Roblox Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 9, 2023

There are 12 speakers on the call.

Operator

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Roblox Second Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Thank you.

Operator

Stephanie Natani, you may begin your conference.

Speaker 1

Good morning, everyone, and thank you Thank you for joining our Q and A session to discuss Roblox's Q2 2023 results. With me today is Roblox Co Founder and CEO, David Biszucki and CFO, Mike Guthrie. As a reminder, our shareholder letter, press release, SEC filings, supplemental slides and a replay of today's call can be found on our Investor Relations website at ir. Roblox.com. On this call, we will make some brief opening remarks And reserve the rest of the time for your questions.

Speaker 1

Our commentary today may include forward looking statements, including but not limited to our expectations of business, Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in our forward looking statements and such risks are described Excuse me, everyone, risks are described in our risk factors, including in our SEC filings, including our most recent reports on Form 10 K and Form 10 Q. You should not rely on our forward looking statements as predictions of future events. We disclaim any obligation to update any forward Statements except as required by law. During this call, we will also discuss certain non GAAP financial measures. Reconciliations between GAAP and non GAAP metrics For our reported results can be found in our press release as well as our supplemental slides.

Speaker 1

For our webcast participants, please note the question icon at the bottom right of your screen, where you can submit your questions. With that, I'll turn it over to Dave.

Speaker 2

Thank you, and good morning, everyone. Q2 was another quarter of strong growth across all our key metrics and we welcome you today. Bookings were $780,000,000 up 22% year on year. Our DAUs were $65,500,000 up 25 percent year over year. And our hours engaged in Q2 were $14,000,000,000 up 24% year over year.

Speaker 2

We generated $28,000,000 of operating cash. Our cash is now north of $3,000,000,000 at 3,025,000,000 We showed a GAAP loss of $283,000,000 and covenant adjusted EBITDA at $37,900,000 These results powered by all of our investments in innovation And as we discussed last quarter, we continue to be on track with our bookings growth and our expense control To generate positive operating leverage, we highlighted in the first half of this year that our bookings are growing year on year than our cost of goods sold. We continue to expect in Q3 of this year that our bookings growth year on year We'll be faster than our infrastructure growth year on year and we continue to expect in Q1 of 2024 that our bookings growth will be Faster than our headcount expense. We expect to return to double digit covenant adjusted EBITDA margins In Q4 and 2024 as a whole, let's dive into the business. We're driving continuously To our vision and mission of 1,000,000,000 daily active users and as part of our 4 part growth strategy, I want to highlight Some results in all areas including international, all ages, really the utility of Roblox and driving towards A daily product for everyone and our economy and ecosystem.

Speaker 2

Let's start with international. And I want to highlight That many of our huge international cohorts are really big and growing faster than our overall Bookings and DAU rate. Let's start with some key geographies. Germany DAUs, 25% year on year growth Korea, 34% year on year growth Brazil, 38% year on year growth India DAUs, 40% DAU growth year on year. And Japan, one of the largest consumer gaming market spaces, DAU growth of 107 percent year on year.

Speaker 2

A product highlight supporting this, we mentioned semantic search Last quarter for Japan, we turned this on everywhere in Q2. This improved search for Out of catalog searches and pop culture terms and we've seen a significant increase in global Click through rate because of this north of 3%. We're no longer talking about aging up. We are a platform for all ages. Our 13 and over cohort is 5 times larger than our under 13 cohort And our 13 and over cohort is growing at 33% year on year for DAUs.

Speaker 2

Our 17 through 24 cohort is growing at 36% year on year for both DAUs and ours. And I do want to highlight that we introduced experience guidelines this quarter. You can read about it in our blog. Around the world, 17 through 24 and our 25 and up cohorts consistently show higher bookings per hour than other age Let's take a look at our dev ecosystem. We are on track for our developers To earn $800,000,000 in 2023, our DevEx payouts in Q2 were 165 1,000,000 up 16% year on year.

Speaker 2

And I want to highlight the growing variety of content on our platform. In the last 12 months trailing, the 10 highest earning creators earned an average of $27,000,000 each. These are growing and larger significant businesses. But at the longer tail, developer number 1,000 is now growing 2 times faster over the last 3 years And is making $64,000 a year. That's 1,000 and 1,000 of people making a living on Roblox.

