Roblox Corp Q3 FY2022 Earnings Call

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 Q3 2022 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 session. I would now like to turn the conference over to Stefanie Notaney, Director, Financial Communications. Please go ahead.

Good morning, everyone, and thank you for joining our Q&A session to discuss Roblox' Q3 2022 results. With me today is Roblox' CEO; David Baszucki; and CFO, Mike Guthrie. Before we start, I want to remind everyone that earlier this morning, we published a shareholder letter and earnings results 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. For our webcast participants, please note the question icon at the bottom of your screen where you can type in your questions. We'll do our best to take as many questions as possible in the time we have allotted today. On today's call, we may be making forward-looking statements, including but not limited to our expectations of business, future financial results and business and financial strategy. Forward-looking statements are subject to risks and uncertainties that can cause actual results to differ materially from those described in our forward-looking statements, and such risks are described in our risk factors, including in our SEC filings, including our most recently filed 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-looking 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 issued as well as in our supplemental slides, copies of which can be found on our IR website. Finally, this call is being webcast, and it will be archived on our website shortly afterwards. With that, I'll turn the call over to Dave.

Thank you, Stefanie, and welcome Roblox investors, Roblox community. Some quick bullets before we dive into your Q&A. We had a wonderful October, as we mentioned in our letter, $701 million bookings in Q3, up 10% year-on-year. And on a currency-adjusted basis, up 15%. Also, we've shared October 27-day numbers so you can compare to last year, and the first 27 days of October on a bookings basis were up 13% on an adjusted basis. I want to really highlight to the Roblox community on the revenue side, where in Q3, we showed up 2% at $517 million that we follow GAAP accounting principles, and we defer revenue over the life of our payers. In our letter, we highlighted we've increased that lifetime from 25 to 28 months. That is a very good thing that relates to the retention of our player bases. We ultimately want that number to be as large as possible; the more we retain our customer and user base. Without that increase, our Q3 revenue GAAP accounting would have been $628 million, $111 million larger. So actually, watch us continue to try to increase that lifetime to increase retention. On a DAU basis in Q3, our DAUs were at $58.8 million, which is a 24% year-on-year growth rate. And highlighting October, those numbers in the first 27 days were $57.8 million, up 14% year-over-year. I want to note, we still have difficult comparisons relative to opportunistic regions from last year. But you're seeing our core and strategic users with the bookings start to lap COVID. Our developer community, once again, the number of developers with experiences gathering over 100,000 hours, up 54%, and the number of developers with experiences with over 1 million hours, up 47%. A couple of things for our large Roblox and investor community, I really want to highlight. As you look at our business, we run the business internally as 30 separate cohorts. That's five age ranges. We look at gender, and we also look at the region around the world, and we have a lot of headroom in many of these cohorts, and I'm going to comment on that a bit. I also want to comment that we run the company as seven product groups, and we have product groups directly responsible both for retention or frequency, for engagement, and for monetization. I'm going to highlight a few of those numbers as well. Before we even went public, we've been sharing with all of you our vision of building a platform that optimistically brings people together around the world of all ages and for a wide range of uses, including playing, learning, and working together. And I'll highlight a few of those as well. Around the world, in the U.S. and Canada, we're showing 17% DAU growth in what has historically been our most early and saturated region, just showing the amount of headroom we have in our core market there. In Europe, our DAUs are up 30% year-on-year. In APAC, our DAUs are up 40% year-on-year. Talking about aging up, highlighting that our over 13 segment grew 34% and now accounts for 54% of our DAUs, and also 17 through 24 is our fastest-growing cohort growing at 41% year-on-year. There is a lot of room for us in both our 17 through 24 cohort as well as our 24 and up cohort, and that is why, once again, we ask all of our investors to look at us as a wide range of businesses across all of these cohorts based on age and region. I also want to share some of the drivers of our business that highlight our optimism around Roblox' ultimate evolution to be a utility that is used very frequently. We started to share some signals on frequency, which is the ratio of our DAUs to MAUs. I want to highlight that relative to September 2019, our frequency is 20% higher, and our frequency is at or above levels we saw in '20 and '21 during peak COVID. The other thing I want to share, the same with engagement, our engagement levels, which are hours relative to DAUs, are now nearly 20% higher than pre-COVID September 2019, slightly below peak COVID times, but in a great direction. And finally, just highlighting the extent to which our brand experiences have started to grow and expand. We're participating with Elton John in a new persistent world called Elton John Presents: Beyond the Yellow Brick Road that premiered last Thursday on November 3. I think it's just showing the extent to which Roblox brands have become really ubiquitous in the music and brand industry. Finally, we shared a lot around our product progression during Roblox Investor Day. We thank you all for participating. I want to highlight just on one small detail, and that is we have started rolling out early versions of our immersive ad product, and we are casting now with some publishers and brands. We will keep iterating on that. With that, I will ask Mike Guthrie, if he wants to add any other comments. And if so, welcome, Mike. If not, we'll go straight to Q&A.

