Roblox Corp

NYSE:RBLX

Earnings Call Analysis

Roblox Reports Strong Bookings Growth

Roblox ended its fiscal year with significant growth, marking a 25% increase in Q4 bookings and 23% growth for the fiscal year. Older users have been contributing more to the user base, consistently growing quarter over quarter, proving pivotal for the company's strategy. They also plan to maintain a high single-digit infrastructure cost as a percentage of bookings over the next few years, with current spending at about 11%. The company expects capital expenditures of $180 million for the year, with a portion attributed to real estate rather than just infrastructure, emphasizing a reduction in infrastructure investments.

Performance Highlights

Roblox has reported a remarkable year with a 22% increase in daily active users (DAUs) reaching 71.5 million. Revenue soared by 30% to $749 million, while bookings rose 25% to $1.1 billion. Engaged hours were not left behind, growing 21% to hit 15.5 billion hours.

Financial Strength and Operations

Financial fluidity remains robust, with net cash from operations climbing 20% to $143 million. Roblox exhibited strong net liquidity at $2.2 billion, reflecting a healthy balance sheet. The covenant adjusted EBITDA for the period stood firm at $259 million.

Demographic Expansion

Roblox isn't just for kids anymore – users aged 13 and above surged 28%, now comprising over 58% of the DAU. Growth wasn't confined to the home front, with the U.S. and Canada seeing a 17% rise, and an even more significant 23% increase in DAUs internationally.

Global Outreach

International markets showed impressive performance, particularly Japan, with a staggering 45% ascent, and India, where DAUs rocketed by 59%. These leaps were attributed to strategic international expansion, including AI-powered language translation to make content universally accessible.

Product and Service Innovations

Roblox's ecosystem got even broader, launching on new platforms like PlayStation and Meta Quest. Developer subscriptions were another feather in the cap, underlining Roblox's commitment to offering novel experiences and deepening user engagement.

Brand Engagement

The final quarter saw a record-breaking 69 brand collaborations, showcasing Roblox as a burgeoning platform for brands. The commitment to social connection brought new features, notably for older players, and voice DAUs expanded by 161% compared to the previous year.

Technological Adoption and Safety Measures

Roblox leverages artificial intelligence not only to boost user experience but also to streamline costs effectively. The platform's unwavering focus on safety and civility differentiates it from its competitors and amplifies its appeal.

Cost Management

Expense control is a priority, with key fixed costs like compensation and infrastructure expanding at a more moderate pace than bookings, resulting in fiscal efficiency and propelling free cash flow.

Guidance and Growth Trajectory

Investors can anticipate GAAP revenue and net loss guidance with margin improvement projected between 100 to 300 basis points. Bookings per DAU rose by 3%, reflecting a strengthening monetization strategy. Furthermore, Q4 marked the zenith for monthly unique payers, a testament to the platform's growing user monetization.

Seasonality and Cash Flow

Roblox anticipates Q1 generally records the highest cash from operations, presenting a slight variation in seasonal patterns related to working capital. Projections suggest a healthy year-on-year margin increase for both Q1 (approximately 8%) and the full year (approx. 13.4% to 14%).

Earnings Call Transcript 2023-Q4

[Operator]

Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Roblox Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Stefanie Notaney, Senior Director of Financial Communications. You may now begin your conference.

[Stefanie Notaney, executive]

Thank you, Dennis. Good morning, everyone. Thank you for joining our Q&A session to discuss Roblox's Fourth Quarter and Full Year 2023 Results. With me today is Roblox Co-Founder and CEO, David Baszucki; 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. Our commentary today may include forward-looking statements, including, but not limited to, expectations of our business, future financial results and strategy. Forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those described in our forward-looking statements. A description of these risks, uncertainties and assumptions are included in our SEC filings, including our most recent reports on Form 10-K and 10-Q. You should not rely on our forward-looking statements as predictions of future events. We disclaim any obligation to update these 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 can be found in our press release and supplemental slides.

With that, I'll turn the call over to Dave.

