Mike Guthrie: And so yes, and David, on costs, maybe just back up a little bit. We really €“ if you look at our cost structure, there’s really four primary areas of costs in the business. The first one is, of course, COGS and payment processing, which is more or less strictly variable, though, has been coming down as a percentage of bookings, primarily because €“ we’ve been really successful with prepaid cards and other alternative payment methods that are lower cost. So that’s one. The second one, of course, is the investment in the developer community. And in a sense, we have been leaning more heavily into that. We think that the returns are now €“ we’re seeing those returns in more content, better content, which has historically been a part of the flywheel that’s driven Roblox for years.
And in a way, the savings in margin that we’ve seen in COGS has more or less moved into over the last few years into the investment in the community, which we think is great. Those are variable costs. On the fixed cost side, it’s been infrastructure and people, as you rightly point out. We made a lot of investment in human capital over the last few years. This year, we’re slowing down the rate of hiring, but we are still hiring quite a few people. We’re making a huge investment in great engineers. We still need them. We still have ambitions that are large and a lot of work to get done. So we’re going to continue to make that investment, but we are slowing that down just slightly over the last couple of years. And some of that is also digestion and bring in a more senior team to help manage and onboard and grow the engineering teams, which is great.
As it relates to infrastructure investments and trust and safety, those are high priorities. They really tend to be driven by the growth in our user base. So the users have an amazing experience. But we do €“ over a long period of time, we expect that is going to be a high €“ an area of high operating leverage. I’m not prepared to talk about the growth rate of expenses. I’ll have to go back and take a look at Q4 and reference exactly what you’re talking about. But I would expect to see us to continue to invest because we think the investments are high ROI. But to the extent we are driving healthy growth in the top line, we have operating leverage, which is what you saw in the fourth quarter. So normally, just in terms of trends because I know this question will come out.
Fixed costs tend to continue to grow throughout the year as we hire and invest in infrastructure, again, albeit at a slower rate possibly this year. But overall, as the top line keeps growing, we think that’s the right way to show operating leverage because we do believe the investments we’re making are very high ROI.
David Karnovsky: Thanks.
Operator: Your next question is from the line of Mario Lu with Barclays. Your line is open.
Mario Lu: Great. Thanks for taking questions. The first one is on the January trends for bookings, a 3-point acceleration ex-FX. So I was just curious in terms of how to parse that out. You guys also mentioned the Lunar New Year coming in January this year. Is that typically an uplift to bookings or a drag? So any color in terms of what that trend looked like before diluting the year would be helpful. Thanks.
Mike Guthrie: Well, December bookings is probably a good guide before the Lunar New Year because it was before Lunar New Year and the growth rate was pretty high. So that’s probably a good way to look at it. What was €“ and so what was the other question about? Yes. So January, Yes, January accelerated a little bit over December because the business is accelerating. There’s more content. There’s better content. We’re seeing growth. It really is basic stuff. We’re seeing growth around the world, as Dave talked about, specifically incredibly strong growth in strategic regions. So I think Western Europe and East Asia, we talked about that area being a secular tailwind of the company, I think, in the last earnings call, and that continues to be the case.
As an example, just in the month of January, within the strategic region alone, bookings grew by about 37%. So €“ and that’s now becoming a pretty big part of the bookings. Opportunistic regions, Latin America, Southeast Asia, et cetera, grew at 23% in January. So again, huge part of the world, lots of population and also healthy growth. The other thing that’s continued to allow us to drive bookings growth overall is the fact that in our core markets, U.S., Canada, UK, Scandinavia, ANZ. Those are the parts of the world where we had highest rates of penetration, biggest businesses going into COVID, obviously, they popped up very high during COVID because we were so well established there. But we are now through that and now growing above the peaks that we had in terms of the user base in COVID.
And in particular, our younger users continue to grow, even though that’s the most highly penetrated part of the market. But really, it’s those aged up users that Dave referenced, 13 to 16, in particular, 17 to 24-year olds. And now we’re seeing really interesting growth and substantial scale in the 25 and over user base. So really, its strength around the world and strength in all age demos, but in particular aged up.
Mario Lu: Helpful. Thanks, Mike. And then just one on the EBITDA margins. It was 20% in the fourth quarter, any update to your prior commentary that EBITDA margin should be below 10% in 2023, especially with the strong bookings growth in December and January. Or should we expect any upside to bookings kind of reinvested back into the business? Thanks.