Yes. Thanks, Dave. I think you covered it. The secular trends that we talked about in aging up, our core markets and strategic markets are really, I think, some of the key financial points. So why don't we turn it over to Q&A.

And your first question is from the line of David Karnovsky with JPMorgan. Please go ahead.

Thank you. Dave, as you noted, the fastest-growing demo is 17 to 24. I was just hoping you could speak to some of the drivers of this growth. Are these last players that are coming back? If not, what are the types of experiences that are bringing these new users? And then one for Mike. Just hoping you could remind us of your typical seasonality in the year-end. I think you've seen some pretty strong step ups in bookings the prior two years, but I feel there might have been some COVID factors that were helping with that. Just want to get a sense of how this has looked over a long period of time?

Yes. I want to highlight that the 17 to 24-year-old growth has been a continuous improvement over the last three to four years. And our whole stack is contributing to this. We continue to make exceptional gains in search and discovery, both cold start and warm start, which means when an older player signs up and joins Roblox, they see more and more experiences that are tailored to them. We continue to make improvements in our game engine and our cloud game engine as far as raw performance. We have made amazing improvements in our avatar stack with layered clothing and the ability for older players to have avatars that they can identify with. We are seeing developers respond with more and more content that is interesting and applicable for older players. We introduced experience guidelines and shared that with you at our Investor Day, which we will start over time having some experiences that are ultimately 13 and up and 17 and up type experiences. So this is pervasive throughout the stack, throughout the seven product groups. We really all are working on this. And it's many, many factors that have contributed to drive this growth. I'll turn it over to Mike on the seasonality.

Yes. Great. Hey David, thanks for the question. So we're in a period right now, September and October, when we were coming down off of the summer. Peaks in the summer, July and August. We saw that seasonality occur in September down from August. October is pretty similar to September with a pickup then right around Halloween. We had a really strong beginning of October of this year, a lot of special content around seasonal content that was quite popular. Going into the rest of the quarter, November is typically up a bit from October. And then, of course, December is the big month in the fourth quarter. So like a lot of companies around the holidays, for example, November, we usually see a pretty big step up around Thanksgiving, and then we're into the holiday season. So December is always the biggest month by a long shot. And so far, seasonality seems totally normal to us. I think what we're probably most excited about is this growth in the payer base. And so you saw it in the third quarter, all-time peak number of payers at $12.9 million. That's a really good signal for us.

And one other thing you may have picked it up in what I just said, and I'll circle back to the aged-up growth. Thank you, Mike. You hear how we always lead with raw product, quality, and virality. But I do want to pay notice to all the wonderful brands and music producers out there, along with the intermediate agencies creating some of these experiences and our own brand team that is also contributing to growth. So Wimbledon, WimbleWorld, 11.8 million visits. Our Tommy Play experience, our Chipotle experience has had over 20 million visits. Our FIFA World just started, millions of visits. Our Chainsmokers concert, once again, 8 or 16 million visits. So there's also a lot of potential traffic being driven by our brand and music partnerships on top of the raw product virality that we focus on.