[David Baszucki, executive]

Thank you, and welcome, everyone, to our Q4 and full year 2023 earnings call. It's great seeing or hearing or talking with all of you, and it was great seeing you all at Investor Day.

We had a strong fourth quarter and a strong full year 2023, consistent with the outlook we made at Investor Day. Some highlights in Q4: Our DAU $71.5 million, up 22%; hours engaged, 15.5 billion, up 21% year-on-year; revenue, $749 million, up 30% year-on-year; and bookings $1.1 billion, up 25% year-on-year. It was our first quarter over $1 billion in bookings and also our highest quarterly growth rate in 2 years. For the full year and fiscal year 2023, DAU is up 22%, hours up 22%, revenue up 26% and bookings of $3.5 billion, up 23% year-on-year.

We continue to invest in innovation and simultaneously invest very thoughtfully in the growth rate of those investments. And at our Investor Day, we discussed thoughtfully balancing the growth rate with our investments, both in cost of revenue, infrastructure expense, people and capital expenses.

And we're pleased to share that in Q4, we delivered net cash flow from operations of $143 million, up 20% year-on-year. Strong net liquidity of $2.2 billion, and our covenant adjusted EBITDA was $259 million. Mike will talk about the balance of our investments and the management of our margin targets.

I want to highlight going all the way back to our S-1, our 4-dimensional growth strategy, including all ages, international Roblox everywhere and a vibrant economy. And in all 4 of these dimensions, we made great progress on all ages. Our 13 and over DAUs grew 28% in the last quarter and over 58% of our DAUs are now 13 and up. And these older DAUs are interesting and exciting for the advertising business that we're building.

Our growth continues to be the result of innovation and investment in the platform as well as our amazing creator community. On the international side, DAUs in the U.S. and Canada grew 17%. DAUs outside of the U.S. and Canada grew 23%.

A couple of highlights in Q4. Japan DAUs, 45%. India Q4 DAUs up 59% year-on-year. This growth, we believe, is supported by our international expansion playbook, including a foundation of safety and stability automatic AI-powered language translation. So all of the content our creators create can run around the world.

Our infrastructure, including edge data centers around the world to supply performance and reliability, great content developers popping up all around the world, and continued innovation here. On Monday, we announced that our own AI model is powering real-time AI chat translation, allowing people around the world to communicate with people who are chatting in a different language.

On Roblox everywhere, in Q4, we released Roblox on PlayStation and on Meta Quest, both of them attracted new users and continued on our vision that we want Roblox everywhere. In our vibrant economy expansion, in Q4, we delivered developer subscriptions. We're moving consistent with the vision of everything is creator-driven. Our Avatar platform, to full UGC. And quick update on our advertising initiative. We had the most brand engagements ever in Q4, 69 great brands working with the platform, and we're scaling up over 2024.

A couple of highlights on innovation that we're building on top of all of this. On our social side, we're connecting more friends all the time. On -- we released real names for 17 and up players. We released video capture -- or sorry, image capture now. He hinted where we might go there someday.

On the immersive communications side, we saw great growth in our voice DAUs. Voice DAUs are up 161% year-over-year, which is just highlighting our vision of Roblox connecting and really acting as a connection and communication platform. We -- on the avatar front, we continue to make progress in immersive connected avatars in addition to layered clothing, we released this year, and we're seeing more penetration on facial animation everywhere.

We are seeing more penetration on voice chat. And a hint of what's to come at our Roblox Developer Conference, we hinted around the use of our own AI to generatively create avatar. The AI opportunity at Roblox is manifest and everywhere. We've been working on this behind the scenes for many, many years.

On the more visible generative side, we have announced Roblox Assistant, which is now in beta, where creators can use natural language text prompts to generate new ideas, in addition to code assist and material assist. Behind the scenes, we continue to roll out more and more AI on real-time image voice and chat moderation, which, in addition to constantly improving quality, is also making our whole safety platform much more efficient.