Speaker 2

And as far as content variety versus a year ago, within the top 150 experiences, we're seeing 9% more variety of new experiences created in the last 90 days this year. A cool feature that we introduced for all devs is product analytics. It's ways for developers to Monitor user acquisition, performance, benchmarks. And I want to highlight in the last 6 months Use of analytics by the top 10 ks devs has gone from 22% to 40%. We think this is a good signal.

Speaker 2

This is 10,000 developers with 40% of them paying deep attention to analytics to help, we believe improve the quality of their For those that are deep into our ecosystem, I want to highlight that the anti cheat technology we Acquired from Bifron is live now. It's made a significant impact in the quality of experiences on our Windows platform Where a lot of our more serious gamers are playing and really significantly reduced exploits and bot activity. As we're Moving towards our vision and mission of connecting a 1,000,000,000 people daily, we're making significant advancements in our products To make Roblox a daily utility. And I want to highlight, we believe we have significant headroom Even in our core market where we got our start, which is USA 9 through 12, a highlight, We introduced Meta Quest on beta. We saw a 1,000,000 downloads in the 1st 5 days on that platform.

Speaker 2

And it highlights our vision of Roblox being available everywhere and it highlights the vision that when a creator makes an experience on Roblox, It immediately runs on all platforms and is immediately dynamically translated into all languages. We believe that's Part of the DAU growth we've seen around the world. Getting into utility high Frequency communication on our platform. In the USA, we now have 12% of our 13 and up Daily actives using voice and 2,000,000 voice DAUs worldwide as of the end of Q2, this is a 30% growth over the last 6 months. And we have strong evidence That is people become more immersed with voice.

Speaker 2

It has uplift in key metrics both on hours spent and on Robux. Facial animation, we just turned on for 100% of voice users. I want to highlight this coupled with voice, we believe makes Roblox communication much more connected and realistic. And we also turned on Animated heads for everyone using voice. We have some great stuff coming on animation as well.

Speaker 2

On the social side, I want to highlight we've been hard at work improving the way people connect and the way real life friends And we've seen a 9% year on year growth in real life trending in the 1st week, Which we feel is significant and once again strong directional evidence that this benefits retention. On our economy, we're creating products and systems To build a vibrant economy and empower our creator community to offer them more ways to earn and be discovered, Advertising is now live in its early form. I want to highlight some key things there. We have promoted Christina Wooten To Chief Partnership Officer to help drive our connection with brands, we've now done over 200 brand activations on the platform and we'll make revenue this year in advertising. And we'll make revenue this year in advertising.

Speaker 2

We're going to share at Investor Day in November our expectations for this For 2024. But I do want to highlight that on the supply side now, 19% of the Top 100 experiences on our platform have ad units and this has been added organically by the creator community. And also want to highlight that there are areas already where we see strong demand and more demand than supply For advertising on the platform, want to welcome some of our advertisers that are live, including NARS Cosmetics, H and M, Spotify, NASCAR and Iheartradio, I'm really excited about Really the vision that we've been talking here that this is a new form of immersive advertising. This is a form of advertising that actually allows people To go to an immersive experience and experience a brand, highlighting that we are on track On our UGC economy to get to full avatars throughout the ecosystem by the end of the year, We think this is going to significantly change the look and feel of Roblox, really looking forward to that. Also just Highlighting on search and discovery on the Efficient Frontier, in Q2, we've been able to increase both The impact of bookings and the engagement on our search and discovery system at the same time, Which is what we've been talking about doing for a while.

Speaker 2

Let's talk a little about AI And just how big it is for a platform like Roblox. We are approaching 14,000,000,000 hours of engagement on Roblox in Q4. There are many, many, many areas that we're already live on the platform with ML and AI stacks and more to come. I want to highlight that we have 70 machine learning training stacks right now. We have trained, for example, our own translation model with 1,000,000,000 parameters.

Speaker 2

This is the model that helps Auto translate all experiences, when a creator makes them. And the range of verticals That we have live right now, we've mentioned material generation and code generation have shipped. We mentioned that we're making Really impressive gains in both quality and cost throughout our safety systems on all types of assets, which is live. We've mentioned that we're building our own model internally and running our own inference on voice safety. Internally on search, we're live and we have a lot of 3 d generative Coming as we move to creation everywhere and our Avatar project.