Your next question is from the line of Omar Dessouky with Bank of America. Please go ahead.

Hey guys. I wanted to ask about something that I think the market doesn't appreciate enough about how transformational limited items will be to the platform in 2023. Can you explain why it will fundamentally change behavior among users? And which of your KPIs should see the biggest inflection? And also among which of your 30 cohorts do you expect to see those metrics inflect the most pronounced? And I have a follow-up after that.

Yes. Mike, I'll provide an initial update on the cohorts. All 30 of our cohorts are performing exceptionally well, and Mike will elaborate on that. Early on in Roblox, we began creating items with the goal of empowering our users and community to generate all user-created content, including clothing and avatars. We are currently finalizing a limited marketplace. This means that a creator, like Gucci for instance, can receive validation with a blue check mark next to their profile. If they choose, they can produce a limited quantity of items instead of an unrestricted number. These items can be indexed, similar to how we categorize items in the real world. For example, white T-shirts represent a high-volume, low-brand item. We’re transitioning to an economy where top brands can offer limited-edition items. An example of this is our Domino's crown, which trades at $20,000 on our platform. We anticipate seeing comparable trade values for scarce items like these. We believe this will enhance user engagement and significantly contribute to our economy, making it resemble the real world more closely, including high-priced items. This development will influence our metric for bookings per hour or monetization, positively impacting the entire platform by increasing both hours and monetization. I'll pass it over to Mike to discuss any specific cohorts.

Yes. Yes. So Omar, thanks for the question. Because it's going to be an open marketplace, I think the answer is it's going to be all cohorts. There will be content that is appealing to younger users and older users. I agree with Dave that you're going to see it mostly reflected in monetization as a core metric, though I also expect frequency engagement to also move up because it's a better experience for the user. I also believe it's something we don't talk enough about, that will also affect all genders as well. So the cohort is not just age cohorts, but content will be appealing to male and female users as well. So I think that's also really exciting.

Yes. One way to think about it. One cohort that this will affect in the real world, who buys high-priced jewelry, rare artwork, and Ferraris. Those cohorts, I think, will be affected on Roblox as well.

Awesome. All right. Looking forward to that. So then the second question is I wanted to ask about when some incremental revenue opportunities may hit, namely dynamic heads and game fund. So in June, I think your blog said that dynamic heads would be in the avatar store later this year. It's November now. Are you still kind of on track to have those in the avatar store this year? And if so, kind of what's your monetization model there? And then on the game fund side, I think you showed game fund examples throughout the year. When will those start to go into soft launch, number one? When will they launch in earnest, number two? And do you expect any of them to become like top 10 hits in the next year?

Yes, I can discuss a couple of points. For our investors, I encourage you to view dynamic heads not just as a monetization product, but as the future of Roblox in terms of immersive conversation. We're transitioning from a time when most users on Roblox primarily use text chat with static heads. The demonstration I presented at Investor Day highlighted how our faces can express emotions and animate just like in real life. We also communicate using voice. We have dynamic heads available in the catalog, and our vision is for every user and head on Roblox to be dynamic. We aim to reach a point where everyone can animate their avatar. While we haven't specified a timeline for this, it is gradually being introduced and will continue to be rolled out over the next year. There is a blog post on our site from late September titled "Funding Future Roblox Creations," which outlines some advancements in our game fund. I believe some of these initiatives will be transformative, though I cannot comment on specific ones or their timing. However, if you look at the broader trend of game fund experiences, you'll notice they are largely geared towards older players, many of whom feature older avatars. Many of these experiences will be launching soon, and we have more in development. While I won't go into details on them, I will say that we have experienced developers creating very professional experiences for older audiences. Mike, would you like to add anything?

No, I think it's perfect. I got nothing to add.

Great. Thank you.

Your next question comes from the line of Drew Crum with Stifel. Please go ahead.