Looking forward, we will continue on our path of innovation and execution. Consistent with what we shared with you at Investor Day in 2024, we are driving growth and engagement in DAUs. We are relentlessly focusing on the leverage we gain from raw performance, quality and cost to serve efficiency. We are focused on accelerating monetization through advertising in our virtual economy. We are using AI both in, once again, the user-facing generative way to accelerate creation and expression, but also behind the scenes for cost and quality.

And underlying this always since day 1 is our focus on safety and civility from the start of our platform to really just stay forward. And we continue to be optimistic about our mission to connect 1 billion people every day with optimism and stability, not just in gaming, but in entertainment, ultimately in shopping, ultimately in social communication and ultimately in learning and education where we're making amazing progress as well.

With that, I'm going to pass it over to Mike Guthrie, our CFO.

[Michael Guthrie, executive]

Thanks, Dave, and good morning, everyone. Just a few quick comments before we open it up to your questions.

So obviously, we're pleased with the '23 results. I'm going to reference our supplemental materials, which are on the IR website, ir.roblox.com, and some of the charts there. So on bookings, as Dave said, Q4 $1.127 billion, that's 25% growth year-over-year. Strength across all geographies, which you can see on Page 18.

Expense growth. In particular, compensation and infrastructure are 2 big fixed costs, on Pages 12 and 13, you can see are growing at a slower rate than bookings growth, and that's yielding healthy operating margins and more cash flow from operations. Cash from operations on Page 19, you can see the growth there and how we saw good growth year-over-year, both in Q3 and in Q4. And then reduced capital expenditures are yielding significantly higher free cash flow.

I want to now address some seasonality, which I think will help people with their models. We're really starting to see good seasonality in the business. And really in '22 and '23, we're through COVID comparisons as you can really start to see things more clearly.

On bookings, back to Page 17, normally, Q1 is down from the Q4 of the prior year, the holiday season. Q1 and Q2 are pretty similar in terms of overall bookings, with a slight uptick in Q2. And then we see very good sequential growth in Q3 with the summer, and then a big sequential jump in Q4 for the holidays and then again, back down a little bit in Q1 of the next year. So that's normal seasonality on bookings, and you can really see that.

On Page 19, you can start to see our cash flow from operations and the seasonality around cash from operations. Let me just talk a little bit about that. Note that Q1 is normally the highest cash from operations rather than Q4, which is the highest in bookings. And the reason for that is simply working capital. We had a working capital buildup in Q4 when holiday bookings are the highest, and then there's a big release of that with post-holiday collections. And so Q1 tends to be our highest cash flow from operations.

On Page 36, looking at covenant adjusted EBITDA. It's a little bit different than cash from operations because the difference is actually that change in working capital. And therefore, the seasonality around covenant adjusted EBITDA tracks much more with normal bookings. So Q1 is lower because we don't have the working capital benefit.

Q2 goes down a little bit because we tend to grow the top line, but also invest a little bit, and we have some amount of fixed cost growth. And then Q3 and Q4, covenant adjusted EBITDA tends to pick up with growth in summer bookings and then, of course, hits its peak in Q4 with peak holiday bookings. And free cash flow, we'll start to see more seasonality -- normal seasonality as long as CapEx sort of matches and flows throughout the course of the year, which we think it will.

Some other quick callouts. Dave talked about DAU growth and hourly growth, great numbers, both overall and across all geographies and with older users. I do want to call out monetization. Our bookings per DAU, which you can see on Page 26, was up 3% overall. And on Page 27, it was up across most of the regions around the world. And then on Page 28, monthly unique payers hit an all-time peak in the fourth quarter. And a big call out -- our bookings per monthly unique payer was the highest of any Q4 and actually, of course, the highest in the history. And that number was up nicely over the same number this time last year. Our share count grew by about 3.7%.

Let's talk a little bit about guidance, and then we'll open it up to your questions. We are obviously guiding to GAAP revenue and GAAP net loss. These are going to be a little bit difficult for you to get exactly right because of the waterfall of the deferred and the factors that go into determining that number. So those are the natures of goods purchased, whether it's a consumable or a durable and then the life of a paying user. We're also guiding on a non-GAAP basis to bookings and adjusted EBITDA.