Speaker 2

I want to highlight 2 key things on our platform. First, we've got 5 approaching 5,000,000,000 hours of human interaction on our platform every month. And this human interaction can help us and does help us reinforce the quality of our civility We believe long term that on our platform because we can run infrastructure Inference on our own infrastructure, there's an amazing opportunity to run inference all over the platform and run it at extremely low cost. I'll give you an example. Our personalized recommendations right now, 100% of these are running on our own infrastructure, Running inference and doing it really cheaply at scale, also all of our safety pipelines, image, Audio, voice, text and 3 d are running on our own platform, doing inference on our own platform at significant Efficiencies of cost and driving quality there, longer term look for us To build bigger and more sophisticated models, first around voice, text and language supporting safety and civility, Look for bigger and more interesting advanced models for us for 3 d generation and ultimately look for models from us On general human simulation and NPCs, once again running at extremely high performance and low cost On our own infrastructure.

Speaker 2

Finally, just to cap it off and then we'll start taking questions. We do have a research group that is producing some really high quality technology that we will be wrapping into our product over the next 2 to 4 years under Doctor. Morgan McGuire. Check out research. Roblox.com.

Speaker 2

Manish Agrawal just published a great paper on adding conditional control to text to image diffusion models in 2023, and you can see all of what we're doing there. With that, thank you, and we'll welcome questions.

Operator

And your first question comes from the line of Andrew Crum from Stifel. Your line is open.

Speaker 3

Okay. Thanks, guys. Good morning. So Dave, I think in your prepared remarks, you made a comment that the company is on pace to pay out $800,000,000 in developer exchange fees this year. That would imply an acceleration in the second half over the first half against conceivably a deceleration of bookings growth.

Speaker 3

Just want to make sure those assumptions are correct and what's driving that uptick in the second half? Thanks.

Speaker 4

Hey, Drew, it's Mike. Generally, backup revenue in our business is higher than the front half of the year. It's pretty simple. So It's straightforward. You know what the roughly what the payouts are.

Speaker 4

And so that's what's driving the $800,000,000 number.

Speaker 3

Got it. Okay. And then just a quick follow-up. Can you address your plan to enable developers the ability to offer subscriptions within their experiences. Any sense on timing and if or how Roblox would share on the economics of the accompanying bookings that are generated through subscriptions?

Speaker 3

Thanks.

Speaker 2

Yes. So thanks for highlighting this Roblox way of Thinking about things, a lot of our developers would like to offer VIP subscriptions directly for their experience. We are working on it. We plan to support this. We're not going to give a date or a time.

Speaker 2

We do think it will be significant And we do think it will interact with subscriptions on the platform and recurring revenue.

Speaker 3

Thanks guys.

Operator

And your next question comes from the line of Eric Handler from Roth Capital Partners. Your line is open.

Speaker 2

Yes. Good morning.

Operator

Thanks for the question. Wonder if

Speaker 2

you could talk about what the impact has been on various cohorts for Now having 17 plus rated content. I want to share that it's early. That said, we have started to see some organic traction, which is just the same as, we've seen in all the areas. We have Started to see developers build specific 17 plus experiences and they're starting to show up in our sorts. We We think this is going to continue to grow and get bigger, but you can check it out on the site.

Speaker 2

Great. Thanks. And just as a follow-up, With advertising beginning to rollout now, how are you pricing the inventory? Yes, this is really exciting. We've been a little gentle on the pricing right now.

Speaker 2

We're going to we Expect at some point in the future to float the price. And when we do this, we will see the true value of what we believe is an Extremely new and valuable ad unit, which is a teleport into an immersive This is a new ad unit unlike a video ad unit, unlike an image ad unit. It's literally moving real time People on Roblox into one of our partners' experience and we will self discover that in the free market as we float pricing.

Operator

Thank you very much. And your next question comes from the line of Clark Lamkin from BTIG. Your line is open.

Speaker 5

Thanks. Good morning. I have 2. Dave, I want to start with some of the AI commentary you made in the shareholder letter. Understanding that it's And accelerate creation across the platform, I think the consequence from a user side seems fairly obvious in terms of the overall experience improving.