Thank you. Good morning. Mike, in the shareholder letter, you mentioned that you plan to target an EBITDA margin below 10% through at least 2023. Has there been any change in what is influencing that figure compared to earlier updates this year? How are you considering this metric beyond next year? And Dave, you briefly mentioned the immersive advertising efforts. Can you share any early insights? Also, do you have any updates on how and when you plan to implement that across the platform? Thank you, everyone.

Yes. Hey Mike, I want to quickly lead first on the earnings and EBITDA long-term. I know right now, there are a lot of companies doing layoffs, and I want to highlight a couple of unique things about Roblox. We are going to continue hiring through 2023. We have an exceptional talent base that we are continually adding to and improving. We will do this in a way that keeps really stock-based compensation in a really good range. I think this is highlighting our drive to continue innovating and the ability to do this with $3 billion of cash in the bank and a good forward-looking cash position in the company. We are in innovation mode. We are in thoughtful, balanced hiring and growth mode. We run the company in a very thoughtful way, looking forward, modeling forward several years in advance. Hopefully, we're moving the tiller gently and thoughtfully towards driving this type of innovation. I'll let Mike comment a little bit more on the earnings as a result of that.

Yes. There are four main areas of cost and investment in our business. Payment processing is one area that hasn't changed significantly, although we have seen a slight decrease in costs relative to bookings, which is positive. Additionally, there are three key investment areas focused on innovation that Dave has emphasized: infrastructure and trust and safety, personnel, and support for our developer community. We remain committed to these priorities and continue to invest in them without any changes in our emphasis or strategy. We have sufficient liquidity to enhance long-term value in our business, and we view these investments as sustainable. Moving into 2024, we expect to optimize our investments and leverage our cost structure across these areas. Our user base and revenue growth continue to be driven organically by improvements in our product, without significant increases in marketing expenditures.

Thanks, Mike. Regarding immersive advertising and the opportunity, Roblox has always focused on creating user-generated content or self-serve platforms and products that allow everyone to participate equally. Our aim for next year is to roll this out for everyone, although we don't have a specific launch date yet. Currently, we are testing our immersive advertising technology with some brands and developers. The plan is to make it available for self-serve next year.

Your next question is from the line of Matthew Cost with Morgan Stanley. Please go ahead.

Hi, everybody. Thanks for taking the questions. I have two. So just looking at the bookings in September and October, there's a pretty meaningful acceleration going on there in terms of year-on-year growth. I'm just wondering, Dave, earlier in the Q&A, you were talking about some of the platform improvements you've been making, which makes a lot of sense. Were there any specific user behaviors or types of experiences or new platform features that were kind of needle-moving and behind that reacceleration you saw in the past two months? And then just separately on frequency, given that you're running at levels of the DAU to MAU ratio that you saw during COVID, you said at or above, how much headroom do you see going forward in terms of boosting that ratio? Thank you.

Yes, in terms of product architecture and our operations on Roblox, we have a broad technology stack. Our talented products and engineers are focused on enhancing user experience, social connections, and access points across mobile and console platforms. We also have dedicated teams working on growth, search and discovery, core creator tools, our 3D simulation engine, and the economy that not only facilitates monetization but also contributes to the enjoyment of the platform, alongside our essential cloud infrastructure. Our comprehensive safety and stability team helps ensure that Roblox remains a welcoming and secure environment. There’s a lot happening, and historically, our growth has been fueled not just by major initiatives, but by numerous smaller improvements being developed simultaneously. I want to emphasize that some advancements, such as enhancements to the raw performance of our game engine and improvements in how quickly users can join experiences, are often unnoticed yet contribute significantly to growth. We’ve made various improvements across the platform that have enhanced search, discovery, and overall product performance. I am very optimistic, particularly about the growth potential in our core U.S. market for 9 to 12-year-olds, as we observed during COVID that many utilized Roblox as a means to connect and spend time together. This utility aspect extends beyond just play, and I believe we will see people increasingly engaging at higher frequencies. While I can't disclose specific figures, I see considerable potential for growth in daily active users within the 9 to 12-year-old demographic in the U.S.

