Roblox Corporation (RBLX) Earnings Call Transcript & Summary

[Presentation] Please put your hands together for Roblox's Co-Founder and CEO, David Baszucki.

Okay. Hey, welcome, everyone. Third Annual Investor Day, we've come so far, both want to welcome all of you that this will be your third year. I also want to welcome all the new investors everyone out there in the Roblox community who's watching, welcome Roblox employees, Roblox fans, all of you, we're really proud to be here today. We're going to focus on 3 really big things today. First, we're going to talk about growth. We're going to talk about how growth in DAUs and ours leads to bookings growth. And historically, our growth has been viral and driven by innovation, and you're going to get some snapshots of innovation. You're going to get some snapshots of AI innovation from Dan. You're going to get some snapshots on monetization, innovation from Christina. We're also going to talk about just raw operational excellence. How do we do so much with 2,500 people. Manuel is going to share a little bit of an overview of what we've done in the last year. And then we're going to talk about leverage and really operational leverage, you're going to get a glimpse of how efficiently we run our infrastructure. We're going to glimpse of how efficiently we run our engineering team and then Mike gets to come on and kind of share the results of that, which is super, super exciting. But let's back up to innovation and growth and just review Roblox 101, what is driving our growth? And what is really driving our growth is the future of communication. Humans, since the dawn of time, have been figuring out when we can't be together, how can we communicate from a distance and how can we be together from a distance? It started with drums and smoke signals. We saw the telegraph system. We've now seen SMS as a new way to communicate. Of course, the phone system as well, very innovative. And then for us, really the last 3 to 4 years, we became very familiar with video communication. But this isn't where it ends. It's ultimately going to 3D simulation. It's ultimately going to not just being together at a distance, but doing things at a distance. And this is really what has been behind Roblox growth. In the midst of COVID, when people couldn't be together, we saw them using Roblox as a utility to be together. And ultimately, the resolution, the fidelity, the devices, whether it's whatever device we're using, more and more goes to high-resolution photo realism. And what we will all use someday is 3D simulation to communicate. So that's really what's really driving our growth. And it's so fun actually to run a company with that big tailwind behind it, a giant movement for the future. We've coupled that with an architecture driven by UGC and the community. And we have an absolutely great community, which is -- has driven our growth. From day 1, that viral growth has really been driven by amazing content that's powered places for our users to come together. And we are arguably the largest creative community, if not one of them in the world. And that creative community has grown up with us. That creative community used to be hobbyists in the early days, doing it for fun. But that creative community over the last 8 to 10 years has become a business, has become then a larger business and now has become a business with large studios, some with more than 200 people making a lot of money and some of those studios being valued at north of $100 million in our -- in my RDC predictions, I shared a 5-year prediction that one of our Roblox studios, someday in the next 5 years, will be worth $1 billion. Of course, that's a prediction. That was my fun RDC thing, but we really do see amazing growth in our studios. And you can see in the last 12 months, they've earned over $700 million, and they've grown 6x in the last 4 years. But our community continues to grow. What was originally users and creators has expanded at RDC this year, influencers is actually an amazing huge new community on Roblox. If you have probably 14 through 18 year olds in your household and you ask what you want to be when you grow up? An amazing number of them now say, I want to be an influencer. For some reason, it's the most exciting job. They actually power Roblox's growth. They create an amazing amount of awesome video content that powers us. Brands, even from the very early days of Roblox, we saw brands who had a bit of a vision, how do I connect with fans or people who want to experience our brand. Originally, that was paper advertising, billboard advertising. We saw video advertising. There's something very unique about the brand connection on Roblox where you immerse in that experience and create 3D memories with friends and arguably, you're going to hear more today about how we believe that immersion together, whether it's shopping, skateboarding, trying on clothing is so powerful for us. And then more and more, we're seeing educators starting to use Roblox as a way to help learn when people can't be together, first robotics, for example, a huge partner simulating what people used to do with physical robot construction as part of a school curriculum on our platform. And then welcome all of you, our investors. So quick fun history lesson, showing the really relentless focus of our vision, which is the original Roblox business plan slide from 17 years ago. And what you'll see here is we borrowed 4 big elements: creation, which used to be only in the toy business now on Roblox; UGC, which at the time, was early in the video business now on Roblox; 3D simulation, which arguably online games World of Warcraft were some of the innovators there; and finally, a social graph to power that. We really, like great artists, borrowed all 4 of those with our vision of building a utility 3D in the cloud platform for playing working and all of that. And we've come a long way since then. What used to be a very blocky platform that arguably, how would ever -- anyone ever used this for gaming. Over the last 16 or 17 years, we have worked constantly on creating very high-quality simulation in the cloud, in our own infrastructure that works on any device. Our vision has always been the same, which is really we are reimagining how people come together. We're reimagining really the way not just that we communicate, but the way we will play together the way we will go to concerts together. At Roblox, we're reimagining the way we work together with Roblox office, where I do all of my Monday one-on-ones, and you'll hear more of that in Roblox we're reimagining how people learn together, which are all part of the way people communicate at a distance. Let's touch on 3 things that are supporting this growth. I want to just take a step back and share our notion that this is bigger than building a gaming platform. This is building a 3D social utility communication platform. All of the elements that support that overlap with elements that support gaming, which is where we arguably got our start. First, let's just talk about avatars and why they're so important, and second, we're going to be talking about your social graph and then we're also going to be talking about just how important it is to communicate in 3D. So let's take a look at avatars, and I'll give you a bit of our history. That first Roblox avatar was arguably very toy-like. It's been come to be known as that Roblox classic avatar, but very early on, we had the notion that we're going to do something very, very difficult, which is really reinvent ourself and go beyond that. That classic Avatar is arguably a favorite, but we knew that ultimately a platform like Roblox has to have any avatar, you can imagine all the way from a toy avatar to a photorealistic avatar and ultimately has to have an avatar that everyone really connects with and feels like it's your avatar. We're not all the way there, but we're well on our way. And so what we did in the initial foundation of Roblox, we went from Blocky to our Rthro avatar. We've added more ways for your avatar to connect, tracking the camera, voice, all of that, but wait, there's more. If you look at Roblox right now, you'll see that all of the experiences have been made by the community. And there's one last step that isn't really driven by the community and that is our avatar system. And so we're in the midst now of all avatars are also created by the community. And then beyond that, we're in the midst of a future where you don't just go and buy your avatar or grab one for free. If you have the favorite experience and that can either be a really high-end AAA experience, it could be a fun cartooning experience, you will go there to build your avatar. And this is very much a Roblox philosophy of taking things that are centralized and embedding them and giving creators the power. So we are expecting an exponential explosion in the quality of avatars over time. And ultimately, where this will go as the technology catches up as we have more and more local compute power, you will see a blending of avatar is becoming photo-realistic. So that's really the vision. And your avatar, if you want, will look like you based on AI tech. Next thing we just want to talk about is the natural motion of your avatar. We're just getting started on really the way to control your avatar, whether it's on a phone or a VR headset for your avatar to more and more do natural things in the world, ultimately for your avatar to pick things up, for your avatar to high 5 someone, for your avatar to swim better to do this on all platforms. So that's on the way as well. Second key pillar is really social connection and bringing that social graph to life, both within Roblox as well as in the real world. And Roblox is very unique in that. I may have a Roblox avatar phone call, and we're going to show that in a few minutes with someone I know very well at Roblox, but also Roblox is a place where a lot of real-life friends are made and both of those come together. Some of our game studios are powered by creators on Roblox who have never met in real life. And so Roblox creates this junction of real-life communication with a place where people are able to connect and make new friends. And you can see by the number of friendships we drive every day that this is getting more and more powerful. One of the things we really work on, and we'll just give you a little video is all of the ways to bring those friendships together. One of the things we're more and more going to be delivering is the ability to share moments inside Roblox, whether it's a screen capture ultimately, whether it's a video of something really exciting, that may be -- I'm at the bottom of the roller coaster ride, and I got a video of myself and use that to invite friends to our platform. So we think we think actual friend invitation, there's a lot of work we're doing there. We've also added real-life names. We've added all of the standard ways of connecting with friends to drive those types of social connection. And then the third thing, of course, that we have to do is more and more support real-life communication. Roblox got really, really big without voice, without facial animation. We got really big with PureTechs communication and game. We're more and more following the future of that. A one example is Roblox Connect, this went live yesterday. And for the first time ever in Roblox's history, I've been able to make a Roblox phone call and avatar communication with members of my family, which is absolutely amazing. It's amazing because we're experimenting with new modalities of how we track camera. We have facial animation on, voice animation on, and it's also amazing because Roblox Connect is something anyone can build on our platform. It's completely open sourced. We've built it as an example for others to almost be a showcase of our technology. So we're going to see more and more apps on our platform that either use a kind of organic join together or a phone call joined together. So you can grab this on Roblox right now, Roblox Connect. We shared it at RDC, make a phone call, connect up with someone, start chatting, pick your avatar and all works just absolutely wonderfully. Okay. So that's a little high level. So let's take a step back to the S1 that Roblox published before we went public. And we really, for a long time, have been talking about this 4-dimensional growth vector system that we have, what's quite exciting is without really making any predictions of our future growth. One can imagine the amount of headroom in each of these vectors and then multiply them together if you can think in 4 dimensions and that starts to create a really interesting number. International growth, which we're well on our way, even when we went public. Really everyone on the platform, we used to call this aging up. We don't call it aging up anymore because we feel we're already in the middle of it. So it's a little bit of a bigger term. The third is Roblox Everywhere. This includes devices, where would I be able to access Roblox? It also includes more and more a platform that people use every day. And these 2 things really magnify the users on our platform. And then, of course, our economy, which is super vibrant and we're going to touch on it. Each one of these multiplies with the others to create really the headroom that we're excited about in our growth. And we're going to start with international. Really, by far, most people in Roblox are no longer in the U.S. and Canada. We've seen very consistent growth in the bookings from that international growth. And I want to highlight 4 countries that showed a common theme here. We're going to start with Japan, which is really exciting. Number three interactive media place in the world, and what you'll see in each of these slides, starting with Japan, is as people have begun to trust Roblox as Roblox has matured in each of these companies, you're starting to see bookings catch up with user and our growth and push forward. And I think it's a real testament to all 4 of these countries. The other thing you'll see here, and let's take a look at what's happened in Japan specifically, is that when we look at a country like Japan, and we say, okay, how are we really going to get Japan to the same place the U.S. is? We do it in a system way, and we do it in a platform way. We look at search and discovery. We look at the quality of our natural language translation. We look at the performance of our infra. And when we do these things in Japan, they happen to work in all other countries at the same time. So there's a lot of leverage in what's happened in Japan with semantic search and the quality of our translation. It's really lifted boats around the world. Germany really exciting as an example of a really core market where we've seen bookings growth start to catch up with user and DAU growth. Brazil arguably a country when we started, that was right on the edge of being profitable for us from a cash basis, more and more of that bookings growth as we've added ways of payment. And then from a user standpoint, India, very exciting because it's highlighting the quality of our infra and our tech. It's highlighting all of the hardcore engineering we've done on our client, on our infra. So there's no custom client in India. There's no custom anything, it's the raw performance of our super lean client starting to show amazing growth there. Okay. Next growth vector, we've always talked about is platform for everyone. Let's just take a look. We're really in the middle of this. So there's almost 30 million people on our platform over 17, and the growth rate of that is pretty substantial. The exciting thing about platform for everyone is -- those of you that have been with us for 2 years know that the cohort from 9 to 13, for example, or 13 through 16 is much smaller than the cohort from 17 to 60. Do the math. So there's a lot of opportunity out there, north of 17 on our platform, and we're starting to see a lot of the work we've done in expanding this age group really come to fruition. You're going to hear more today from Christina around Gen Z and really the growth we're seeing in that 13 through 24 segment, which is arguably a very, very valuable and difficult segment to reach for brands who want to interact with that was really exciting on our platform is the amazing growth of this segment, especially in 17 through 24 and also the engagement in that the daily active users on Roblox spend about 2.5 hours on our platform, which really bodes well for the future of brand interaction. Next up, of course, is Roblox Everywhere. And you'll see, and you've already seen us talk about more and more Roblox as a daily use platform. But I also want to talk a little about just the philosophy of 3D immersive in the cloud, multiplayer avatar communication. And the vision we've had from the start is that this should work everywhere. Different camera controls, different user controls. But ultimately, we validated that the same creations on Roblox can work on a phone, and they can work on a VR headset and they can work on a gaming console. So we just added 2 platforms. There's arguably in the future, if we stretched our brains here, at least 2 more other platforms. There is arguably in the future, augmented reality platforms and there's arguably in the future living room TV type platform. So we're not done here. But we do feel this should be everywhere. The 2 examples we just most recently did with Quest where we saw on Quest, 2 million downloads to date. And then on PlayStation, we saw 15 million installs to date, which as you can imagine, the wonderful thing here was these were really hot start platforms, so much good content already running on other platforms where from day 1, these platforms just did enormously well and took off. And then finally, the fourth dimension, if you can think of that, I can't think of it. I can think of 3, not 4. But the fourth dimension is our economy I just want to give you a little history of the economy and where we've gone and where we started. So we started up until now with some of the fundamentals of Roblox. For those of you that look in the history books of Roblox, you'll see we initially started with a club membership if you can believe that. Now most people don't. We then made the innovation that we wanted our creators to be able to support themselves on the platform. And we also created our virtual currency system, which coupled with all of the amazing creators, coupled with the ability for developers to earn a living on the platform created enormous acceleration and created the fundamentals of our economy today. What's really exciting is how far we've come really without advertising. And what a big company we've built without tapping into that engagement of those older Gen Z people on our platform. So today, what's exciting, and you know a lot of the things we're doing today, both accelerating our virtual economy, moving everything to UGC, allowing our UGC creators to make limited items, to make very expensive items. Also, we've announced very shortly, we're going to do something that's very Robloxian and that is take something that's traditionally a platform feature like subscriptions and allow every creator on the platform to offer a subscription. I remember back when we allowed creators to use virtual currency in their experiences and just the explosion of creativity that we saw there. I personally am very optimistic about the creativity of our developers in offering all kinds of subscriptions within their experiences. And those are subscriptions that will be backed by credit cards, by the App Store, by the Google Play store. So there'll be available across platform, which is really cool. And then finally, you've seen in the last couple of quarters, we started to introduce what we feel are very innovative advertising products, native, immersive non-blocking kind of fun actually somewhat like the real world, maybe even better than the real world. If we're walking around and we want to go shop at a brand we can go there with our friends. So you're going to see a lot more of that today. And I'm really excited about really the quality of the experience that we're going to see from this coupled with tests this year and then most likely in 2025, moving that all the way to physical shopping as well. And that creates this wonderful closed loop of walking with a friend, going to a brand store, buying virtual items, watching video, trying things on and arguably buying rate there at the same time. So this -- really excited about that. Our payer community, of course, is growing as well. But what's really exciting is complementing this very robust economy with all of those people not in the payer community and having a more even complex immersive economy to support all of that. Okay. Finally, -- that's a lot of the growth stuff. That's a little bit of Roblox 101. What's the vision? What's driving our growth? What's driving it organically? How are we multiplying that on the economy side? But I think the next thing just you're going to pick up today as well is operational excellence and leverage. And I'm going to highlight on 2 of them. One is operational excellence on our product engineering. Many people I talked to, how do you do that with 2,500 people in the company? Like that's amazing. That's a really complicated product to do that. We really do run a fairly visionary way of doing product and engineering at the company. You'll hear from Dan and Manuel in a bit. One thing to think about is as much as possible, we try to give leaders in the company, autonomy. And in the perfect world, one can imagine Roblox as a tightly coupled collection of 8 companies, plus of course, our core finance and other groups that drive this. And each one of these is actually quite significant. Our people and systems team and company is not just the traditional people and systems. It's really a platform to drive innovation. It's how do we automate? How do we optimize recruiting? How do we optimize the life of an employee at Roblox? How do we make it amazing? So we actually think the primary product at Roblox is our people and systems company. That supports 7 prod engineering groups and the scope of these engineering groups and prod groups is quite amazing. Our infra prod engineering group is arguably building a Roblox cloud, both internally and for developers. Our economy group is building this very rich, vibrant economy, virtual currency, advertising. So each one of these groups arguably is a small company led by amazing leaders One other operational excellence point I want to just highlight is you've seen for the last 2 to 3 years, a pretty big CapEx bill for infrastructure. We needed redundancy. We needed to have 2 data centers. We needed to build out this edge. You're going to see in about an hour or 2 how this has really paid off. And 1 thing to highlight is our bills to cloud companies are very small relative to other companies, and this would have been impossible without doing this. So we save an enormous amount of money on the infra that we've built. And our infra is really significant now. It is many, many edge data centers. It's a lot of bandwidth. It's stuff we control. And one fun hint for the future, it's a way to run AI inference extremely cost effectively. And it's a way to imagine really a meshing AI into our platform in a way that's foundational and central to it without writing big checks to other companies. So in closing, focus today, you're going to see more innovations around growth. You're going to hear more around operational excellence. And what comes out of both of those 2 things is operating leverage. And with that, I'm going to introduce Manuel, our Chief Product Officer.