Speaker 5

But as we think about The developer side, how does that increase sort of in volume and velocity of content creation impact Developers, does it make it a more competitive ecosystem? And if it is, is there a need to, I guess, sort of offset that with potentially higher developer distribution rates over time?

Speaker 2

We think that I mean, we're entering an Exciting new period on our platform. You highlighted that for users traditionally when users Create immersive 3 d content or social content. They're used to doing it with graphics tools and 3 d type creation. We think experiences, for example, a fashion design experience is going to migrate all the way from using a virtual sewing machine and scissors, 2 purely based text prompts and ultimately will enter an age on Roblox Where anyone can make their avatar or clothing 100% through text prompts. So if I or you wanted to build a piece of clothing, we could We're going to see that created in real time.

Speaker 2

We think for developers, this is going to accelerate quality Up and down the stack, there's a great video clip. We're not going to claim when we will achieve this on Westworld where there's a text braced interaction of 3 d creation. And we do think that's the product vision Where developers will have all tools at their disposal. We'll see a greater diversity of experiences. We will see people who before didn't expect To be creators making immersive 3 d experiences and we'll see the ones that are created by developers become more rich and dynamic, We may ultimately even see experiences that are dynamically personalized for each individual player.

Speaker 2

So It's really early, but we think it's a really exciting frontier for 3 d creation.

Speaker 5

That's helpful. I appreciate the comments. Maybe one for Mike as a follow-up. I want to kind of pull out the thread that you dangled a moment ago with Saying the back half of the year is going to be bigger than the first half traditionally. I think that sort of implies an acceleration Or I guess at the very least steady growth into the back half of the year.

Speaker 5

Assuming that sort of persists if not improves next year with Product cycles that are unfolding and sort of improving, we talked about advertising already. Could you help us, I guess, Think about ongoing rates of margin improvement with the business. You identified the sources, I guess, across OpEx, but Maybe simplifying a lot of those things between COGS, ITS and R and D over time, does that roughly speaking translate to sort of 200 to 300 basis points Per year, is it a little bit more or would you be willing to quantify at this point? Thanks.

Speaker 4

That was a long question. That's okay. We will see Leverage against pretty much all of the cost areas over the next 12 months will we think we'll see a little bit of leverage in Cost of goods sold, because we've slowed down hiring, leverage against our compensation expenses because in for trust and safety, We slowed down a little bit there. We've already closed the gap pretty meaningfully on both of those 2. Just to give you a few numbers, In the Q1, Infrastructure and Safety was growing at about 33% year over year bookings were growing at 23%.

Speaker 4

And then just last quarter, Infrastructure and Safety was growing at 24 and bookings were at 22. So you can already see there's a lot of leverage that we've already shown and obviously well underway to seeing leverage in Q3. Same thing with personnel. The headcount costs were growing far in excess of bookings in Q1, much less in Q2. And we've already taken steps so that We'll see leverage in Q1.

Speaker 4

So we or 24. So we really feel like all the cost areas, there is opportunity for leverage while we continue to invest in growing the top line. It will really depend on both a combination of It will really depend on both a combination of how the costs roll out and how fast our top line grows obviously, but I don't really we're not giving guidance on what the year is going to end up. We're just saying Q4 is we're a seasonal business. Q4 is back into double digits And we should be able to run double digits for 2024 as a whole.

Speaker 6

Yes. And on the high

Speaker 2

end, I just want to highlight, we continue to hire a Lot of people, the year on year incremental headcount compensation costs will go down slightly. We do expect bookings in Q1 2024 To be growing at a year on year rate higher than the headcount compensation. And the final thing just to add, I said once again in my statement We do expect double digit covenant adjusted EBITDA margins in Q4 and 2024 as a whole.

Operator

And your next question comes from the line of Brandon Ross from LightShed Partners. Your line is open.

Speaker 7

Hey, thanks for taking the questions. Your beta with MediQuest actually opened

Speaker 8

a few

Speaker 7

questions In my mind, one of them is, while we're on new platforms, is there any update on opening Roblox to Other new devices and game platforms like PlayStation or Switch? And then I have a follow-up.

Speaker 2

It's a great question. High level, we believe immersive 3 d human co experience should be on every Platforms, we, of course, have our eyes on those platforms and stay tuned.