Now you're all familiar with bookings. This quarter, we're guiding to adjusted EBITDA, and that calculation differs from what most of you referred to as adjusted EBITDA in your Roblox models. What most of you are referring to is covenant adjusted EBITDA.

So just to clarify, again, the difference between covenant adjusted EBITDA is calculated by adding back that net charge of deferrals. And so that's what most of you are modeling to. So when you see the adjustments, and you'll see in our releases, you have to add back the deferred to get what's in your models as adjusted EBITDA.

Margin guidance, about 100 to 300 basis points. We talked about this at Investor Day. That means, year-over-year by quarter and for the full year. So when we have variance in margin, that's okay. We're going to show margin improvement in each of those quarters and then overall.

So for example, many of you in your margin expectations for Q4, we're at about 18%. We generated about 23%. And for us, that compares to 20.3% last year. So it was about a 270-basis-point increase in the fourth quarter. And then for the full year, consensus estimates were about 10% for '23. We produced 12.3%. So that's about 230 basis points of improvement.

Now for the full year, and then I'll stop and let you ask questions. For the full year, the midpoint of our margin guidance would suggest 13.4% or 110 basis points higher than where we were last year. And the high end implies about 14% or 170 basis points.

And for Q1, the midpoint is about 8%, which is also 110 basis points higher than where we were last year in Q1, again, just the seasonality and the change in margins. And the high end implies 8.3% or about 140-basis-point improvement.

So with that, why don't we turn it over to questions.

[David Baszucki, executive]

Yes. And just highlighting 2 growth rates. Q4 bookings growth, 25%. Fiscal year bookings growth, 23%. So thanks, Mike.

[Operator]

[Operator Instructions] We'll first go to the line of Omar Dessouky with Bank of America.

[Omar Dessouky, analyst]

I wanted to get a sense of how much the developer layoffs in the video game industry could potentially be a tailwind for you in 2024. Some industry experts estimate that over 10,000 workers lost their jobs in the video game industry in 2023.

And Kotaku reports that over 6,000 have already lost their jobs in January, including 2,000 from Microsoft. And I was wondering, did you notice more mobile app and PC console game developers than usual joining the Roblox developer community in Q4 or in January so far? And what is Roblox doing in 2024 to attract some of that video game industry talent to your ecosystem? And then I have one quick question after that.

[David Baszucki, executive]

Two ways to talk about this. First, we continue internally within the company to hire throughout this year. Also, over really all of the last years, all the cohorts of the creators on Roblox have continued to grow and make more money, whether it's the top 10, top 100 or top 1,000.

So what you're asking has already been in place for several years. And as we grow bookings, we grow the economic opportunity on our platform. So we believe naturally, irrespective of the layoffs, our creator community will continue to grow.

[Operator]

Next, we'll go to the line of Jason Tilchen with Canaccord Genuity.

[Jason Tilchen, analyst]

I'm curious -- with the really strong bookings growth in Q4, I'm wondering to whatever extent you can share about upside that was driven by advertising? And then just more higher level, where do you stand today in terms of building out some of those additional capabilities and measurement tools you talked about at the Investor Day?

[David Baszucki, executive]

I'll go high level on that, Mike. We have a plan throughout this year to add more ability for our partners to measure and see what's going on, on the platform. We had real bookings in Q4. We have a quarterly target for advertising within the company. We're not sharing the splits, but we are very focused on this year maturing the size of that market.

[Michael Guthrie, executive]

Jason, we said in the past that we're going to start disclosing specific financial data on advertising when it becomes material and really important to the financial results. And so while we're really pleased with the progress, we have not hit that point yet.

[Operator]

Next, we'll go to the line of Brian Pitz with BMO Capital Markets.

[Brian Pitz, analyst]

While you continue to make progress aging up the user base, this does remain one of the biggest questions from investors. What do you attribute as being the biggest factor in attracting and retaining older users? Is it the higher quality or is it different content?

And then as you look at the audience, I'm really curious about how the different age cohorts are engaging differently on the platforms. It'd be really great to hear more in terms of gameplay and spending habits between the different age cohorts.