All right. Thank you, Dave. Good morning, everyone. I'm delighted to be here today to share about our approach to product development and all the features and projects that we released this year that have contributed to the strong momentum that we have had. When we build our road map, when we build our products, we use this framework to guide the work we do. We think about projects that actually drive our vision, the long-term view, our secret sauce, what sets us apart. We also look at projects and features that are going to drive our business. Think about the growing our audience, growing bookings, improving margins. And of course, we also think about projects and products that are going to drive excellence. We think about quality, we think about performance, we think about compliance. And all of these things are to delight our stakeholders. And as you see in the center of the triangle, we have our users, we have our creators, and we have our brands. We want to delight them with every product we make, and we want to become part of their daily fabric. We grow our business by shipping features that improve user metrics. Here's where we think about sign-ups, retention, engagement, daily use of the product. We also grow our business by shaping features that directly impact bookings, thinks about the things that we do to drive payer conversion, spend per user, spend frequency. Growing each of these pieces individually would grow the business. The amazing thing is that we can have a compounding effect by growing both our audience metrics and our business metrics at the same time and that has led to the momentum that you have seen this year. So let me talk about that momentum. We had a strong Q3 and a lot of that was the result of all the projects that we ship. So I want to take you down a list of many of the things that we ship this year. It's not comprehensive, but it's a good list for you to connect the dots between all that engineering and product work and the results that we have had. Let's start with Platform expansions. We have always strived to meet users where they are. We have had a strong presence on mobile, on tablet and on desktop. And in Q3 of this year, we launched the PlayStation, the Meta Quest, and we improve our experience and revamp our experience on the Xbox console. Now shipping in each of these products will bring you a new audience and help you grow your platform. But the one interesting point is that actually shipping each of these platforms made the entire ecosystem better. And think about it for a couple of reasons. On one end, you get network effects. If you have a friend that had a PlayStation and in the past, you couldn't play with them if you had an Xbox console or mobile device, now you can all play together. That's what we call user liquidity. You can do more matchmaking, you can find people that you want to play with. Now if you're a creator and you see us ship in another platform, immediately, we're increasing your TAM. So as a platform, we become way more attractive for you to create because now you have more users that you can cater to. And last but not least, each of these platforms may highlight different type of content. There are experiences that may be better played on a console. Maybe a racing game, it's actually more interesting to play on a console. There might be other experiences that are better to play on a mobile phone. So as a creator now, you can think, hey, I can have all these campuses for me to create and produce something that is going to delight the users. The other interesting thing about our approach to creating for all of these platforms is we have taken an approach that we call universality or building a universal app, but we actually make that app feel native in every device because of the controllers, the size of the screen and so forth. Now the cool thing here from an efficiency standpoint is that we can build once and deploy everywhere. And this is a capability that we also give to our developers. So when we launched the PlayStation, developers didn't have to think about, "oh, what do I need to do to actually be available in PlayStation?" Their experiences were available right away. We're building our product in the same way so that we can make it very easy for our teams to deploy on these platforms and on any future platform we want to build. Second, I want to talk a little bit about our investments in the economy. We have a very vibrant economy. And it's a result of a lot of investments that we have made throughout the years. This 1 is very exciting for me because it reflects how we take the long view. In 2021, we made a decision, we design our economy based and grounded on economic principles. And we think about those economic principles in a way that drives the market dynamics that we want to drive in the future. So in 2021, we made a decision. We said, hey, we have a revenue share with experiences that are willing to distribute catalog items. We have the marketplace. We have items that are created by our GDC community. We gave developers the ability to become distributors or resellers of that content. That was a decision that we made in 2021, and we improved the revenue share for developers to incentivize them to become distributors of that content. Fast forward to 2023 and a class of experiences started to making a really good use of this economic principle, and they became -- they created a new category that we're defining as social shopping experiences. These are places where you can go with your avatar, you can check out outfits. Your friends are around you. They're checking you out. They're checking the things that you're picking up, and then you end up making a transaction. Catalog Avatar Creator capitalize on these economic design and is now one of our top grossing experiences on the platform. And they are creating this category that we're calling social shopping that will be very powerful for brands as they continue to come to Roblox. Second part, of course, you heard from Dave is this desire to create and expand our UGC catalog, our user-generated content catalog. In this year, we introduced a couple of things. We introduced limited items in Q2. Limited items are kind of like in the real world, collectibles. Think about it in the economy is something that is scarce and tends to appreciate. What we have seen with limited items since launching them is that they come at a higher price point than other items in the marketplace. And more interestingly, the majority of them resell for a value higher than the initial price. So it's creating that dynamism in the economy that we want. We also launched this year and gave creators the ability this year to create UGC, user-generated bodies and heads, completing this notion that now creators can produce avatars for Roblox. This is super important for us, and it's part of us building a platform for everyone because as you do that, the diversity and range of avatars on the platform just increases exponentially giving everybody, every user an opportunity to find an avatar that they relate with that represents them. That is part of their identity, and that's what we want to build and it's contributing to our growth. Now you're going to hear a lot about that from Christina Wootton later. I just wanted to give you -- share a little bit of the products that we have built in this space to support and establish this market. When you think about the ads business, we have both advertisers and we have publishers. So we're building products for both of them. On the advertiser side, this year in Q2, we released our ads manager which is a self-serve tool that allows anybody to create a campaign, an advertising campaign or rollout without human intervention. They can track their campaign, they can decide how they're going to run it and then place it, and we will take care of distributing that content across different experiences. Then we have also provided tools for the publishers. The publishers are the experiences that host these ads. And what we did for them, for example, in a studio, we gave them a drag-and-drop tool that allows them to place ads anywhere in their experience and begin to understand what performance those ads are going to have, so that they can decide, hey, if I place this ad in the home, how is it going to perform, then I can move it around and actually start measuring with reporting the performance. They can select the ad format, they can select the placement. They get reporting. And in Q1 also, we added automated payouts. So both in Q2 and Q1, we were building and establishing this market from a product standpoint and we've been doing a lot of things on the business side that you're going to hear also a lot more from Christina. Now we also grow by developing tools for our creators to build better content, more engaging content in the platform and also by building technology that makes that content discoverable, so that everybody can find what people are creating. So let me start a little bit with the work that we have done on the creator side. We first made it easier for more creators to onboard. And the idea here is that if you're a player today on the platform and you have a log-in, how seamless do we make the transition from the player app to studio so that you can use your credentials to start creating? We also gave them tutorials and content to get them started. In Q4 of this year, what you're seeing on the screen is a tool for collaboration that we call live scripting. You can see multiple members of a studio writing code together. This, of course, increases efficiency and studio collaboration. We also launched a Blender plugin. Blender is a tool that many developers in the community use, and we wanted to make it easier. We did this in Q3 to import and move content around so you can bring your creations and you can use those workflows. And you're going to hear a lot more about AI from Dan, but I wanted to list a few things that we launched. In Q1, we launched our material generator and Code Assist, making it easier for creators to produce materials and to learn and improve their coding. And one that I'm very excited about in Q4 of this year, using LLMs, we actually created an interface for developers to interact with our documentation. And it doesn't sound that exciting, but it actually is super exciting because what we created was a natural language interface, similar to what you see in other products out there, where I could go to Roblox and start typing my questions, how do I monetize my game. How do I improve this feature? I need to grow retention and ultimately from all our documentation get summaries and answers that guide them. We're seeing a lot of adoption from this and take rate, and we believe it's going to help a lot of new developers coming to the platform. Now we also empower our creators through analytics. We want to give creators the tools to understand their business, make decisions, run their life operations and ultimately grow their engagement and monetization and retention in their experiences. And we do this by giving them dashboards that allows them to analyze and understand what's happening in their experience. This year, we released a number of dashboards to supplement what we already had. In Q2, we released a real-time stats on our reporting dashboard. That helps creator understand performance issues and correct them in their experiences. In Q3, we released an insights dashboard for experiences. Insights are like titbits of information that tell you how your experience is performing relative to a benchmark of other experiences in your category. So you could know, hey, my experience is in the 50th percentile of retention for simulation games. And that will actually provide you links and tutorials and content that tell you how can you improve and make your experience better. Just helping people parse this information and act on it. We also released in Q3, the audience breakdown. This allows every experience to check out their audience based on gender, age, country, so then they can tune their content creation strategies based on the audience they have. And last but not least, in Q4, we released the dashboard for avatar item creators. This is for the people who create UGC content so they are able to track their creations, understand what's performing better, pricing and all those things and make real-time decisions as they're growing their business. All of these equipment developers with better tools to make decisions and run their business. A big area of high leverage that I've talked about in the past is our continuous improvements in search and discovery. As you know, our role with search and discovery and when you have a user-generated content platform where you have a lot of content, you're trying to do your best to match users with content they will love. And as you do that, you're also trying to drive engagement, retention and monetization on the platform. What you're seeing on the screen is something that we call the efficient frontier, probably a term that you're all familiar with. But in our case, the way we think about our efficient frontier is an optimization function for recommendations that finds the optimal point allowed along the curve of monetization and engagement so that we can make the right trade-offs when we're recommending something. Sometimes something may monetize better and engage less and vice versa and we want to make decisions that are the right decisions long term for the platform. So we've been investing in this function. What you can see in the screen, you see the efficient frontier in blue, the horizontal line at the top would be us making decisions in a very conservative fashion where you're only willing to grow monetization as long as engagement is constant. But with the efficient frontier, we can actually divert a little bit and start exploring a lot wider surface where we can make recommendations where these rates are optimal for the long term view of the platform. And it has yield amazing results for us in the business. For example, the other thing that we do with this function is increase the distribution of discovery. One of the things that is important for users and for creators is that more content can be discovered on the platform. We know that for users when they engage for with more than one experience when they engage with multiple experiences, the retention on the platform increases. So discovering more experiences and engaging with more companies a positive variable for our business. For creators, if you're a new creator in a platform, you want to know that Roblox is a platform where people can discover your content, and you're excited to produce for this platform because you know that whatever you create maybe this covered. And the numbers show pretty amazing things. We double -- almost doubled at 85%, the number of experiences that are recommended on the platform. 38% of the top 1,000 experiences on the platform were created just like last year. That tells a great story for creators that if you can come to Roblox, you can actually succeed and hit a big and be part of those top 1,000. And while doing this, we have been increasing the play time or the time spent from homepage by 23%. This is when people open the home page and discover experiences and start engaging with them. We've been increasing their playtime as we improve this recommendations. With growth in distribution also comes growth in the business, which is really, really important for creators. More distributions leds to more creators making money. And you can see this impressive stats. Our top 10 creators are making on average $27 million a year. That's a big, big number. That's a big business for a lot of people here. And it's very interesting because it has grown 1.5x since 2020. Our Creator #100 is making almost $1 million a year, and that's a 2.2x increase from 2020. And our creator #1,000 is making $65,000 a year. which is an improve of 4.5x over the last -- since 2020. So as I mentioned with more distribution and more opportunities to monetize. The platform becomes way more interesting for people out there to create for us. Of course, this is just a small fraction of all of our 20 million developers building on Roblox, but it speaks volumes to what's possible on the platform. Now there's no better way to illustrate these points than with our recent example. There's 1 experience on the platform called Blade Ball. It was built by 2 people who started working on it in January of this year. By June, they were able to put it in the market and launch it out there and see, hey, let's see what happens. The experience had great metrics and our recommendation system started to pick it up. The blue line is impressions and recommendations that we started giving to Blade Ball because we knew that it had great retention, engagement and monetization. The gray line in the bottom is a typical number of impressions that a top experience will get on our platform. You see that as we start learning from Blade Ball, we give it a lot of impressions. We started learning from it and then the curve starts to settle because we have learned the play through the engagement and the monetization as you expand their audience. Now the results have been phenomenal. Blade Ball, it's one of the fastest experiences to get to 1 billion place. He did it in only 4 months. 1 billion place is a monumental number, and it's not something that everybody achieves on the platform. It still is one of our top 3 experiences right now on the platform. And I think they have a very strong future. But Blade Ball is not alone. Since 2008, more than 93 experiences have achieved the $1 billion place mark and just in the last 2 years, 9 experience have crossed that threshold. We believe that with all the work that we're doing, we're just accelerating the ability for these experiences to reach this massive audience. Now let me shift a little bit to international. You've heard that we have achieved tremendous growth in these markets. And a lot of that has been the result of the work that we have done with feature releases. So not only we make recommendations, we tune them per market. So if you're a user in the U.K., you will probably see different recommendations in your home page that our users, say, in France or in India. But we started adding features like semantic search. Semantic search is basically something that makes search more useful because instead of just searching for specific terms to find an exact match, you can start searching for topic themes things of interest for you and see what actually shows up. The example that you see on the screen, and we did this globally, the example that you see on the screen is someone searching for cooking competitions in Japanese. They didn't search for a specific title that you said, "Hey, are there games that are related to cooking competitions?" And they got some very relevant results. We've been also making great improvements in machine learning translation so that these 2 developers that launched Blade Ball can actually deploy that experience globally without having to worry about that. But what you see here is something that we've been experimenting in Q4, which is real-time machine learned chat translation. So not only we're making it easy for people to create experiences globally, but we're making it easy for people across the world to be able to communicate with each other in different languages and interact in 1 single experience. This creates a super powerful network effects as you continue to experience Roblox. And last but not least, in the growth side, we've been working with notifications to give creators channels of communication or ways to engage their users. In Q1 of this year, we launched what we call invite notifications. This basically allows a developer to place an object or a trigger in their experience to have someone invite friends to join them and then send a notification. An example of this is a boxing experience where the moment that you step in the boxing ring, it prompts you to say, do you want to invite a friend to join you and fight? And many people can become more creative about the ways they use them. And in Q4, we introduced what we call the real-time toast notification. The real-time dose notification allows a user to see real-time and invite insight and experience. So if my friend is in experience A and I'm in experience B and they invite me, I will see the toast in experience. I click on that and immediately join them. And this is super important because we know that experiencing with your friends make the platform better. So speaking about friends and connections, you know that we're building a platform for connection and communication. And we released a number of features to support these part of our vision in 2023. Lets talk about friend invites. More than 19 million friend connections are formed on Roblox every day. That's a huge number. But one thing that we have learned from an analysis is that when people experience a platform with real-life friends, the retention is better. So in 2023, we made a lot of investments to make it easy for people to find real-life friends or connect with real-life friends on the platform. And you can see some of the features that we launch. In Q1, we launched the Contact Importer, making it easy for you to go to your address book, see which of your friends are already in Roblox and the ones that are not, you could invite -- we also launched in Q1 the ability to friend someone using a QR code. So if I'm sitting next to my friend, and I want them to friend them, I give them my QR code, they take a picture and now we become friends. In Q3, we began testing with real names because it's easier to find a friend when you try the real name, not the user ID, you may not know it. So you can actually type the real name and get to them. And we started up ranking what we call people you may know recommendations. These are recommendations that make it easier for you to find people who have shared experiences with you, share contacts with you, share friends with you so that you can actually connect with more friends. All of this work has led to an increase of people interacting with real-life friends on the platform, which will have significant long-term effects in terms of retention and engagement. Now let me talk about communication. You know that we started working on real voice communication in experience, real life communication -- communicating with voice makes communication more natural, more seamless. In Q2 of this year, we began expanding to make it available to more and more users on the platform, 13-plus users on the platform. We also added facial expression. So both with lip syncing with my voice or with the camera, you could detect my facial movement and my animation as I speak and represent that with my avatar. That's super powerful because it makes communication more seamless, more natural as people engage. And we have a strong evidence that as users engage with voice on the platform, their core metrics improve, both their user metrics and also the business metrics. So we want to continue investing in voice and communication in 2024. All right. Last section is about product excellence. As I mentioned, we invest in features and in projects that drive quality, performance, compliance to the lighter users. One big area for us has been this notion of making Roblox better, more performance, higher quality in what we call mid- and low-range devices. As you can imagine, when you go global, the footprint of different devices is very wide. And you can find a lot of markets where the majority of users may be enjoying Roblox to what we would call a mid and low range device. So improving performance there, and you also improve in how then -- we operate on the different network conditions, made the experience significantly better for users. And this is an area of continuous improvement for us. We'll probably never stop because I don't think maybe there are points of diminishing returns far in the future, but we believe that it is improved performance. You have a great opportunity to improve engagement. The other thing that is so important is provide a Roblox experience that feels very snappy, very fast. When you try Roblox Connect, you're going to feel it when you answer your phone call, and you get immediately teleported into experience and can have a conversation, you're going to feel that. If we can continue to improve joint time, if we can continue to improve time to interaction in all of these devices, we believe that we will increase engagement. So this has become a big area of investment for us, and we keep improving these numbers. And last but not least, I want to talk about safety and stability. As you know, safety and stability is core and paramount to what we do on Roblox. It's part of our vision. So we continue to innovate in categories that make us more accurate and better at safety and stability to promote that on the platform. And while doing that, we're also becoming more efficient at scale. So this year, we continue to improve our automated content moderation. This makes it easy through machine learning models to detect if there's an appropriate content on the platform and automate those flows. We launched in Q4 something that we're calling descriptive safety reporting. So if you're in an experience and you're a user and you experience something bad, you can actually capture a picture of what happened, share that with some annotation. What that makes is the process a lot more efficient because if you are a person on the moderation side and you receive that information, it's a lot easier for you to take action. So it makes our moderators more efficient, and it makes reporting more accurate. And last but not least, we launched something in Q4 called the stability prompt for voice. What this does is using our machine learning models and artificial intelligence to detect if I'm having a voice conversation real time, if I say something that is violates our community guidelines. And what we do is we prompt the user with some messaging so that they know that they're doing something wrong. This is to inspire stability and actually make their behavior better. And a fun anecdote, Dave mentioned the Roblox office, we have a simulation of our office where we have meetings. I was hoping a one-on-one with Dave, we're both talking very excitingly. It was a very, very fun conversation and one of us, I'm not going to say who got a lot of these stability prompts. It works. The feature really, really works. So this work not only improves our accuracy and the safety and stability on the platform, but it also makes us more efficient as we scale, improving our execution and improving our costs. So in no way, this is a complete list of all the features we launched in 2023. But I wanted to give you a highlight on an overview of all the things that we have done to further the vision to further the business to further excellence for all of the stakeholders, and we'll continue to invest under this framework in 2024. I want to call Christina to the stage. She's going to share more about that, but thank you very much.