Speaker 7

Okay. And then, Dave, it seems like in the past you haven't shown all that much interest in VR, I could be wrong. But do you believe that VR now will become an important tool for accessing your platform? And does the Apple Vision Pro change your perception At all of how people will experience 3 d Interactive in the future. And then maybe if you could talk a little bit about technically How much more complicated it is to build for VR and AR And still create the same experience across all the platforms you work with.

Speaker 2

Yes. Hey, I tweeted a few weeks ago that we had A million installs on Meta Quest. There's a lot of good information in the comments there where people who haven't used VR before are used Certain Roblox experiences on their phone or their computer and they put on a VR headset, it's like, oh my gosh, this same experience is All around me, I'm deeply immersed in it, and it's the same experience I'm used to. So we do believe it's a Really immersive experience. Our strategy has always been that immersive three d should be everywhere.

Speaker 2

We want Highest quality experience everywhere. We want a creator to make once and run everywhere. We've done a lot of work On performance and on human interaction, so the same experiences out of the box work on Meta Quest. A lot of that work, Of course, it's the same work we would do on Apple Vision, just as a lot of the work we've done on Xbox would be the same work for PlayStation. And we are really excited that some of the performance work we would do for Meta Quest reflects throughout our whole ecosystem.

Speaker 2

So We're already pretty good at build once, run everywhere. And as you correctly note, there's a lot of opportunity For both immersiveness on VR and more platforms. Thank you.

Operator

And your next question comes from the line of Matthew Koss from Morgan Stanley. Your line is open.

Speaker 5

Hi, everybody. Thanks for taking the questions.

Speaker 9

I have 2. Maybe I'll just revisit DevEx for a second. So, it stepped down to like 21% of bookings in 2Q, And given your expectation of $800,000,000 of bookings excuse me, of DevEx for the full year, It would imply that as a percentage of bookings in the second half, it would have to step up depending on your bookings assumption, 2 points, maybe even 3. So I guess I'm wondering given that it's a formula that the DevEx payouts are based on and you have gift cards offsetting Some of what's happening in the second half, what changed in 2Q and then what's going to change in the second half to kind of cause that ratio of Devex payouts to go up? I have one follow-up.

Speaker 9

Thank you.

Speaker 2

Yes. So, hey, I want to go high level on this and we believe over time More and more ways creators earn money on our platform, traditional DevX, engagement based payouts, we have advertising coming And potentially subscriptions and other things. So this is going to be a very rich ecosystem. We've also highlighted that by Q1 of next year, We expect year on year bookings growth to be faster and greater than cost of goods, than infra and then headcount. That leaves either cash generation or DevEx, and that puts us in this wonderful place To balance really how much cash we generate versus how much we distribute to developers.

Speaker 2

So at a high level, The more we drive to this, the more opportunity we have for both earnings and DevEx. With that, I'll kick over to Mike for detail on this.

Speaker 4

Yes. And then just on the quarterly and Timing, just look at 'twenty two as a year, the debt ex rates were 23, 20 2, 20 2, 20 2, 20 in the 4th quarter, 24 in the first So the timing of prepaid cards doesn't, in fact, affect the payout ratios back to 21% This quarter, that number, if you can consistently look over time, it's moving up and it's moving in the 22%, 23% range, again 24% in the Q1. So it's going to be in that it's not entirely formulaic because you do have engagement based payouts On top of the normal formulaic piece and to Dave's point, other things that developers can also participate in over time. So, the number will fluctuate 100, 200 basis points quarter to quarter sometimes. And overall, so it implies that we're going to again be a bigger business in the second half than we were in the first half and it implies A good healthy payout ratio for our developers, which is ultimately we're always investing in the developers.

Speaker 9

Great. Thank you. And then just on the AI model, There's a comment in the shareholder letter about creating a multimodal generative AI model. Dave, you were talking in the prepared remarks about how efficient you're able to be on the AI side. So I guess from a headcount and infrastructure perspective, Are all the investments, if not in place, at least in the plan in order to create those AI models that you're going to need to Go to the next generation of what the platform is going to be capable of?

Speaker 9

Or could we conceivably be in a position where as you Try to build these tools, it requires maybe more investment and that's a worthwhile thing to do.