Yes, it's Mike. I want to add a couple of things to what Dave just said. Regarding bookings and acceleration, take a look at Page 27 in the supplemental materials, which covers the payer community. If you examine Q2 '22 and Q3 '22, you'll notice that the sequential growth in payers is among the highest we've seen. There has been a significant increase in the number of payers, and we discussed the payer ratio earlier in the call; you can observe that in the second or third quarters, with September being included. Likewise, we expect strong payer numbers in October. The conversion rate is currently very favorable. We addressed this earlier in our letter. There are several reasons for this. One reason is the positive mix shift occurring in our core markets, particularly in the U.S. and Canada. We have returned to peak levels across all age cohorts, and we are quickly aging up. The rate of increase in payers is happening in both the U.S. and Canada, and it’s also rising as a percentage within strategic markets. Opportunistic growth has slowed somewhat due to tougher COVID comparisons. Consequently, the mix of payers is shifting towards areas that offer greater monetization. One question we received was about the conversion rate; to understand it, you should look at our other core metrics like frequency, retention, and engagement, all of which are also improving. The impact starts at the user level and extends through to the payers. We are observing improvements across all age cohorts and demographics, with a notable increase in payers and strong sequential growth in the third quarter. We previously discussed seasonality, which indicates healthy trends as we head into the fourth quarter. I view that number as a result of various core metrics we're concentrating on that begin with frequency, progress to engagement, and lead to monetization. This conversion rate has remained high post-COVID, which explains the acceleration we're experiencing.

Great, thank you.

Your next question is from the line of Clark Lampen with BTIG. Please go ahead.

Hi, good morning. Thanks for the questions. I have two on the developer community and advertising. First, Mike, you talked about secular dynamics with aging up before. Are those as prevalent on the developer side such that you're bringing on more 17- to 24-year-old developers, and the content that they're creating is helping you drive what seems like a more recent inflection in growth of other users and also monetization and payer conversion? And then the second question on advertising. Understanding that, that sort of vector of monetization is really early stage right now. We did pick up some good feedback intra-quarter from marketers that basically said, we'd like to spend more on Roblox over time. There's demand from our customers or from us ourselves, but one of the gating factors right now is measurement. I'm curious, is building that kind of performance framework a part of the roadmap for the ads business? If so, is it possible that you could give us some color on the timeline for introducing something like that? Thank you.

Dave, do you want to start off with the ad question, and I'll take the first one then?

I'm really excited about the potential for measurement of both brands as well as action-based type advertising here. We are going to be providing both of those types of things. There will be two types of immersive 3D ad units on the platform, those that are brand where we will be able to measure views and amount of dwell time. This is the creation of a set of new types of measurement for immersive 3D advertising. It's almost as if in the real world, it's hard to measure how many people saw a billboard on a bus when it drives by. But in an immersive 3D world, we can actually measure how many people saw that. There’s the potential in digital to measure things we can't do in the physical world. More and more of the experiences we believe in platforms like Roblox will be teleport-type ads where brands that we highlighted want to bring fans to their experience even for a short amount of time to experience the brand, to acquire items from the brand, and pop back out and come back to where you were. These will also be fully measurable as action-type units once again with measuring the time and the experience as well. There’s a long-term thing that we're not going to comment on or promise. But the ultimate long-term thing is we hear anecdotally about people who have been in our experiences then migrating to the real world and wanting to go into that same store. We've heard that anecdotally around our Vans experience, where the ultimate would be to measure the players on Roblox' connection to visiting that 3D experience and then visiting the real experience. There are a lot of savvy people out there starting to think about how we might do that. So yes, this will be measurable. It's early. I think there's potential for types of engagement that just cannot be done with video, that cannot be done with print. I'll kick it back to Mike for the other piece of it.