[David Baszucki, executive]

First on how do we do this, I want to highlight, we have been doing this for 2, 3 or 4 years already. And in several years back, the vast majority of people on our platform were under 13. So seeing the growth over 13 is a really good sign.

We attribute it to such a wide range of things: quality of the platform, search and discovery, organic growth of new older players, existing players retaining and aging up. We do see play habits generally of older players that might mirror what we see in existing gaming and communication markets. We can see certain cohorts that might lean in for a longer engagement on a PC type experience. We can see other cohorts that lean in socially on mobile.

So the good news is we are seeing patterns on Roblox that mirror really large markets: the overall gaming market, the overall social communication market. And we're -- no specific thing, many, many things all contributing to both, I would say, retention-based growth as well as viral new player growth around the world.

[Michael Guthrie, executive]

Brian, just to add to Dave's comments. Yes, we've been -- the growth in older users has been higher than the growth in younger users for a long time. It's the majority of the user population today. In terms of behavior, and that has been just consistent quarter after quarter after quarter. In terms of behavior, in addition to Dave's comments about engagement, the older users do tend to monetize a bit better on sort of a like-for-like basis, meaning cohorted by time spent on the platform. So over the long run, that is generally a boost to monetization.

[David Baszucki, executive]

I want to highlight, one can qualitatively see the expansion of content that intuitively would seem appealing to older players, both in maybe the realistic battle genre in the fashion and dressing genre. I tweeted to highlight some of these properties.

[Operator]

Next, we'll move to the line of Clark Lampen with BTIG.

[William Lampen, analyst]

I've got 2, 1 for Dave, 1 for Mike. Dave, the network effects that you talked about in the shareholder letter, is it possible to contextualize for us how much of your user base is either utilizing the voice tools or maybe some of the more recent text translation and how much that affects behavior?

And Mike, the uptick in bookings per DAU growth that we saw this quarter, should we expect that to continue? And if so, are the recent releases or maybe economy items that are in pipeline that you'd highlight for us amongst the drivers?

[David Baszucki, executive]

I will -- I don't have in front of me the voice DAU number. I do -- I shared 161% voice DAU growth year-over-year in the quarter. Our internal metrics when we look at users who are using voice show lovely gains on retention, on engagement and on other aspects. So there is a network effect in that the more of our base that is using voice, we see other metrics go up at the same time.

[Michael Guthrie, executive]

And Clark, on the bookings per DAU question, I'm going to be focused primarily -- we will be focused primarily on bookings and bookings growth. If DAUs happen to grow a little bit faster, then that number might come down a little bit. If they happen to grow more slowly, that number will go up a little bit.

On the other hand, I will say the economy team at Roblox has more compelling initiatives going on than I've ever seen. And so I'm certainly excited and optimistic about the ability to continue to improve monetization.

I would also look at that number generally again, just make sure seasonality, just compare like periods to like periods for the most part.

[Operator]

Next, we'll move to the line of Ken Gawrelski with Wells Fargo.

[Kenneth Gawrelski, analyst]

I want to go back to the advertising, and I understand that it's too early to quantify. But could you give us a sense of kind of the key signposts we should be looking for as you develop the opportunity, whether it'd be market research or case studies with brands? And -- how do you think about the -- how should we think about your -- the development of your direct sales force? Where are you in the build-out of that process? And are you ready to go to market?

[David Baszucki, executive]

Yes, I'll share the signpost one might watch. We shared anecdotally the just rough growth in the number of brands advertising on the platform. This year, you'll see, from a platform point of view, more and more measurement abilities for our partners to attribute brand advertising. We have shared that we are also building experiments with physical shopping, but no ship date on that, that we think will ultimately create a full closed-loop effect for advertisers on the platform.

As Mike said, we're not sharing specific numbers on the development. In Q4, we hired Stephanie Latham, who's driving just an awesome team. And we're growing out that brand partnership team to go to market. I just met with them all yesterday actually. And it's an amazing team.

Mike, I don't know if you want to add anything on top of that?