Speaker 2

Yes. I want to highlight that right now we have a lot of people working on AI internally already. So we have a fairly significant team. And it's a fairly significant team considering once again the scale of what we're doing. We're running 70 different vertical training models right now.

Speaker 2

We built fairly significant tech on the trust and safety side. I don't want to comment On the future opportunity there, we're always open to things. But right now, we're still on track to have our bookings Expense beat our headcount expense in Q1 of 2024 and we have a really great sophisticated AI team already in place.

Speaker 9

Great. Thank you.

Operator

And your next question comes from the line of Omar Zuske from Bank of America, your line is open.

Speaker 10

Hi, thanks for taking the question. You launched UGC Limited in April. I was wondering if you could update us on your commercial learnings thus far. And I'm particularly curious if you saw a corresponding increase in the mix of subscriptions. And I have a follow-up question.

Speaker 2

Yes. I'll tell you, right now, limited UGC is the long term vision. Right now, it's a smaller proportion of our marketplace. But you could one could say that UGC Limited is more accurately near the economics of the real world as far as Scarcity as far as cost of goods sold, as far as creating really a rich and vibrant economy. And we do expect ultimately for every cohort, every type of asset to follow this pattern of more similarly mirroring the real world.

Speaker 2

The pricing on UGC items is 3x, the non UGC or non limited pricing, which is a really, really good sign. And it's a good sign that we're moving in the direction of strong economic theory supporting how we build a virtual goods marketplace. We'll be rolling out expansions of this over the next two quarters and ultimately it's our long term direction.

Speaker 10

Any comment on the effect on premium subscriptions because from my understanding you have to have a premium Description in order to participate in the trading of that?

Speaker 2

Yes. I believe we may be referring to be a creator and we're using that most likely more as Validation of user account, we'll have to check on that. I want to validate that. But we're not requiring subscription necessarily, I think, to buy UGC Limited. And we'll check with the team on that.

Speaker 10

Understood.

Speaker 2

So yes, we're not trying to Yes. Just I want to clarify, we are not trying to drive subscriptions with UGC Limited.

Speaker 10

Got it. And how much do you think UGC Limited could influence the trajectory of monetization in your core markets in the next few quarters?

Speaker 2

Hard to say. We are doing experiments once again through every cohort, trying to optimize mirroring of real life. All of the projections we talk about, as far as bookings, versus expense and Q1, Really headcount expansion acceleration or not acceleration, but really bookings beating headcount expense. I don't believe we have huge Gains from this built in, I believe we have a lot of upside there.

Speaker 10

Thanks a lot, Dave. Appreciate it.

Speaker 2

Yes.

Operator

Thanks. And your next question comes from the line of David Karnovsky from JPMorgan. Your line is open.

Speaker 8

Hi, thanks. Dave, I was wondering if you could discuss for and I know it's early for games that have added advertising units, How that's impacting the overall experience? Is it purely additive in terms of monetization? How does it impact engagement? And then your shareholder letter noted Giving measurement and attribution tools to brands, wanted to see if you could unpack that a bit.

Speaker 8

How much targeting, you think you can provide for marketing purposes?

Speaker 2

Yes. Two things to unpack. One is developers have a lot of analytics right now on a platform and they're opting In to these ad units, once again to the 2 19 percent of the top 100, we're optimistic that these types of ad units are native immersive, non blocking and additive. We're not The non blocking and additive, we're not talking things that prevent you from playing or pre roll or things that get in your way. We're talking about Add units that somewhat simulate the real world.

Speaker 2

We're walking around. We can see a portal to go to one of our Brand experiences and then people will have a back button and they can come right back. So we're really optimistic about This I would say, can you just highlight once again the second part of your question?

Speaker 8

Yeah, Yes. It was just about in the shareholder letter, you talked about giving measurement and attribution tools to brands. Just wanted to see if you could discuss that. Yes. What level of targeting you're willing to get?

Speaker 2

We're building a full ad marketplace for this new type of ad unit brands will have Within the constraints, of course, of safety and civility on our platform and PII rules and COPA rules And all of those types of things as well as our own vision, the ability to, I think, thoughtfully do some targeting. We're not going to be doing this for you 13s on the platform. This is all for 13 and up. And we are already seeing Buy for these ad units. Thank you.