Hello, everyone. So today, you've heard about our users, our growth and our product. And I'm super excited to give you an update on our brands business and how we are going to scale and grow our advertising business. So over the last 5 years, we've been working with some of the top IP holders, brands and talent in the world, and they are reaching their -- this highly coveted demographic on our platform through immersive, authentic experiences and they are influential. These are the brands that are bringing on the rest of the industry, Nike, NFL, Gucci and so many more. And just in 2023, we've seen H&M, Amazon, Walmart, e.l.f. Beauty and amazing artists like BlackPink coming on to the platform. And we work very closely with them. We talk to them every single day and something really special is happening. They are reaching audiences building communities and those audiences are turning to consumers and fans. So what are the brands coming on to the platform to do? They are coming on, they're creating virtual items to launch in our marketplace like Forever21 who launched the collection of accessories and clothing. And this golden beanie here is sold out, but now available on our secondhand market. They're integrating into top existing experiences, such as L'Oréal did for their fashion show in Paris. They're integrated into Livetopia which is one of our top experiences. And they're creating deep immersive experiences such as NARS Sweet Rush for a limited time or like Walmart discovered, creating persistent experiences that live on. And something that is happening in these persistent experiences is they're building communities. They are creating innovation labs, where they can get feedback on virtual products, designs and colors before they even decide to produce that in the physical world. And they are seeing amazing results. In the first 3 quarters of 2023, over 1.8 billion visits to brand experiences and over 185 million hours spent in those experiences. And as they are moving to incorporate the virtual economy in Roblox more into their business goals, in the first 3 quarters, we saw over $30 million of revenue from branded virtual items on ad spend. Now let's dive deeper into why brands are coming on to Roblox? Gen Z. Dave touched on this a bit. But Gen Z, they're digital natives, they grew up online, and they moved seamlessly from the digital to physical worlds, and they make up 40% of global consumers and command $360 billion of spend. They not only have spending power, they have influence. Gen Z influences everyone around them from the older generations to the younger and brands that understand if they do not engage with Gen Z, they will not stay relevant. Gen Z has the power to make or break brands. And Gen Z on Roblox, they are the most engaged demo on our platform with 34 million Gen Z daily active users, and they're spending on average 2.5 hours per day on our platform. So Roblox is the leading platform for [ DOL ] Gen Z in terms of time spent per daily active user. And brands are seeing huge success. Gen Z is spending on average 11 minutes when in a brand experience. Let that sink in. For a brand to be able to reach Gen Z, which is a highly coveted consumer demographic for 11 minutes is unheard of. Typically, they spend seconds with them on other platforms. And this is why brands are continuing to be excited and invest on Roblox. Okay. So let's talk about how we're going to take our brands business to the next level. We are thinking about our brands business with 3 main strategies: one, making our existing products even better; two, lowering the barrier to entry for advertisers with new formats like video ads. And three, like Dave alluded earlier, we're going to start testing real-world commerce. And foundationally, we will increase alignment with the advertising industry for all of our products. Okay. So let's dive deep into improving our existing products, which are portals and sponsored experiences. So when you think about portals, when you come on to Roblox, typically, you look to see where your friends are, you teleport to them. And when you're in experiences, you teleport to other experiences as well through our new innovative ad product called portals. And we launched this in 2023. Brands are seeing massive success with these and great traction. 34% of eligible brand activations are now using portals to drive people from 1 experience to theirs. And some of the advertisers utilizing these innovative products today are Walmart, Paramount, iHeartRADIO, Spotify, DICK'S Sporting Goods, NASCAR and so many more. So brands are looking for discoverability. They're looking to drive new net users to their experiences. And through portals, they're seeing 90% net new users into their experiences. So portals are working. But that doesn't mean we're stopping there. just like everything else that we do at Roblox, we constantly iterate and innovate. And we're getting feedback from the market and from brands, and that's informing our road map. So in 2024, we're going to make portals even better. Today, the portals have a static image above them. And from feedback from the brands, they really would love more creative control. They would love to engage the users before they actually go into the experience. So videos are going to allow that to happen, and it will be leading to more intrinsic value for advertisers. So let's take a look at what video portals are going to look like. [Presentation]