[Michael Guthrie, executive]

No, I was going to say the same thing. Both Dave and I had the opportunity to address the new and emerging organization. So it's growing, new people all the time, very talented, very excited.

And Ken I think one of the main points of this is what are the best ways to show signposts as we get to that revenue level that will become material? And so we'll continue to come back on that. Right now, it's a sheer number of engagements is the right way to look at it.

And Dave talked a little bit about the number of brands that started to work with us in Q4. And the quality of them and the depth of the engagement is fantastic. So we'll be talking more about that in subsequent quarters.

[Operator]

Next, we'll move to the line of Eric Sheridan with Goldman Sachs.

[Eric Sheridan, analyst]

I want to know if we go a little bit deeper on your updated thoughts on some of the more emerging platforms, elements of augmented reality, spatial computing platforms like the Quest 3 and the Vision Pro from Apple? And how you think about continuing to widen out means of distribution and new experiences for users over the medium to long term?

[David Baszucki, executive]

Really proud to be on Quest with Meta and along with PlayStation in Q4. Highlighting our vision that immersive 3D connection and communication 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.

[Operator]

Next, we'll move to the line of Drew Crum with Stifel.

[Andrew Crum, analyst]

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? And any sense of timing on that?

[David Baszucki, executive]

Yes. Highlighting my tweet on Monday and our release that, I believe, right now between 16 languages, we're allowing real-time text chat translation. Always sitting on top, of course, our same safety civility back-end infrastructure.

This is the first step really to some of the dreams that 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. We're 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, 2 things. We're getting really good 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 2 Venn diagrams. And I think I tweeted once again on Monday, voice would be lovely someday, once again with our safe foundation.

[Operator]

Next, we'll move to the line of Andrew Uerkwitz with Jefferies.

[Andrew Uerkwitz, analyst]

Mike, could you just talk a little bit about the full year 2014 guidance? How 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?

[Michael Guthrie, executive]

So Andrew, the forecast that we built 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 relative -- we 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. 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, analyst]

Got it. 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?

[Michael Guthrie, executive]

That's correct. Yes, that's right. And on Page 36 in the supplemental materials, you can see that number. What 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 company adjusted EBITDA, which is normally the number that we're talking about.

[Operator]

Next, we'll move to Eric Handler with ROTH MKM.

[Eric Handler, analyst]

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 how -- what is your CapEx expectations for the year?

[Michael Guthrie, executive]

When you say free cash flow conversion -- the EBITDA operating cash flow conversion to restate that part of...

[Eric Handler, analyst]

Your covenant adjusted EBITDA to operating cash flow conversion is pretty much right in line around 100%. Is that something...

[Michael Guthrie, executive]

Yes, that's right.

[Eric Handler, analyst]

That's a good...

[Michael Guthrie, executive]

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 that -- those are the quarters where there is 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, analyst]

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 the excess cash and sort of as you think about capital allocation?

[Michael Guthrie, executive]

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, it's 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 operations.

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.

[Operator]

Next, we'll move to the line of Brandon Ross with LightShed Partners.

[Brandon Ross, analyst]

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, executive]

Yes. 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 can probably go in and figure it out what percent of the top 20 creators on the platform are now offering in-experience 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...

[Michael Guthrie, executive]

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've 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 fed.

[Brandon Ross, analyst]

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, executive]

A 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.

[Operator]

We will move next to the line of Bernie McTernan with Needham & Company.

[Bernard McTernan, analyst]

Great. Just 2 on bookings. First, the booking acceleration that happened in the U.S., just any thoughts in terms of what's driving that. Remember last year, there were some thoughts that there could been some outperformance last year because of gift cards, so if that played through in a similar way. And then 3 million new payers added in the quarter, where are those coming from, from a geo or age demographic perspective? And any shifts that are going on that are significant?

[Michael Guthrie, executive]

Bernie, on the second question, no big geo shift. We're seeing strong payer growth really everywhere. Part of the reason monetization has gone up is older users in places like U.S. and Canada have grown at a really nice clip. And as we said earlier, they monetize a little bit better.