Operator

And your next question comes from the line of Matthew Thornton from Truist Securities. Your line is open.

Speaker 11

Hey, good morning, David and Mike. Maybe 2, if I could, 1 on AI 1 on ads. On AI, I don't know if this is for Mike or not. I think you guys have got thousands of Trust and safety headcount on the platform at current. I think that's an area where you could certainly point AI to drive efficiencies.

Speaker 11

I'm curious If you have any color or thoughts on timing of attacking that and what that impact might look like from a margin lift perspective. And then just second on ads, as we think about the back half of the year, it sounds like we're going to need a lot more color here at the Investor Day in November, which is great. But as we think about the back half of the year and into next year, how should we think about, number 1, just The biggest friction point that you see that you still need to unlock to kind of grease the wheel for acceleration there or Or said differently, maybe milestones we should look for in that ad business. And then a follow-up to your prior commentary on ads. I'd be interested to hear what developers are opting for in terms of ads portal versus billboard, if you have any

Speaker 2

Okay. Yes. So, 2 things. 1 is, We'll give you a little hint here that we've indicated our year on year bookings growth is going to be faster than our infra costs in Q3 of this year, infra includes all of our infrastructure hardware. It also includes cost for trust and safety.

Speaker 2

And we'll also say that all of our asset review pipelines are moving more and more to higher quality And lower cost with AI acceleration, all 5 of those pipelines I mentioned. On the advertising thing, the thing to watch For us, we'll be and we're not going to give a date. When we fully float the advertising market and so you can see true pricing Out there, we're excited about it because we're seeing supply demand really being interesting in some cohorts. As far as portals, of the 19% of the units that we've placed, I believe most of them, I think 12% or 13%, I'm looking it's about 12%. Great.

Speaker 2

So 12 of the top 100, I'm grabbing the data. Yes, cool. So 12 of the top 100 are placing portal ads. Do I have the right data there? 10.4, thanks.

Speaker 2

And now I'll kick it over to Mike.

Speaker 4

Yes. Thanks, Matt. On friction, again, maybe just I'll keep it high level for a second. Ultimately, in my mind, it's the total volume of brands that get engaged on the platform. So brands Today, agencies working with agencies and working with us, how many of those brands are building and engaging on the platform?

Speaker 4

We noted there's over 200 brands that have engaged with us at this point. That's a double over last year. And that rate of growth and that rate of adoption is really what makes the platform a rich and open opportunity for advertisers. So that's the number I track almost more than anything. I don't think it's technology.

Speaker 4

I think It's the volume of brands and agencies that are working with us and getting their content onto the platform. So that's really what I look at.

Speaker 2

Yes. And then one final thing, the unlock When we say float pricing, the complementary unlock there is everything we're doing is completely Self serve. We're not building a handholding platform. We're building a platform where any brand on their own can come and start using our

Operator

And we have time for one more question. Your final question comes from the line of Tom Champion from Piper Sandler. Your line is open.

Speaker 6

Hi, this is Jim on for Tom. Thanks for taking the question. I guess one for Dave. So I think you mentioned some detail around decreases to the premium payout program. Can you just touch on that a little bit?

Speaker 2

I'm trying to think I don't think we've mentioned any detail around Can you give more color on that? So we haven't I

Speaker 4

think we've addressed premium payouts on the call. What was

Speaker 8

the Comment?

Speaker 2

Yes. So we've been talking about DevEx and also engagement based payouts. We haven't announced any changes in either of those programs.

Speaker 6

Okay, great. And then I guess just one more on the developer exchange fee. Is there anything we should keep in mind with respect to Like FX here for payouts that are going to non U. S. Dollar developers?

Speaker 2

Yes. I'll chime in. I believe we pretty much normalized everything to the U. S. Dollar in all of our payouts And do that in real time as we pay up.

Speaker 6

Okay, great. Thank you.

Speaker 1

Well, thank you for joining us today. That's a wrap for us. Rob, you can close it out.

Operator

Thank you. And that does conclude today's conference call. Thank you for your participation. You may now disconnect.

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Earnings Conference Call
Roblox Q2 2023
00:00 / 00:00
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