Pretty awesome. So we just took you through our ad products that are within experiences. We want to take you now through surfaces that are outside of our experiences that get hundreds of millions of impressions per day. So typically, people come to the homepage or Discover page on our platform and we're going to allow brands to actually bid on these experiences, these premium placements through the ad manager. And we're going to make this even better. So we're making it more prominent placement on these pages, and we're seeing exciting results so far. So through test 2x conversions from this premium placement positioning. We are also doing the work to make targeting better. So today, brands can target through gender, geo, age and device. But we know that advertisers want more precision over who sees their ads to drive ad effectiveness. And that's exactly why we're enabling genre-based targeting for all of our ad units going forward, starting in first half 2024. So brands want to target their ads based on genre. This allows them to reach specific genres like action, role play, sports and fashion. Okay. So let's move into the second pillar of our go-forward strategy, which are video ads. Now brands have been asking us for video ads for many years, and we're excited that they're coming in 2024. These are going to make it easier for brands and advertisers to come on to Roblox and for us to scale our advertising business. Portals and sponsor experiences are for brands who have an existing experience already on Roblox. Video ads can be for anyone with or without an experience. Let's take a look at video ads. [Presentation]

So we're excited to announce that we are currently testing video ads right now with premium partners, and we're testing these in 2 ways. One is standard video and two is rewarded video. So rewarded would be an example of you're watching this amazing top gun video. You watch it fully, and then now I'm rewarded with a bomber jacket that I could wear on my avatar. We're optimistic that this will be a win-win-win for brands, developers and our business. As we think about what's ahead for video ads? We will be officially rolling out video ads in first half of 2024. And our goal for the next 6 months is to really build the foundation for an ad product that we can scale. Later in this year, we're going to be doing also market education. So really utilizing our team internally, but also our partner program to really educate the market at scale about our new ad products. And later this year, we're going to be building towards greater demand while also doing the work to get to parity. We are talking with several parties to help us drive demand in the market while also getting the product work done that are table stakes, like third-party verification as well as enabling measurement to help brands effectively measure ROI. And we feel really good about this road map here, and we're excited to see the influx of brands from all different categories come to Roblox for video ads. Okay. So we talked about our virtual economy, and we've talked about advertising. Now let's talk about real-world commerce and how we're going to be starting to test this to enable virtual to physical conversions for brands. This is something I'm very excited about. We're going to unveil our strategy for a full-funnel solution for brands that we are working towards testing in 2024. And we have what no other platform has, we have 70 million people coming every single day that they have a digital identity that represents themselves and that we know that, that digital identity influences their physical selves and Real World Commerce through web linking will be enabling brands to guide users from engagement straight to their websites. So let's talk a little bit more about how -- why we think commerce will be so massive on Roblox. When we think about commerce, it's really thinking about how we can go from driving discovery to driving purchase of products on our platform, and we are uniquely positioned for brands to be in front of consumers at every step of the way. We have a scaled audience of 1.8 billion visits to brand experiences year-to-date and guess what? They have intent to shop. Shopping has been part of the platform behavior for over a decade. Users are searching, they're trying on their purchasing and wearing virtual items from creators and their favorite brands already. And then just this year alone, users purchased 1.6 billion virtual items. And this is a massive opportunity for brands because it's clear that the virtual influences the physical. And the vast majority of Gen Zs say that once they try on a brand's item on their avatar, they're likely to purchase. And I can attest that not just Gen Z, but my avatar is wearing a Gucci headpiece and a Gucci bag and I am currently in a Carolina Herrera dress from Karlie Kloss. And I would say that I am definitely wanting to go get that head piece from the bag and the dress in the physical world. So this is already happening today. And navigating between the digital and physical world comes naturally to Gen Z. 3 and 4 Gen Z say that were in digital fashion from a recognized brand is important to them and brands like Forever21, Fenty, Carolina Herrera, Karlie Kloss, they're already leaning in. Forever21 launched a collection of items, and they really use that data from the users to see what they should produce in the physical world. And this black beanie, by far was the most popular item, and they produce that for the physical world, and it's sold out pretty quickly, and they're very excited about that. Rihanna's Fenty Beauty, they launched an experience where users could create and vote on their favorite lip product. And that's going to be available in 2024 in physical stores. Same with Carolina Herrera and Karlie Kloss and Fashion Closet. They had users vote on their favorite floral print edition of the Good Girl Blush Perfume that is now available. We expect this relationship between the virtual and the physical to continue to grow, especially as we start testing real-world commerce. Okay. So let's finally talk about how we're going to execute on our brand strategy. So to scale our brands business, we know we need to get to parity with other large platforms and this will set the foundation for scalable revenue for Roblox. Currently, we have a small team that's verticalized and has deep expertise into verticals like fashion, beauty, music, sports and entertainment and we have brought on Stephanie Latham, our new VP of Global Partnerships, who spent 12 years at Meta, growing that advertising business in North America from the ground up. So we are being very strategic on how we grow our team internally and bring on strategic leaders who have video expertise and know how to speak to video buyers who have expertise in the verticals that are emerging like CPG, auto, travel and more. And we're also expanding our measurement and attribution capabilities, both on first-party and third-party fronts such as brand lift measurement and third-party verification. Lastly, we are going to be continuing to grow our ecosystem of partners to include more agencies, resellers and third-party demand aggregators. And many of you might remember that in June, we announced our partner program at Canne, where we have this community already who's working with brands directly without even our involvement so developer studios who actually produce the experiences for brands, and now they're educating them on how do you not only launch the experience, but how do you market it? How do you use advertising tools to create discoverability. We are working with agencies as well, who we educate and then they have scaled education, they go out, speak to clients all over the world. So we are going to be expanding this as well. And delivery in full-funnel solutions. So right now, we are still in that experimental budget in 2023. But as we move into 2024, we're moving down this funnel into the brand awareness budget as we bring more brands onto the platform and have solutions at scale for them to easily come on to Roblox such as video ads. And as we think about testing and getting to real world commerce, this is where it's going to really bring us down to the full-funnel of direct response, and that's how we're going to accelerate and scale our advertising business. Okay. So today, I walked you through the brand's business and the great progress we've made today. Hopefully, you have a better understanding of our opportunity ahead because it's massive. Top brands are already leaned in, and they will have many more ways to tap into the opportunity and reach their audiences on the platform, building an end-to-end solution across funnel for our partners. We believe we are uniquely positioned in the market with our brands business as it encompasses the virtual economy, advertising, and sync commerce, all feeling one another. We are just getting started. Thank you.