Mike Guthrie: I think what we hope everyone takes out of the fourth quarter is that over the course of the year, we were really, really thoughtful about what we invested in. We believe that we had a business that had a very, very long way to go. We took a really long-term perspective. We believe that hiring great people was the right thing to do. We believe that investing in the infrastructure was the right thing to do. And that the best way to show operating leverage was to grow the top line. And so we were €“ I know the concept of efficiency is being talked about a lot, which is obviously very, very important. And you can get there in a couple of different ways. You can get there through cutting costs, you get there through growth in the top line, you can get there by doing both.
We chose very strategically last year to invest in the belief that the top line would grow, and we would see that kind of leverage. So my only update to what I said last year is that we are thoughtfully investing this year. We were fortunate to bring in a lot of very talented engineers over the last couple of years and talented employees in general. We can slow that growth this year a little bit, but we’re still out investing. And our investments in infrastructure are supporting an ever-growing user base. And those users are converting at very high rates into payers, they’re doing what they’ve always done, which is as they stay on the platform, they find great content, they make friends, they find a community, they end up being very valuable.
And then €“ and Dave, as a follow-on.
David Baszucki: Reiterating on what Mike is saying, there is enormous long-term headroom in our business. We’re focused on getting to 1 billion DAUs on the platform. The largest segments in our business are 2017 enough and those are growing at enormous rates. And we really are focused on the appropriate balance of growth, innovation and efficiency. Our infra is amazingly efficient. We’ve built our own cloud, which continues long-term to bear efficiency benefits. And we have a fair amount of control on our headcount, velocity and growth. And simultaneously, we’re trying to move as much money as we can to the developer base. So we’re taking a very balanced approach here to the velocity of innovation as well as our efficiency.
Mario Lu: Great. Thank you both.
Operator: Your next question is from Bernie McTernan with Needham & Company. Your line is open.
Bernie McTernan: Great. Thank you for taking the questions. Just wanted to hear win on Western Europe and APAC. Just any additional color you can provide in terms of why the acceleration is happening right now from either engagement perspective or content perspective that or anything else that’s driving this?
David Baszucki: Some of the countries in APAC and Western Europe are not as mature as the U.S. as far as our user growth. But I would highlight the U.S., which has been traditionally where we got our start continues to show amazing growth and continues to show growth in the 9 through 12 segment, which is really where we’ve got our start. So there’s underlying growth that is worldwide as we focus on frequency. And as we focus on engagement, we focus on the quality of our product, even for our core market, but on top of that, Germany, France, less mature than the U.S. continuing to grow in January in Germany and in France, we saw DAU and hourly growth both north of 20%, so there’s a lot of room there. And we ultimately, once again, as part of our vision of innovating the way people come together. We are ultimately trying to get every country in the world to the same level of engagement as the U.S. And so some of those countries are just earlier on the growth curve.
Mike Guthrie: Yes. And Bernie, just as you’re doing the math, maybe two thoughts. One is, I think David talked language is getting better and better everywhere around the world. So where there is translation. I think that certainly is helpful. But the other thing is because as Dave mentioned, in the U.S., we started off with a younger age demographic. Through that age demographic became very, very popular there and then the older age demos started to come on board. In some of the other markets in Europe and Asia, it took a while for Roblox to sort of get there. And when it did, it was almost like we have much more content to all of the ages same on the platform almost more so at the same time. And so we get growth from U-13 and over 13, almost at the same time in places like Western Europe and East Asia. And I think that has €“ that affects the math as we see the platform really gaining traction because it’s doing so across all ages in those markets at the same time.
David Baszucki: One final risk on what Mike said and also, refer on AI. One other thing behind the scenes is we continue to improve on our own natural language translation facility, which is getting better and better the higher of the quality of that system, the higher is our experienced quality around the world because our developers traditionally develop in one language and we auto translate into many, many languages for them. An example would be Japan, which we believe we started to hit the level of product quality both on our app as well as the experiences to drive viral growth there. And in January in Japan, our hours and our DAUs were growing at over 100% year-on-year. So there’s a little bit of a leverage as we improve the quality of our translation technology.
