for joining us today. And that's a wrap. Bret, you can close it out.
Operator: Thank you. This does conclude today's conference call. Thank you for your participation. You may now disconnect.