Awesome job. So good to see all of you today. What I'm going to walk us through the next 20 minutes is just a quick overview of where Roblox is with artificial intelligence. And of course, you kind of have to be completely ignoring the tech world, not to know that AI is causing some incredible opportunities and challenges within every tech company. I'm going to show you how Roblox is taking this full head on. It's going to be an incredible, incredible positive force at our company. So if there's one thing, one thing I want you to walk away from this presentation knowing and understanding is that AI is the greatest accelerator for creation we've ever seen in tech. There's been a lot of tech that's advanced other fields, other areas, but this is enabling creators to move faster, to iterate faster, to refine their ideas faster and to do it with less deep technical skill, but more focused on the spark of genius that they have in their heads and the thing they want to bring to life. And that's true across the industry, and it's especially true on a platform like Roblox that is, at its heart, a creation platform. So remember that, one key thing. And then if there's a second thing I want you to remember, and I promise there's only 2 things. You can go to sleep right after this slide. But if there's a second thing I want you to remember is that Roblox is uniquely positioned to benefit from this new technology. And that's for a few reasons. Of course, we're a creator platform. So everything I said before applies doubly to Roblox. But at Roblox, we have some incredible data sets. They're unique to Roblox, and they enable us to take advantage of this technology to some incredible ways. These are things like our social graph which you heard from well and others is growing rapidly. All the voice that we are capturing on the platform as people communicate. One of the largest collections of functional 3D objects on the planet. And when I say functional, I mean, we don't just have images or 3D images. These have to be working on. It's a house in Roblox has doors and windows and rooms, a car drives has moving wheels. Our ability to learn from that and build models from that is an incredible benefit for the company and then of course, all the code that people have written to bring experiences to life on the platform. And the second reason we're so in such a great place with this technology is because we actually have control of our entire stack. Core to Roblox has been the fact that we're basically a cloud provider under the covers. So we've carefully managed how we build that infrastructure out across everything we deploy. This is doubly true for AI, where we have the ability to deploy on an end client device, at our edge, in our data center on third-party cloud and we get to pick where we deploy based on what we need for the user and the total cost of ownership as we look the solution across the board. So keeping those 2 facts in mind, this is how I'm going to take you through this. I'm going to start with some things we've been doing for a while in AI. Just to show you our roots and where we're coming from and why, how we think about these sorts of problems. And then we're going to talk a little bit about some of the newest step we've launched some of the highlights from RDC. It shows you we're kind of at right now and some of their first deployments of generative and large language models and all the new tech that's appearing in AI right now. And then I'm going to give you a brief sneak peek into what the future might look like in some of our ambitious goals going forward with this tech. So let's jump right in with that and where we started, safety and moderation. So its earliest days. I think safety and moderation of the platform was Dave and [ Eric ] kind of watch what's going on and like getting people to behave. That clearly doesn't scale. Dave works really hard, but I don't think you can handle 70 million DAU and watching everything they're saying, right? So you got to bring automation to this. And that's where we started with AI and tech filters are a great example that we use this across the board. We need awesome text filters that can understand what people are saying in context and block things out when not appropriate. When we started here, we started using industry standard tools. The problem of those industry-standard tools is they didn't know Roblox. So for example, you could have a number on the system. And if you want to prevent exchange or personally identifiable information, then you would want to block that number, but saying your phone number versus saying, "hey, I want 2 apples off the tree, that 2 should still show up." So by building our own models, we were able to dramatically improve the quality and accuracy of our moderation. Nothing is less fun than it being moderated when you shouldn't be, right? And we're able to do it efficiently and at better total cost of ownership. You've heard a lot about recommendations and personalization. This is something every content platform has to do. When you have millions of creators, you need to be able to bring the right content to them at the right time. What's really interesting on Roblox, though, again, comes down to our data. We have these long plays in our experiences. It means we also have signals like your social graph. We also know things like what sort of device you're going to run on. And we know some experiences run better on a low-end device. Others really staying on a high-end device, and we can bring that in the recommendation. We take into account things like the efficient frontier, allows us to customize personalization specifically for Roblox. This has been going really well this year. I think you've seen some of the results directly as our business has grown. And then translation. You also heard so much about how important translation was to us. This is another great example. We're using our own data set, made a huge difference. We've been using industry standard tools for a while for automatic translation for our creators. So they don't have to go hire a translation team. A team of 1 or 2 can't do that. Think about the creators at Blade Ball. They're not going to go hire a full on Japanese translation team, for example. We provide this automatic translation as we move from industry standard tools to using our own data sets, quality dramatically, and you can see in some of our growth numbers internationally. Okay. We're going to get some more recent stuff and what I think is a little bit more fun stuff, right? We're going to talk about avatar expression. This is key to Roblox Connect. And the idea here is we're capturing your image on your camera on your device and we're using that to animate your avatar, but we're doing that using an AI model and some really cool technology. I'm going to walk you through that. So here, we have [ Kieron ] Bot from our AI team. He's -- his image is being captured on his camera. But then what's going on is he has an AI model running on his phone that's picking these distinct points off this face, and they pick the same distinct points of my face of yours. It's those points, not the video that is transmitted up to our cloud and back down to everyone else in the experience and allows it to animate any compliant avatar. So [ Kieron ] could be animating this avatar, maybe one that looks much more like him or a space alien. It doesn't matter which this carries over across the whole platform. There's some cool advantages to this. First, we're not sending up a ton of video that's very expensive to compute. It's a ton of bandwidth and we have no need for it. So we only send this core data. Secondly, it's privacy preserving. We're not sending the video. Video is a lot -- has a lot more personal context in it than setting up some facial expressions. And then the third really cool thing, and this goes to how we think about total cost of ownership and user experience. We can deploy different models based on the device the user is on. So if you're on a lower-end Android, you might have a slightly lower power device that uses less CPU or less memory, but at the same time, it gives you a pretty good experience. And then on a high-end gaming PC, we could send down like a really rich model. In all cases, we're not having to do the computation for that AI at all. In last March, we also launched our first [ foray ] into true generative AI. These were like our first experiments, and they're coming along incredibly nicely. The 2 products was a material generator, which allows you to create these really awesome unique materials called PBR materials or physically based rendering materials. Now PBR materials look really slick. You can see the glimpse of this car here. It gets more metallic, you can do a lot more with light. But they require a lot of technical expertise to build. And this goes back to what I was saying before, let's get the technical hurdles out of the way of a creator and go with just their idea at that spark of genius be what drives them. And that's exactly what we do with PBR materials. The result is we have increased by over 50% the number of folks building or using PVR materials on the platform. We also built CodeAssist. So CodeAssist is exactly what it sounds like. It helps you code faster. And we've seen there some incredible results where we doubled the amount of code that people using that solution are generating. I'm going to walk you through some examples here. So here, we're going to use a text prompt until we want this green metallic car, it immediately codes it that way. We're going to move to diamond metallic as well. You see how easy it is to build this out and change the material, something looks really realistic and awesome. We then can also build some code by giving some English text prompts about how we want the lights to flash and be operated, and it just generates the code on the side. And we can even take that a step further and talk about the world and say, "hey, I want it to rain. Here's the behavior want for the rain." You can kind of see the rain. It's hard on the distance on the screen, but it starts raining in the world, again, generating all this code from just a few english text prompts. And the great thing is all these tools also then produce those assets. So if you want to start here as a creator, you want to iterate, but then you want to come in and fine tune it, you have all the assets you need to do. You've lost no control of the system. Okay. So those are some of the things we've already launched. I'm not going to talk about some of the things we either just launched or in the process of launching. A lot of this has been discussed at RDC. So if you tune in there, some of us will repeat. But I want to grab some of the highlights to show you where this technology is heading for us. Okay. So this kind of solves the mystery that Manuel put out before about who was using strong language in a one-on-one conversation? So this is Roblox office, and this is a snapshot of Dave's screen here. You can see his selfie up there. He's got to learn the CTO knows everything that's going on in this company right? But anyway, so Dave got this up prompt. And I want to explain what's going on behind the cover stuff. When we first stepped into voice last year, we're like we need to be able to moderate at scale. We, first, were wondering, can we just use like abuse reports? Will people behave civilly? We realized voice is a tech where kind of one person not behaving the right way encourages others not to. And we needed to really have an incredible solution for real-time moderation. The challenge was no one had ever built one of these before. There were no prior examples of real-time voice moderation that we could find anywhere. So we set out to build the first real-time voice moderation at scale in the world. And we did this in an incredibly interesting way. The state of the art, if you looked at academic papers, the way they were doing it, was it take voice, turn that into text, put text through a filter, right? And we knew that would, one, be very slow going through all those different steps, but it would not be real time. And secondly, you'd be in a position where it's extremely expensive. There's a lot of compute required to run on those steps. Third, you lose some really important information. We all know this. Tone of voice can dictate so much about what you're trying to express and how you're trying to express it. And if you do that translation, 2 steps, you're not going to get there. So we sat down, we started with large language models. We use them to distill down an incredibly efficient classification system that runs in real time against the voice stream, and when necessary, can let Dave know he needs to chill out a little bit, what's also great is as we deploy this, we deployed this with this sort of notification. And what's awesome about this notification, we've seen it changes behavior on the platform. We have an incredible number of users, get 1 notification and as best we can tell, their behavior changes for life on the platform. They go, "oh, this is what the rules of governance are on this platform. This is with civil. So this is now how I'm going to behave." So it actually decreases the moderation problem in some way. It makes it much strong -- gives us a much better, more civil environment overall on the platform. I'm hoping that prompt worked with Dave and he learns and he starts to moderate his language in his one-on-ones, it would be a real shame if we had to ban them off the platform. Okay. Another great piece of tech that we're going to launch over the next few months is this idea of how do you create an awesome super cool avatar. And this example, I was the guinea pig for this. We're taking a photo and we're turning into a working avatar head on Roblox. We do this in 3 stages. We start with a 2D image, and we take my photo and we turn it into, as you can see here, just a 2D kind of creation to represent the style I want on the platform. And we can tweak that with text prompts. By the way, in the mix tier is a system called ControlNet. It's kind of stayed in our industry. And we're really privileged that Manish Agarwalla, who's the creator of ControlNet is a visiting researcher at Roblox. The next step is we take that 2D head and we turn it into a 3D kind of image head. And we have to do a bunch of AI there as well to kind of create what you see over there with images from different sides. And then the last step, and this is so important to the way Roblox is going to approach AI and 3D creation. We have to turn into something that works on Roblox. So you can see here that 3D head actually does all that stuff [ Kieron ] was showing you before, where the mouth moves, the eyebrows move, et cetera, it's expressive, you can turn it. That's so important for anything on Roblox. We don't stop at 3D. It's got to be functional. Another cool thing about this design is we can run these 3 different parts of the pipeline in different places based on where it makes the most sense. And I'll talk about that a little bit later how we're going to distribute that out. Now last June, there was a Morgan Stanley event I presented at. Some of you may have seen this, where we talked about an early technology we were calling Helix. And Helix is a conversational AI on top of Roblox Studio. We've been working on actively. We're getting much closer to our product version of this, and we're going to be releasing this in component parts over the course of the next few months. So again, you're going to be in studio and you're able to have a conversation with Roblox Studio to help you build a place. I'm going to walk you through some examples there. So here, I'm going to say I want to -- you won't be able to read the prompt. So I'll tell you what's going on. I want to build a campfire game. Is it going? No. Let's go back, okay. Let's try this again. I campfire a game or I'm going to gather wood and so on. This may not -- let me say if we can get it 1 more time. There we go. Okay. Now it's running. You'll see us at. So we're going to ask you to build this kind of Campfire experience. Let's let that pop up. There we go. Okay, great. And now we're going to say we want to build the woods around this. So Roblox Studio goes in the creator catalog and pulls out some trees and places them around our world or a place. And we can see they're cutting nicely laid out by Roblox assistant. And then from there, I say, wait, I want some more variety. So change up the trees a bit. It's going to put in some birches and dead trees instead of that one style tree. And I kind of have a really great setting, almost instantly just by talking to Roblox assistant here. But I can go a step further. I want to customize it more. Let's say it's Halloween. I say I want to make this spooky. So I ask Roblox assistant make it spooky. It changes the lighting, it adds some fog in. You can't see it here, but it put a nice big moon in the sky with a Sky box there. I then want to add some Halloween appropriate prompts. It goes and add some gravestone, some jack o'lanterns. We're going to bring a crypt in as well. And all these assets then, again, can be modified by the users. So in case the user is saying, "well, I like what the crypter was, I'll move it over here, I'm going to grab some more things from the creator marketplace and bring them into place and skeletons and so on." Again, you get a perfect combination to be able to move quickly, be able to iterate quickly, but complete control of what you're doing. So this is going to integrate with everything we're doing around our docks, with AI, with code and AI materials and then bringing eventually scene building, as you see here. Okay. So that's some of the things we've been launching lately. I want it with the minutes left here, just give you a sneak peek as to where we're going. And we're going centers around a really ambitious project to build our own foundational model, our own large model, but a model that is based on some of the really unique that we have on the platform. And that's why we're driving towards this. This is not a glamor project. It's what the open source community in the world is doing is kind of stopping at certain sorts of formats that aren't the ones we have on our platform. There might be text, there might be photos and so on. We have some really unique capabilities, as I mentioned before. We have all that voice we're collecting. We have all that safety data we're collecting. We have a huge collection of functional 3D objects. We have over 5 billion hours each month of user behavior on the platform that tell us how avatars, in a virtual world, might move, might look, might express, might converse. We're going to bring all of that together into our own large foundational model and use that to drive kind of the next set of innovation here. So I want to step you through just a concept car of what that innovation might look like. None of this is running code, it's not shipping product. It's not even close, but I want to show you where we're headed with this. So first is very similar to what I showed you with Roblox assistant around seeing creation, but with 1 big difference. Everything is going to be created generatively. There's not going to be going into the creator catalog and finding existing assets. I'm going to say, build me a city scene, and it's going to build buildings for me. And I could then go and change the prompt, say, "give me a city seen set in the 1820s or set in the 1720s or maybe set in ancients, right?" And it can generate that idea for me from the 3D generative models that we're going to build. And then I can go a step further and this is where it starts to get kind of crazy. I can also populate this world with animated characters within the gaming industry called NPCs or nonplayer characters because I have all that behavior to train on about how avatar's move and converse and express, I can bring that to bear in a large language model. And I can use that to create what we're thinking of as nonplayer character as a service where we can create as many of these as we want, and they can run in your experience and just bring immediate richness to the entire experience. We can take that concept, that technology and go one step further to what we're calling a personalized virtual proxy. Think in Roblox Connect, you call me, but I'm not online. I'm not available. You could actually get an avatar who can using large language-type technology -- generative technology, can maybe take a message, check it on my calendar, maybe text me if it's really urgent, but it can be trained with what's called few-shot learning. In other words, a small amount of data for me on top of our general models to behave like me to have my facial expressions to use speech patterns the way I would. It's a really deep experience. And up until recently, this has been like a pure sci-fi, and we're not that far away from being able to do this. To do all this, though, we want to do it responsibly and efficiently. So how are we doing that? I want to first talk about training and then going to talk about inference. So training is the part of the AI process where you're building these models. And the way we're approaching this is we're starting with open source models, which are awesome. The open source community is incredibly dynamic. And in some cases, we're contributing to that. Like StarCoder is a model where one of the leaders is working with Roblox research today. So we've been integrally involved in this. But then we're taking our unique data and putting on top of that. And as you've heard in this presentation, every time we do that, we find, we end up with a better result. So it can be a model like StarCoder, which is helping us with CodeAssist, getting at the point where it's better than what we can do with GPT. With voice safety, I said we started with WavLM and Whisper, which are big open source models around voice. We've refined that down though to something run incredibly efficiently and does a far better job than the open source models on their own. So we can use open source as a base layer, support that community, but then bring our data to bear on that and end up with an incredible result without having to spend all the cost of doing the training from full -- from scratch ourselves. The other half of the equation is what's called inference. And for those who aren't aware, that's simply when I have a request to an AI model, giving it to it and getting results. And this is very important for any platform at scale at 70 million daily active users, we need to be very efficient on how we do inference. Most tech organizations will do all their inference on GPU sitting on a third-party cloud, and that gets very expensive. I'm sure you've seen readouts from a lot of companies as these costs balloon. It's not an efficient way to run the platform. We have control from our client to our data center, whether we're on GPUs or CPUs and we're using that actively. So some examples, I showed you with Karen before, facial animation runs entirely on a CPU on the end client device. It's not a cost that directly hits our data infrastructure. At the same time, voice moderation recommendations, we run entirely on CPU in our data centers and we're moving towards the point we'll be able to use spare capacity, let's say, when Japan is asleep, we can use data centers in Asia and better utilize our CPUs in that sort of direction. And then there's examples like I showed you with photo to avatar. If you recall, I showed you 3 distinct stages for photo to avatar. Our plan at this point is we'll be able to run the expense of 2D generation on the local device and then probably run those other 2 stages where we convert to 3D and 3D and gets functional on Roblox on our edge data centers. But we can vary that, again, based on whatever gives us the best user experience and total cost of ownership. I've shown you a bunch of examples in this talk. We only had about 20 minutes. There were many, many more things I could talk about. We have an incredible number of AI projects in the company. They're touching pretty much every part of engineering and product we're building because it is so applicable whether it is behind the scenes with things like moderation are right in front of our creators or users, letting them build things they never imagine they could build incredibly quickly. So with that, just some takeaways. Again, AI is the greatest creation accelerator that we've ever seen. And secondly, Roblox is so well positioned to be able to take advantage of this tech. It meshes beautifully into our long-term plans. So hopefully, you've enjoyed this, learned a little bit about AI. Mike's going to be up here next or maybe it's just a virtual simulation Mike. You don't know. And with that, thank you very much.