Clark, your question about developers is quite intriguing. We are observing a trend among older users who are effectively monetizing in what I refer to as the top experiences on Roblox, which may or may not be designed for an older audience. At the same time, this group is also experimenting with other experiences that feature more mature content. While these experiences aren't currently the most popular on Roblox, they are indeed more suited for an older audience. In these cases, older users are spending significantly more. Although it's early and based on a smaller group of users, this suggests a strong interest in mature content. We believe that much of this mature content is being developed by an older developer community. In response to your question, I don't have specific growth rate numbers with great precision, but I suspect they are quite similar, and we are witnessing a growing amount of mature content that is beginning to gain traction. There's still a lot of potential here. We will work on compiling some metrics to share on this topic. However, we certainly observe this trend among our older daily active users, as they discover appealing mature experiences, engage deeply with them, and monetize effectively. These experiences are likely to gain more visibility over time, and it's almost certain that they are being created by an older developer demographic.

Yes, I believe Roblox, in the long term, combines excellent long-tail discovery with young developers who start as hobbyists. Meanwhile, our larger studios, which consist of more than 100 people and earn tens of millions of dollars annually, have top developers that quickly resemble those of leading game developers on any platform or experienced developers. We are witnessing this evolution happen rapidly.

Your next question is from the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Thanks so much for taking the questions. Sticking with the theme of aged-up cohorts, do you see different behavior by geography in aged-up cohorts? I'm curious if you do, how that informs elements of what you want to invest in the infrastructure or the product development over the long term? And then even away from just geographical SKU among aged-up cohorts, any sense of how you continue to think about partnerships on the content side and bringing more original content into the platform that can be consumed via partnership or licensing over time to drive up higher forms of engagement as well? Thanks so much.

Yes. I feel as if we're doing our job right, we are building high-performance immersive 3D infrastructure as the utility, pools, with amazing search and discovery, and an amazing creator base. Just as with other forms of immersive media of which we're very immersive, but whether it's video, print, or whatever, we're providing a high-performance platform in all regions of the world that our developer community can respond to, more than we respond to technically. We focus very much on what's latency in India. We have a new data center in India. Do we have edge data centers around the world to provide high performance? Are we doing awesome search and discovery in South Korea or Japan or India to help drive growth there? What we can see is when we go to various regions around the world, a mix of what we would expect. Some classic Roblox experiences top in many, many countries using our dynamic translation facility, but also regional experiences just as we would expect in various countries. I think this is what philosophically is driving our growth in Japan now, which is driving our growth in India right now, which is our awesome infrastructure, coupled with great content from our developers. From a partnership standpoint, our goal is to make this self-serve. Our goal is to make it so developers can couple with brands. We're seeing more partnerships on the platform that we have not been involved with, which is exactly where we would ultimately want to get to, which is the spontaneous partner ecosystem.

Not on the partnerships, but regarding your question about aged-up users, I want to clarify. Are you asking if we observe different behaviors among older users in various geographies? For instance, does a user aged 17 to 24 in the U.S. behave differently compared to one in Germany? Is that what you mean?

That's part one. And if so, does that inform any elements of how you think about product development or platform development over the long term?

Yes, we're observing similar patterns across different geographies. Aged-up users are engaging at comparable rates, and in some instances even higher than younger users. Their monetization rates are also exceeding those of younger users, which is consistent globally. The dynamics we're witnessing are similar across regions. For instance, the monetization rate for aged-up users in the U.S. is on par with that of aged-up users elsewhere compared to younger users. Overall, within the demographic, aged-up users are exhibiting similar engagement frequency and higher monetization.

Yes, and maybe a philosophical way of thinking about this is, we saw different behaviors with aged-up people in Germany relative to the U.S. We would take a look at that and build platform infrastructure that supported both of those, so that our developers could respond to the differences rather than us having to split the platform. We're always trying to build a worldwide utility that works in all regions.

Okay. We have time for one more question, and then obviously, we're going to be available for the rest of the day. Operator?

