David Baszucki: Hey, really, proud to be on Quest with Meta and, along with PlayStation in Q4, highlighting our vision that immersive 3D connection and communication. It should be on phones, tablets, computers, VR headsets, consoles. We can span the other platforms where we’re not on — and those are all logical candidates. Vision Pro obviously is an interesting candidate. There are others out there that you all know about as well. And I think looking way off into the future, we’re excited about the really connection and communication things we’re building out on our platform, including our open source Roblox Connect that shows up a lot of communication APIs, and we’re well aware that some of this communication may go beyond VR into MR and AR as these platforms become more prevalent.
Mike Guthrie: Thanks, Eric.
David Baszucki: Thank you.
Operator: Next, we’ll move to the line of Drew Crum with Stifel. Please go ahead.
Drew Crum: Okay, thanks. Hey, guys. Good morning. So, we saw that you introduced real-time chat translations on the platform recently. Any early learnings you can share there? And as you continue to push globalization of the platform and launch features that enhance localization, what would be the next milestone? Is it voice translation? Any sense of timing on that? Thanks.
David Baszucki: Yeah. Highlighting my tweet on Monday in our release that I believe right now between 16 languages, we’re allowing a real-time text chat translation, always sitting on top, of course, our same safety, civility, back-end infrastructure. This is a first step really to some of the dreams we shared where a class in the United States might have a partner school somewhere overseas and be able to go visit them and communicate with them. Also highlighting this is our own model based on our own ML platform, where behind the scenes, we’re building out this AI platform to support both generative as well as stuff like this translation. And it’s running on the same technology that allows translation of content, as well without any ship dates and leaning in on vision.
Two things. We’re getting really good at high volume voice processing for safety and civility, once again on our own infrastructure at low cost. And as you see, we’re getting good at models that can drive real translation. So, you could project the overlap of those two Venn diagrams. And I think I tweeted once again on Monday, voice would be lovely someday once again with our safe foundation. Thank you.
Operator: Next, we’ll move to the line of Andrew Uerkwitz with Jefferies. Please go ahead.
Andrew Uerkwitz: Yeah. Hi. Thanks for taking my question. Mike, could you just talk a little bit about the full year ’24 guidance? How do you think about the different mix of DAU growth and maybe spend per hour, even maybe spend per payer? Like, what’s the key metrics we should be watching for to see whether you overperform or come in line there?
Mike Guthrie: So, Andrew, the forecast that we build internally are generally driven primarily by user growth. We tend to take a conservative assumption on engagement. We have relatively high engagement on the platform. So, we don’t tend to forecast meaningful increases in engagement per user, even though we have achieved those over time, but we just generally take a fairly conservative view. We’re relatively stay conservative on our conversion to payer numbers. And so, we have tended to have a little bit of extra room there. And then, in terms of monetization, we are fairly conservative improvements in monetization, but we do forecast some improvements that we have to achieve those. As I mentioned earlier, we — our economy team has a lot of things that are very — so compelling opportunities to improve monetization.
We tend to bake a fairly small number of those into the models that those are available for upside. So generally, the models that we build internally and from which we yield our guidance are focused on user growth and continued user growth.
Andrew Uerkwitz: Got it. Thank you. And then, just as a housekeeping question, on the covenant adjusted EBITDA, you’re making no other adjustments there besides deferred revenue. So, it truly is your historical adjusted EBITDA plus the change in deferred?
Mike Guthrie: That’s correct. Yeah, that’s right. On Page 36 in the supplemental materials, you can see that number. What will look odd a little bit in the letter with the guidance as adjusted EBITDA is negative because the deferred is not in there. You have to add the deferred to that and you’ll be back to covenant adjusted EBITDA, which is normally the number that we’re talking about.
Andrew Uerkwitz: We got it. Got it. Okay. Perfect. Thanks, guys.
Operator: Next, we’ll move to Eric Handler with ROTH MKM. Your line is open.