Good morning, everybody. It's really nice to be here. It's great to see everybody. So all I have to do is model everything you've seen this morning and then give you guidance on it, piece of cake. All right. We start off almost all of our financial presentation is basically the same way. We think there's 3 core drivers of value, almost no matter what's going on in the world, what's happening in the markets, we focus on scale, growth and cash flow. The bigger the business, the more valuable. The faster it's growing, the more valuable. And the better ability to generate cash, we think the more valuable to the company. So we focus on these things all the time. Based on what we said on the last earnings call, what I said on the last earnings call about Q4, we will have our first $1 billion bookings quarter. That's a scale number. Not many companies get to that level. We're very excited about that. Also, we revealed last quarter, we're 3 quarters in a row of 20% growth. Not many companies are doing that right now. We feel incredibly excited about our ability to grow. And I think the thing that was maybe most exciting to most investors was the cash. It was the margins that we're generating and the ability to turn those margins into cash flow. There are really 3 things going on with this last item at all are really working together. One is operating leverage. We've made a lot of investments, obviously, in infrastructure and in our head count, but getting operating leverage drives up the margins of the business. And now that we're through a fairly substantial infrastructure investment, cash conversion goes up. And so those things work together. And number three, as you heard earlier, and we're going to talk more about -- we now have a new revenue stream coming into the business. Those 3 things work together to help us generate a lot of cash flow. So we're excited about the year that we've had. We're super excited about the year ahead of us. Just to go back and look at Q3, it was the quarter of 20% growth, 20% growth on bookings to just over $800 million of bookings in Q3. We crested 70 million daily active users for the first time, which is a big milestone for us. That was 20% growth. We've never had 15 billion hours in the quarter. We went to $16 billion in Q3, that also grew at 20% year-over-year. We're incredibly liquid. The balance sheet of the company is incredibly strong. We have $2 billion of net liquidity, $81 million of covenant adjusted EBITDA, that was a much higher number than we had delivered in Q2 and even last year in Q3. And then over $113 million of operating cash flow. So again, we're starting to see the margins come into the business and also with less capital expenditures, more free cash flow. So we're really building for strength -- from strength right now. Over the last few years, we've been through this unbelievable cycle where COVID doubled the business almost overnight, step function in our growth. We've maintained our size and scale, our user base, engagement, monetization through the reopening, and we've now returned to really significant growth. And we feel as though we're quite honestly, building from a position where the assets in the business have just never been better and never been stronger. We have more engineering and product capacity than we've ever had before, more brilliant people who can build great stuff, turn it over to an amazing creator community and build better and better content, more engaging content. We also have more infrastructure than we've ever had before. It's more reliable and it's more performant and that just yields a better experience for everybody. And the really exciting part is we're starting to expand the economy. It's taken us a long time to build a fantastic user base. We have a huge monetization engine in our virtual economy, and now we're getting ready to layer in a couple of really exciting things with advertising with brands and ultimately with real-world commerce. So the assets are wonderful. We feel like we're really playing from strength right now. I say this all the time when I talk to investors, go back and look at our user numbers, go to the supplemental materials that we publish on our IR website every quarter. And you'll see we just continue to grow daily active users quarter after quarter after quarter. Similarly, we continue to grow engagement on the platform, which is why you see hours of engagement growing at that rate. And it's not just the overall growth that's exciting. It's really where it's coming from. Older users are growing faster. We talked about all ages. And then the growth in international has been particularly fantastic. It's not that we're not still growing in the U.S. and Canada because we are at fairly high rates, especially among the older users, but we really have become a global phenomenon. And the growth that we've seen in places like Germany, Western Europe in general, East Asia, in general, have really been fantastic and just points to what we can do with global growth in the next few years. So this has been bookings over the last 4 years. I'd like to go back and open the aperture, so we can look at the history of the growth of the company. Way back in 2019, we were doing about $140 million of bookings, feeling really good about our ability to continue to grow the business. We did a $250 million bookings quarter in Q1 of 2020. And then within 90 days, the business doubled to about $500 million of bookings. And this is where the investments really started as you have seen in different presentations, and I'll go into more depth on. We did not take the growth for granted. We actually looked at it and said, we have so much work to do. We have to build a platform that more older users will actually engage with. We have to build an infrastructure that is performant that can actually stand up to the number of users and the number of hours of engagement that we have, so we invested aggressively during this time. We really, really proved that we could retain the users on the platform and build and grow on top of that. And so we had very small periods of time where the business flattened as we were all coming out of COVID and then it just continued to grow. We've had 5 quarters in a row of double-digit growth. And as I said earlier, 3 quarters where we've grown at over 20%. Not many companies can say that. We're super proud of that. It speaks to the stickiness of the platform. It speaks to the incredible high quality of the content from this ever-growing community of developers that we have around the world. And this is the investment cycle. This is quantifying that investment cycle. We have increased the product engineering organization materially. We've spent almost $700 million on infrastructure. And by the way, while we were doing that as the company was growing very, very rapidly, these investments happen, we maintain cash neutrality. The unit economics, the underlying unit economics of this business are fantastic. You've all heard me say that before, and really prove that during the investment cycle, where we didn't go through any cash. We ran the business almost to the dollar at cash flow neutral. And now that we're through the investment cycle, as I said earlier, we have both the operating leverage and the reduction in capital expenditures plus the incremental top line that's going to come from brands that really will allow us to convert that into high cash. So these are the expenses underlying the bookings growth that we talked about. It really is the fixed cost of the business that you should focus on in terms of operating leverage. That's the question we get all the time. Why did margins go from less than 5% in Q2 to just about 10% in Q3? It's really the focus on fixed costs. The fixed costs in our business are our people, and it's the infrastructure. And during our scale up, you can see the rate of growth of those expenses really ticked up. But as we got closer and closer to these 20% growth quarters, we've started to slow the rate of growth down. We haven't stopped hiring. We haven't stopped building great infrastructure, but we've slowed that down. And now we can much more carefully as we operate and talked about operations earlier, we can actually grow those things in relation to a top line growth number that allows us to spread that out and increase the margins of the business. We will continue our variable costs, our really around cost of goods sold, where we will seek efficiencies where we can get them and then our developer community where we're always looking for ways to invest even more of the economics of the business with our community because we've always found that when we do that, creation goes up, creativity goes up, better content happens, that drives into more users, more engagement. It's always been good for the business, so we'll continue to do that year after year after year. And this is really the sort of the graph that really shows what we've come through. We've gone through the infrastructure investment in the business. And what's in front of us, we now have the capacity that we need to really drive the business in its growth certainly through 2024, possibly pretty far into 2025. This is what you've gone through with us over the last couple of years, the $700 million roughly of capital expenditures. But going forward in '24, that number will be under $100 million next year. And then we've got a little bit of incremental spend that we'll do next year on our new campus in San Mateo. We are still growing. Our employees are back in the office. It's fantastic to be back working with everybody in the office. And we have to build out some real estate to house everybody. But next year will be a relatively light CapEx year leading to a really good high cash flow conversion. And the really exciting part with any business like this is just more revenue, expanding the economy. We now, over the last 12 months, have about a $3.3 billion virtual economy. That's growing, as you know, at about 20%. That's an absolutely incredible asset. It's built on top of 70 million daily active users and an ever-growing creator community. But now in 2024, we're ready to launch into the advertising economy. We have revenue both in Q3 of this year and of Q4 from the brands, from ads. They're going to scale up over the course of 2024. We're always going to feel good about the back half of the year and back-end loading. But we've seen the proof in the evidence in Q3 and Q4, and we're really excited about that. Sometime during 2024, we'll also start making key investments to enable the shopping economy in 2025. Put those 2 things together, we think we have a really massive opportunity on our hands. We already monetize incredibly well. A daily active user on Roblox is worth $51 on an LTM basis. You guys cover a lot of companies and social, Internet gaming and whatever, these are really strong numbers. So we have a very, very strong base to build monetization on top of. But what's really, really interesting, and you've heard us talk about some of these data points before is that all those paying users are basically spending about -- within about 20% of the hours on our platform. Said another way, about 80% of the hours don't monetize. About 80% of our hours today don't monetize. We have costs associated with them, but we don't actually drive revenue from them. This is where, obviously, the opportunity is for brands and for our community because they have experiences where they have hours that aren't monetizing, they're going to have a big incentive to drive the ad business and the commerce business, and it's great for us because we actually are increasingly efficient. And if we can make the business work on a very small number of the hours as well as we do, we really have a fantastic opportunity when we start monetizing a lot of those hours today, which really are lying fallow. So I get this question all the time, and I've seen it written in some of the reports leading up to today. Can Roblox build a $1 billion business with brands? And I think the easiest way to answer it is there are -- we have a user base in Gen Z that spends hundreds of billions of dollars in spending power. Obviously, brands are spending tens of billions of dollars to reach that audience. So it stands to reason that if you can build a compelling value proposition for those brands to reach those users. Of course, you can build a very large business. That's not really difficult to figure out. In the first couple of years, it will always be hard to forecast something like that. But we're going to learn and we're going to figure it out. And ultimately, we'll start giving guidance on that number as well as what you see today. What is totally logical about the approach, though, today is that on the left, and this is Christina's slide, you see really a budget for a Chief Marketing Officer at a key brand. They can typically split their budgets up into 3 pieces. They have a very tiny experimental budget. Things that they're just testing, let's see if they work. That's where we live today. We're in those experimental budgets for the brands that are, in fact, advertising on the platform. As we go down into those -- the bigger budgets into brand awareness and that intent, then really, we're starting to look at return. What kind of things can we measure that indicate that this is actually having value and you're going to start seeing with video ads in particular. These are things that CMOs are used to spending on. And if they can spend on that on Roblox, then we're going to start moving deeper, deeper into those budgets. That's going to happen in 2024. We'll still tap into experimental budgets during the course of the year, but we'll be growing the size and scale of the economic opportunity with brands as we push into video ads and more into portals. And then ultimately, what we all know is, if we could tag something to a transaction, of course, a marketer is going to pay more for that. That's what they really want to do. They want to be able to measure response in a really economic way. We've shown a lot of things today that indicate that we think this platform is going to be absolutely fantastic when it comes to real-world commerce. It's all very logical. Now we have to go out and execute. And we believe we actually have the right people, the right technologies and 3D immersive -- as you see on Roblox, just recognize that the creativity that we're going to unlock in marketers around the world with really incredible brands, we haven't even begun to imagine some of the things that they're going to do with our technology and with our audience. So we're really excited about that. So over the next few years as we go beyond, we'll literally be tapping into all those budgets and growing the business. So we're super excited. And yes, obviously, this can be a business that crest $1 billion. So I haven't looked at any notes until right now. But my last piece, I'm going to read this directly because this has been something we've talked about doing, and it's a really interesting chapter for Roblox. And so I'll just go in. As we mentioned on our earnings call last week, beginning in 2024, we intend to begin providing financial guidance, which is something we've not done in the past, as you all know. Last week, we highlighted that we are comfortable with FactSet's mean consensus estimates for Q4 of 2023 as of November 7. On our Q4 earnings call next February, we will provide guidance for the full fiscal year 2024 and for Q1 of 2024. Based on FactSet, as of November 12, the mean consensus for fiscal 2024 is as follows: bookings of $4.03 billion, adjusted EBITDA of $489.9 million, which correlates to our calculation of covenant adjusted EBITDA and revenue of 3 point -- okay. Perfect. We're comfortable with these mean consensus figures for revenue, bookings and adjusted EBITDA for fiscal 2024. Further, we expect that infrastructure-related capital expenditures for 2024 will not exceed $100 million and we expect to spend approximately $80 million on tenant improvements on our new campus in San Mateo, and we expect share dilution will be in the range of 3% to 4%. Given that we will talk specifically about 2024 in February, we want to give a high-level view of future growth and margins today. Between 2025 and 2027, we are targeting annual bookings growth of 20% plus. We will do this by continuing to grow our user base, both across all ages and internationally. We will also introduce product changes that make Roblox more of an everyday experience than it is currently. We also believe that our brand business will contribute with increasing significance to monetization over that time frame. Finally, our goal is to drive margins up by 100 to 300 basis points each year over the next 3 to 5 years. We look forward to providing more detailed guidance on our next earnings call, and thank you for your time.