Hi, good morning, David and good morning, Mike. Maybe two if I could. First, Mike, on expenses, as we think about 2023, I mean, should we go back and look at kind of what the OpEx-centric lines have done in terms of sequential dollar growth over the past four quarters and kind of extrapolate that forward? Similarly, should we look at kind of where we are right now when you look at the two more variable-type lines and again, kind of assume that we hold there through next year? Is that a reasonable framework to think about the expense base and expense investments through 2023? And then just second question, more on what you're seeing from a macro perspective. I'm curious, you guys have a global footprint. I'm really curious what you're seeing, if anything, in terms of any changing behavior as macros gotten a little more challenging, specifically in certain regions and perhaps certain demos. I'm curious what you're seeing, if anything? Thanks again, guys.

Thanks, Matt. Regarding costs, I recommend looking at the supplemental materials, specifically Pages 9 through 12, which outline the main cost items. The cost of revenue as a percentage of bookings and payment processing fees have generally remained stable or decreased. I believe stability is a reasonable way to project it, and we are optimistic about achieving greater efficiency. Our prepaid card business has significantly contributed to reducing those costs, and demand for prepaid cards is strong, making it a very effective channel for us. This could further lower costs over the upcoming quarters in 2023. Developer exchange fees have been around 22% to 23% of bookings, and we do not anticipate seeking leverage in this area right now; I expect them to remain within this range throughout 2023. A slight increase would be manageable, but stability is likely a fair estimation. Personnel costs, excluding stock compensation as a percentage of bookings, have been rising as we've been hiring and investing in the last few quarters. I expect this to stabilize around the figures we saw in Q2 and Q3 for most of the year. While we will continue to hire, as Dave mentioned, the pace is probably not going to be as rapid next year, yet we are still bringing a considerable number of people into the company. As a percentage of bookings, this figure will align more closely with what you see in Q2 and Q3. In terms of infrastructure and trust and safety, we have made significant investments over the last three quarters, and we anticipate some leverage in this area eventually, but I wouldn't expect much of it in 2023. We are making substantial investments while also ensuring that our teams are focused on maximizing efficiency. If you model this based on the performance of the last few quarters, you should be in a reasonable position. On the macro front, I’ll start, and Dave, feel free to add anything. Aside from the ongoing fluctuations in currencies against the dollar, we are observing strong user behavior worldwide. User growth, engagement hours, retention, and conversion rates are all encouraging. Overall monetization globally looks promising when adjusted for currency changes. While we acknowledge that the macro environment presents some challenges, particularly regarding how currencies translate back into dollars, the behavior of our user base appears to be quite healthy. I wouldn't say we've encountered anything significant. David, do you have anything to add?

We're going to wrap this up really quickly. I'll add two lightning bullets. One, if you re-watch our Investor Day, you'll see a wonderful presentation on how our infra ultimately is moving to active-active, and there'll be amazing leverage there. We're right now doing a 2:1 infra build. As that gets to four to three and five to four, you'll see amazing cost savings there. The other long-term point is we pay all of our wonderful engineers and product people in U.S. dollars right now. So you'll see a long-term move from us just to make sure we're absolutely tightening up exchange rates in our platform when we collect Roblox as well around the world. I'm feeling very positive about the macro trends that we see around the world on the platform.

Just on the infrastructure spending since Dave brought it up, we'll spend a little over $300 million on PP&E this year. The lion's share of the big infrastructure investment is done this year, although we'll spend another $300 million next year. There'll be a little bit of a shift. A little bit less of that will be on infrastructure and a little bit of incremental will be around real estate. We are still growing; we're moving into some new offices, and so we've modeled in some investments in real estate. Overall, PP&E will be basically flat year-over-year, but the amount that's around infrastructure will actually be down next year as we have taken most of that this year.

That's great color. Thanks, Mike, and David.

Okay. Operator, I think we are ready to wrap up. Dave, any closing comments?

No, just once again, thank you to the Roblox community. All of our wonderful investors, we love working with you and appreciate your support.

And thank you, everyone. That does conclude today's conference call. Once again, thanks for your participation, and you may now disconnect.