In terms of -- the question is, why was bookings so strong in the fourth quarter? We like to think it's growing our user base. They're more engaged. The content continues to get better and better. The platform continues to scale. We were on a couple of new platforms in the fourth quarter. So that clearly had an impact. But overall, a lot of the things, it continue to drive the growth of the business over a very long period of time.

[David Baszucki, executive]

The math, with 58% right now of our DAUs over 13%. When we look at the overall market size of gaming, immersive communication and social connection, that 13 in over market, you can all do your own computation on the size of that TAM relative to the under 13, and that's why growth there is so important to us.

[Operator]

Next, we'll move to the line of Matthew Cost with Morgan Stanley.

[Matthew Cost, analyst]

I have 2 probably both for Mike. So just on some of the expense lines. For the certain infrastructure, trust and safety, it got down to just a really high level of efficiency this quarter, 11% of bookings. I guess when you think about that internally, do you think about that figure on a per user basis, on a per hour basis, on a per dollar bookings basis? And how do you think about where that can go over time? And then I have a follow-up.

[Michael Guthrie, executive]

I mean how we look at it on all of the above? Ultimately, it's cost to serve is the metric that we use and it's the metric that the team owns -- the infrastructure team owns. And so they're working hard to drive that down.

It is -- like you said, it's about 11% now. Ultimately, with higher efficiency, more use of artificial intelligence, we see that as a high single-digit number over the next few years. It's been a good source of leverage recently, and we still think there's more to do there.

[Matthew Cost, analyst]

Great. And then on the developer exchange fees, you gave some good color just a few minutes ago about sort of reinvesting any savings on the cost of revenue side into DevEx. So that's clear. But just DevEx on its own, I think, was below 20% of bookings this quarter, very slightly for the first time in over 2 years.

I guess anything you can say about the drivers there. And then all else equal, do you expect it to still be a number that rises as a percentage of bookings, even if nothing changes on the app store fee side?

[Michael Guthrie, executive]

Yes. I mean, DevEx is almost exactly where it was this time last year in the fourth quarter. So it's about 20 -- it's about 20% last fourth quarter, about 20% this fourth quarter. So I don't see a major change. There is some seasonality in that number. But overall, we always are looking to push more of the economics to the devs.

[David Baszucki, executive]

Yes. Chiming in on what we shared 6 months ago on our Q2 2023 earnings call. The vision -- we want to grow bookings faster year-on-year than cost of goods. We want to grow bookings faster than infra and certain other expenses. And we want to grow bookings faster than personnel costs.

That leaves 2 areas, both our bottom line as well as our creators. And the more efficient we are with the first 3 things, the more we can look to possible future expansion on the last 2 margins, developers and our leverage.

[Michael Guthrie, executive]

I think we probably have time for one more call.

[Operator]

Today's final question comes from the line of Andrew Marok with Raymond James.

[Andrew Marok, analyst]

Maybe to come back to a question that was touched on in a bit of a different way earlier in the call. I know it's not necessarily an input for you guys rather than an output. But any particular drivers on the average bookings per DAU growth, particularly looking at Europe and rest of world? Both of which were still pretty strong and both accelerated in 4Q.

[Michael Guthrie, executive]

The longer payers are on the platform and users are on the platform, the more they tend to spend. We have a very nice mix of older and younger users, with older users growing around the world. They tend to spend a little bit more. And you can never underestimate the importance of great content on the platform. So that's our developers building great stuff that people are paying for.

So it really is a trend that's been moving in the right direction for a while. And as I said earlier, our economy team has a number of initiatives that they're working on to continue to improve that number.

[David Baszucki, executive]

Yes. And complementing that on the economy team angle, there's a lot of hygiene just on payment providers. I also want to highlight that on a biz dev sense, prepaid cards wherever we can around the world has also made enormous progress in the last year.

[Anna Yen, executive]

Well, thank you for joining us today, and that's a wrap.

[David Baszucki, executive]

Thank you, everyone.

[Operator]

Thank you, everyone, for joining the Roblox Fourth Quarter and Full Year 2023 Earnings Conference Call. Thank you for your participation. You may now disconnect.