Please welcome our speakers back on stage for a Q&A panel.

All right. Welcome, and thank you team. Wonderful job. Appreciate it. Thank you for all of your attention and listening. So we are going to open it up. I do want to share one final anecdote. It's almost related to the fun of running Roblox because that anecdote of what happened in Roblox office in the future, we're actually going to start creating an environment where we, as a company, are going to have to decide will we run our Roblox office as a 17-up experience where everyone has a photo ID where we would allow that or maybe not. And so it's actually fun to think this foretells the future of various levels of privacy and we'll be engaged in that discussion. But it was one of the most serendipitous awesome moments I ever had on Roblox is seeing our safety system in action, and it was really wonderful. With that, we are going to open it up for questions and love to hear what you're thinking and how we can help you and raise your hand and we'll bring the microphone to you.

Great. Matt Cost, Morgan Stanley. Two, if I could. I guess just probably starting with Mike. On the 20% plus growth target over the next few years, how much does that depend on success in ads and shopping? You've talked a lot about that today. Are you baking in an expectation of really scaling those businesses? Or are they sort of a positive on top of it? And the second one would be for Christina. You mentioned bringing in some third-party ad partners on the demand aggregation side and the verification side. Longer term, what does it make sense for Roblox do for the advertising business versus which parts of the value chain for advertising do you work with partners for?

Thanks, Matt. So just to clarify, what I said was comfort with '24 consensus for bookings, and then I said 25% to 27%. So that's the 3 years after that at 20% plus. Our business in '24 really parts of '23, '24 are brands plus the virtual economy. So any numbers that we give are going to include both from now on going forward. Over time, we'll expect to be able to give more direct guidance about how ads and brands are scaling. For now, it's all really together in any numbers that we're giving. But over time, we'll expect to have a little more granularity about how that business is moving forward.

Now I'll take the next question. Thank you for the question. We are meeting with a lot of different partners right now and figuring out who we want to move forward with. If you think about our advertising business, it's just like everything else, we want it to be thoughtful. We want it to be high quality. And so we want to make sure we partner with the right partners there. But it's not just the third parties that we're working with for DSPs, it's really about agencies as well, and it's about brands directly. So we want to work with all of them and where the market is.

Tom Champion from Piper Sandler. Dave, I'd just like to hear from you talk about you listed a number of things today, whether it be communication or even aging up or AI or international expansion? What are the one or two things you're most excited about? Do you think we'll be impactful to the P&L over the next couple of years? And maybe one for Mike, too. Mike, if you could just discuss how the P&L will evolve with advertising coming online and shopping coming online, how should we think about that as bookings or revenue? If you could just editorialize there, that would be helpful.

Yes. I want to -- I'll share kind of an orthogonal thought on that. And when I demo Roblox on mobile to other people in the industry at other social companies or whatever, engineers, one of the things they constantly comment on is, "Oh my gosh, how quickly can I get in that experience?" or, "Oh my gosh, is this running on a phone?" So my boring answer would be raw engineering perfection, performance, quality, stability join time, which is something we don't actually think about a lot, but what three or four of our main groups, the platform group, engine group, creator group, are hard core going to be working on. And one can imagine a future where joining a Roblox experience is photorealistic in a tenth of a second, that's actually an enormous achievement. So that really -- that would be a fun nonobvious one.

Tom, on the P&L. So ad revenue will be revenue. It will also -- we'll think of it as bookings as well as just effectively instantaneously becomes revenue in the business because we don't have the same performance obligation as we build for it. It will not require -- if you keep going down the P&L, it will not require massive increases in cost. Ultimately, we have a team that will be out there working hard with advertisers. So there's some incremental costs on driving transactions. But generally, between head count and infrastructure, it provides just a lot more leverage on any fixed cost, it just absorbs those fixed costs. And so as it grows and grows faster, that will ultimately produce margin and cash flow.

Omar Dessouky from BofA. So I might have to quit my job and start a Roblox studio. I might be able to make more money that way. So I wanted you to help me maybe bridge the gap between where Roblox is now and how Roblox -- how big Roblox could be by the end of the decade. So Adobe, the software company, recently estimated there to be over 300 million creators worldwide across such disciplines as photography, filmmaking, podcasting, and about 60 million of those seem to do some kind of game or 3D experience development. And if you look at YouTube and Adobe Creative Cloud, as example, creator platforms, they have about 60 million and 30 million creators each, whereas Roblox is still early in its adoption cycle with, I think, about 4 million creators at the end of last year, right? So that's the preface to the question. What is the potential size of the Roblox creator community by the end of the decade, in your opinion, would be? You have 70 million daily active users now. Do you foresee that, for example, a majority of those could eventually become Roblox creators? And do you expect creator tool adoption by our users to happen organically over time? Or do you have to do stuff to accelerate that? And I'll have one more follow-up.

I feel we shared some pieces of this puzzle that one could assemble. So Mike shared '25 through '27 growth in the 20% plus range. Dan shared a vision of AI creation powered by AI. Manuel shared a review of some of the things we've done. And I shared that the future is really every experience on Roblox supports creation and AI. So I -- my view would be by the end of the decade, we consider every single user on Roblox a creator. And the creator has profoundly integrated in things as far as your wardrobe, what you're wearing, the creation of your clothing, the creation of those assets where I think the majority of people on our platform will be at the very least creating new and unique aspects of their avatar, what they wear and beyond. And I also think the creator community for experience or model or 3D asset creation will be radically expanded. But I think every user will be a creator. Anyone else want to add on that?

I could just chime in. I didn't dwell on in my talk, but to what Dave is saying, this vision of every user is a creator. That's exactly where a lot of the AI tech drives where you could start building the entire world within worlds because you don't necessarily need to have a full-on studio to be doing creation, but you could build things that are awesome and could be monetized. So just back on what Dave is saying, we went very fast this morning, but there's a whole thought process behind like the difference between creator and a daily active user starts to...

Yes. And I think that's really an optimistic vision of the future. I think -- for the actual creation of the experiences that power Roblox today and the experiences that power the avatar assets, we -- I think, even if our creator community were to grow pro rata with that user, we would have more than enough creative energy. So this is almost optimistic creation on top of that, which will fuel us.

So then that begs the next question, which is creators turning their hobbies into jobs. And at the end of '22, out of those 4.2 million creators, I think you said that 11,000 of them qualified for DevEx. So kind of thinking that ratio is like 0.5 of 1% of creators that seem to generate revenue generating experiences and objects. Do you expect that kind of ratio to hold as the decade continues? Or will it become a larger percentage of...

I think the slide that Manuel presented showed more growth out of 1,000 than on 100. And I think the overall income of those creators will grow with our economy. As we imagine, Roblox scaling bookings in the ways that Mike shared, that revenue will flow to those creators as well. So those are once again two hints to the puzzle bookings growth along with fast growth in the longer tail of the creators.

I actually just have a handful of housekeeping questions. On the 20% of the hours that are monetized. Could you give us a little history of what that's trended? Where do you think that goes? Secondly, Mike, could you talk about the gross margins of the ad business. Presumably, there's no platform fees on that, so should have a much higher gross margin. Should the DevEx be higher there? How should we think about that? And then lastly, on the direct response when you eventually -- when you get down to the shopping or direct response sort of ads, are you going to allow users to leave the platform or have ads that allow you to leave the platform? Or will everything kind of just be encompassed within Roblox?

So do you want to talk about the last one first.

I'd just say there's a lot of lovely patterns emerging. You go through the market of Insta, Snap, TikTok, the line goes on. And you can see a continuing more embedding, more immersion type things as opposed to pop out. I think, obviously, whatever we would do would be best practice.

Your first question was translate the 80-20 of hours into prior periods. Honestly, off the top of my head, I don't actually have the figures. We have usually looked at it based on a monetization ratio of payers to users, but for a variety of reasons, we like this -- we like to look at it this way as well. I suspect that it's been lower probably in 2019 and expanded. And I'll bet it's been in this 80-20 range over the last couple of years, but we'll have to go back and look specifically to give you the best answer. Remind me of your second question.

Platform fees.

Gross margins will be higher, yes. And then, of course, we want developers to participate. We have not shared what those economics will look like yet, but yes, it's a very accretive business.