Eric Handler: Good morning, and thanks for the question. Mike, I think you alluded to this earlier, but your operating cash flow or your EBITDA to operating cash flow conversion has been running close to about 100%. Is that a good measure to think about for 2024 and beyond? And also, what is your CapEx expectations for the year?
Mike Guthrie: When you say free cash flow conversion, the EBITDA, operating cash flow conversion, can you restate that part of it?
Eric Handler: Your covenant adjusted EBITDA to operating cash flow conversion is pretty much right in line around 100%. Is that…
Mike Guthrie: Yeah, that’s right. It’s just timing. That’s right, Eric. It’s just a timing difference, and it has to do with working capital and the timing of working capital, and it’s most significant in Q1 and Q4. Q4, it’s the buildup of working capital, and in Q1, it’s the collection, the heavy collections that come in. So those are the quarters where there’s a big difference. CapEx expectations this year are $180 million for the year. And, I think in prior periods we’ve indicated some of that is related to real estate. It’s not all infrastructure. So, our infrastructure investments have come down pretty significantly.
Eric Handler: Okay. And then just as a follow-up, you are — now that margins are expanding, free cash flow is once again nicely positive, you have the high quality problem of being on a position of having a good amount of excess cash. What’s your view on that excess cash and sort of as you think about capital allocation?
Mike Guthrie: Well, I would say we’re in a position to have a nice cash position. Whether or not it’s excess for a company of our size is, I would say, is kind of a matter of opinion. We like having a very strong balance sheet. We like having enough capital on hand, where if we needed to do something or wanted to do something opportunistic, we could do that. We’re also in a nice position where we continue to invest in the business, continue to grow and invest, and we’re doing that out of operation. So for now, we like the balance sheet, we like where it is. We don’t really look at it as a lot of excess cash. Our capital allocation is really investments in infrastructure and engineering and product, and we’re able to do that out of the operating cash flow of the company, so that’s a nice place to be.
Eric Handler: Thank you very much.
Mike Guthrie: Thanks.
Operator: Next, we’ll move to the line of Brandon Ross with LightShed Partners. Please go ahead.
Brandon Ross: Thanks so much. One of the tools that you’ve introduced into the economy has been subscription. Just wondering if that’s — if you see that as an important monetization tool? And how that may impact developers’ abilities to create new types of experiences? And in general, when you roll a new tool out for developers, how long does it take for that to kind of be integrated into how developers create new experiences? Like, what’s the lag there?
David Baszucki: Yeah. We’re not breaking these numbers out, but subscriptions are very consistent with our vision of creating a platform where a lot of developers have optionality on how they monetize. We saw a — I don’t know if we shared, you could probably go in and figure it out what percent of the top 20 creators on the platform are now offering inexperience subscription, highlighting that we’ve seen good adoption amongst our creator base. And these subscriptions allow an individual creator to create a recurring revenue stream whether the user is using mobile payments or credit card or other recurring type payments. We believe this will contribute to long-term monetization on the platform. We’re not sharing the breakout. Mike, I don’t know if you have any…
Mike Guthrie: No, we also think it will contribute to retention and the developers, obviously, they’re free to implement it as they want. I don’t think there’s — Brandon, to your second question, I don’t think there’s any pat answer on time it takes developers to absorb things that we created for them. They all will do that at their own pace based on how that they think that works for their own business. Ultimately, our job is to give them the visibility and the tools to build, and they roll them out as they see fit.
Brandon Ross: And then, obviously, Apple made some changes in the EU to App Store take rates and such. Does that impact you at all?
David Baszucki: Couple of highlights on this across all of our store partners, whether it’s Microsoft, Google, Apple, Amazon, and others. One is, all of the guidance we’re giving is assuming no change in those systems. The second is, they all continue to be great partners. Third is, we are examining the EU ruling to see if it makes sense for us. And the fourth is, we have always hinted that as much as possible any adjustment in future fees, we would want to distribute as much as possible both to our creator community and judiciously some to our bottom-line. So, if and when possible changes happen, we think that can help drive our creator community.
Brandon Ross: Thank you.