Andrew Marok from Raymond James. You talked a lot about bringing generative AI tech to bear for creators and the promise that, that holds. I guess, how are Roblox as engineers benefiting from generative AI tech in terms of the pace of product development and innovation and maximizing output of your engineering teams? And I guess for Mike, what's kind of baked into the assumptions for guidance, et cetera, in terms of the shape of the curve for the pace of product?

I'll take the first part, engineering. So I think it's still early on overall engineering tools and the productivity there. But we are definitely seeing CodeAssist tools, the Star engineers in the same way we're seeing on the platform. And we're still early days, and I don't have numbers to share on that or a strong view, but it certainly helps. The other thing it also kind of helps on is sometimes when you're doing something through an AI model, you're not having to build a huge lump, a very complex code with a sort of special cases so we can simplify portions of the code base. Well, I think about a recommendation system, that was older, right? And like how special case that was, and you could break it easily and all that. And like we just have a model, we have a process around the model, we do that well. We're investing a lot in an internal ML platform that is helping speed all that up as well.

On the question on margins, let me take a shot at how I think about the different cost items and how it drives margin and see if I've gotten to your -- the answer you were looking for. Today, our COGS and our developer exchange, I think of it as more variable. And together, they're about 43% of the bookings number in a given quarter. So let's make an assumption for now that, that number stays steady, but that we -- it's less in COGS and more to the developers, but just for now hold the combined numbers steady. Head count, as a percentage of bookings right now, it's about 23%. Infra trust and safety is about 14%. Those two numbers, I believe, over the next 4 or 5 years will move more towards and for trust and safety being more closer to 10% and head count from 23% into the 20% range. So if you're doing the quick math, that's about 7% on bookings. Assume that this year based on the things that we have said about Q4 and what we've already done in the first 3 quarters, so adding those numbers up. The other number would be just what we call overhead, that's right now sitting at around 10%. It's a little bit elevated because of just rent. We'll try to push very hard over the next few years to get that down to about 8% or 7%. So if I add back the head count savings as a percentage, infra savings and overhead, I think that's about 9 percentage points on top of what we have today.

Jonathan Kees, Daiwa Capital Markets. Mike, I really appreciate the color you have provided for long term, the financial color. I wanted to ask you about something which, I guess, is not a focus on for Roblox, the unique model of Roblox, how money is recognized over time. So they're hence focused on bookings and free cash flow. But I guess as you get more with advertising, which is more up front in terms of recognition, how can we think about in terms of when you can reach positive earnings. There's -- you look at The Street estimates for earnings or negative earnings, it's all over the place, so just thought in terms of that? And then I have a second question in terms of maybe this is for Mike or for Manuel -- I'm sorry, for Dave. Does -- for search and discovery, is there a business opportunity? Or where would the business opportunity be in for paid ranking? Like when you search to be like post pretty high in the search.

Yes, I have feedback on both, but I think Manuel and Mike will probably -- I mean, my highest level feedback is we really run the business on bookings and cash.

I was going to say, why don't we do the other question first.

And then on the search, I'll kick it over to Manuel because I think Manuel showed actually a vision of paid ranking as well.

Yes, it's a great opportunity for us. And if you think at the end of the day, when we make a recommendation of a content, one of the things that we can start modeling is what was the value of that impression because there's not only what people do when they engage in that content, there may be derivative value of actions they take downstream when they consume that. As we continue to tune the model, we're going to perfectly understand the value of a placement or the value of an impression that it could easily be translated into you can earn that impression because you're performing really well or you can buy that impression with some spend. So we're going to -- we started testing. We have a sponsored road today on the homepage. Today, it's at the bottom, we're beginning to test, place it higher. Eventually, what you can imagine, as Christina presented is, individual tiles that you could get placed in different places based on the people paying or buying for those advertisers. And of course, we will clearly label those as a sponsored content on the platform.

So on the first question, without getting into a very, very detailed discussion of accounting policy, which would clear the room quickly. We started off by saying scale growth, cash flow. We really believe in our hearts, that's what drives value. So brands are going to help us get bigger. They're going to help us grow faster and they're going to help us generate more cash. Great businesses, high flow-through, already absorbed the fixed costs in our business. It's -- we're very comfortable and excited about that. As it relates to how things get reported, today, bookings and revenue are different. We do focus on the -- we run the business on cash. So we really have to more or less run the business on bookings because if we didn't, then we wouldn't be making investments in hiring people and paying our developers and all the things that we do with that money that comes in the door. As ads layer on top, I think it makes it just an even better business model. So if you just think of that as bookings -- or as revenue, it's still -- it's cash really quickly. And so that's -- and I would just say that's top line, and that will just be accretive to the top line, help absorb more of the expenses and again, have really strong cash flow characteristics incrementally to the business over a long period of time. So that's how we think about it.

A question on AR. So I guess for developers to build AR experiences, a lot of spatial data is required and that spatial data could be something like a scan of someone's apartment or a theme park or a concert venue on a much larger scale. What are the technical hurdles to getting that spatial data into Roblox Studio? And over time, would that require a different level or spend of CapEx?

Yes. So I think when I was up speaking about platforms, I mentioned there's arguably two more either MR or AR type devices, aka and then also the living room. I think there's going to be a wide spectrum of AR type use. Some is going to require a full 3D scan type things. Others are going to be much more local client sensitive, for example, in Roblox Connect, one can imagine in addition to both people being in Roblox connect and then the AI type world, we might just superimpose someone we're communicating with on a chair in the local room. So I actually -- I'm more optimistic that there are not large hurdles to think about something like that.

And I think embedded in the question is if we see opportunities, but we had to ramp up capital spending or investment, I think that's sort of embedded in that question maybe. So a couple of thoughts. Again, we will continue to invest in the business. We want to be really clear. We've slowed the growth rate of investments down and because we can now, and that's having benefit, and we want to continue to see that benefit. But we'll always look at the economic value of any investment. And if we think it's going to drive extraordinary returns and be really great for the platform for our creators for the users on the platform, we'll make those investments. So I just -- I want to set an expectation that we'll always think that way if it's going to drive value. The benefit that I think we have now of guiding is that we can get ahead of that a little bit with everybody and say this is coming. So we can talk about how that has an effect versus maybe surprising people with investments that we still believe generate long-term return, but maybe were unexpected. So anyway, and we really do think very much rationally and economically about these things. Dan is always talking about what things cost if he's going to build something out and looking for our capabilities very, very cost focused as a CTO, I would just say anyway.

Historically, the ethos of Roblox has very much been in the mindset of build amazing tools, build an amazing platform, put it out into the wild and kind of see what comes of it, and it's been tremendously successful. Dave, how do you think about the changes required in terms of culture or how you guys think about the business as you move more into advertising, which is much more of a we create it and then we push it out and we have to educate and we have to onboard and it requires, I think, a little bit of adjustment or change of how you guys think about it. So what are kind of the risks or challenges or adjustments you guys are making around that?

I actually don't think there's any change. And I think we've been very, very fortunate and good at imagining what is the confluence of what's technically possible in a year or two with devices and networking with things that are ultimately inevitable and are going to happen. And I think that goes all the way back to the foundation of Roblox when we did very unorthodox 3D network, multiplayer cloud stuff. There is a little bit of a watching things happen, but I always think it's very intentional. I think the advertising thing, given the amount of engagement we have and people have been talking about this for 10-plus years. There were advertising companies created to do immersive advertising in games and 3D, they just never had the scale. They never had the -- or the simplicity of embedding all those ad units across many places. We finally have had that. So advertising, to me, feels very authentically Roblox. I think we have all the early signals on the partners, the bookings that we're not sharing with you for Q3 and Q4, but we can see what those bookings are 2 days ago, we reviewed Q4 and Q1 and the next 4 quarters of that real bookings. So I think it feels authentic in exactly the way we've done things.

And if I may add, super concrete examples. Developers have complete control of the ads format where they place them in their experience. And eventually, they could even modify the container to make it fit their look and feel of their experience. So we're always taking that developer view so that they can have a ton of control of what they're placing.

Yes, and I will also just add on the brands business for years, brands are creating experiences where they're storytelling. They're involving the community and they're learning from them and iterating whereas in the past, it might have just been putting something in front of an audience and hoping that it works. But now they're really getting feedback from a community and building together and a lot of the ad products are really discoverability tools for those experiences that their storytelling and building with the community in. So we also think that, that's a massive opportunity for brands moving in this direction.

Clay Griffin from MoffettNathanson. Mike, can you talk about the opportunity for portals as a function for user acquisition, not for brands necessarily, but for existing developers on the platform? And just maybe I don't know if you can size how you think the mix would look like between brands and kind of maybe native user acquisition? And do you think that spend is going to be denominated in Roblox? Or do you think you're going to transact that inventory in dollars? Just want to get a sense of kind of how that's going to work.

Why don't you guys take it.

I can take it. I think that we're going to see a healthy mix of both brands and developers and as the user base of Roblox users, but also the creators continues to grow and as we continue to revamp our search and discovery, I think that there are always going to be more opportunities for people to say, "I want to buy a sponsor tile or a buy a portal, too, as a way to kick-start discovery of my experience and then get growth." So not very dissimilar to maybe what you saw on the mobile app space that eventually the app developers became big spenders in customer acquisition. And I think that as more developers become savvy about their ROI of those investments, they're going to be spending more.

Yes. And I think you -- one can envision a future where there's a unification of many units in experienced video and experienced portal in experienced brand, homepage, tile, search, where both our creators as well as brands are able to bid on all of those.

Yes. And the creators are using portals as well today, so it's not just for brands. And as more creators are building their businesses, we see a lot of UGC creators who are creating collections of digital fashion. They're now launching a shop for collection and now they can actually go and have people portal from one experience to another. So it is something that is for brands, but also our creator community.

Okay. We're going to try to get in one and maybe two more questions. So let's see what we can do here.

Martin Yang from Oppenheimer. My first -- I have 2 questions. First question for Dan. In your last slide, you mentioned one of the upcoming features is a dynamic price optimization. Can you talk about what that is, what that means for users? And second question is, Dave and Manuel both talk about meeting users where they are. A lot of Roblox content are consumed outside Roblox, particularly YouTube, how do you bridge the watching and playing gap?

Yes. So I think you might have misunderstood my last slide. I was talking about how we do inference. I wasn't talking about a feature for users. I was saying as a technical team, when we, let's say, have an ML challenge in front of us, an AI challenge in front of us, we're able to look at where do we get the best kind of bang for the buck on do we run this on the users' device, but they have limited capabilities? Do we run this on our edge? If latency is really important, do we run this in our cloud on the back end? And we're able to break these problems down and kind of distribute. And it sometimes takes more engineering work. And these things to work well on a CPU, you really have to shrink the model, quantize it, distill it to get that to work. It might mean you launch a few months later to get that sort of capability, right? So that's what I was referring to. I wasn't referring to our user-facing feature. What I was referring to is the ability for us to explore that entire search space in the computational graph there between client to our cloud between GPUs and CPUs and build that into our design process as we move forward.

Yes. And on -- I think you highlighted in a wonderful way, the amount of kind of beyond Roblox influencer video, things that are going on. We -- a small hint with our captures product that we shared at RDC is automating the creation of image and then video snapshots under developer control. And there's obviously, a big gap between those, but there is a lot of opportunity on the video side of the moments that happen in Roblox.

And I'll share a little bit more. We, in our developer conference, we actually invited influencers. We have a large community of influencers that we have nurtured and partner with. Some of these influencers have identified Roblox as a medium for them as well. Some of them has transcended to create Roblox experiences or be part of the Roblox ecosystem. And we recently, with video ads and adding -- allowing creators to start showing videos in their experiences, you could imagine that the same people who are creating video content could have consumption, social consumption of that content on our platform.

So the moment is near. I want to thank all Roblox investors, shareholders, community members, players, large and small, for participating and for your support over the last 2 years as we've been public, and we look forward to seeing you next year. And once again, thank you to the team and to everyone who organized this. We appreciate it. Thanks.

There is lunch that way, so we go out into the right. We'll be circulating around the tables. Look forward to continuing the conversation, if you can hang out for a little bit longer, and we'll feed you. Thank you. Thanks.

Thank you.

Thanks.

Nice job.

Good job.