Roblox Reports Third Quarter 2023 Financial Results

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Roblox Corporation (NYSE: RBLX), a global platform bringing millions of people together through shared experiences, released its third quarter 2023 financial and operational results today. Separately, Roblox posted a letter to shareholders and supplemental materials on the Roblox investor relations website at ir.roblox.com.

Third Quarter 2023 Financial, Operational and Liquidity Highlights

Revenue was $713.2 million, up 38% year-over-year.
Bookings were $839.5 million, up 20% year-over-year.
Net loss attributable to common stockholders was $277.2 million.
Net cash provided by operating activities was $112.7 million, up 68% year-over-year.
Average Daily Active Users (“DAUs”) were 70.2 million, up 20% year-over-year.
Average monthly unique payers were 14.7 million, up 14% year-over-year, and average bookings per monthly unique payer was $19.02, up 5% year-over-year.
Hours engaged were 16.0 billion, up 20% year-over-year.
Average bookings per DAU was $11.96, flat year-over-year.
Net liquidity¹ was $2.1 billion, and Covenant Adjusted EBITDA² was $81.1 million.

“Our strong third quarter results reflect our continued platform innovation and growth across all age groups and geographies. We are executing against our key priorities to enable deeper forms of immersion, communication and Avatar expression on the platform, while investing in artificial intelligence, brands and advertising, to drive future growth,” said David Baszucki, founder and CEO of Roblox.

“We delivered another strong quarter of growth while executing against our financial plan. Bookings growth was particularly strong in western Europe and east Asia. The US and Canada still accounted for the majority of bookings growth in dollar terms among all regions. We also slowed spending growth across most of our major expense categories. As a result, we showed marked improvement in margins compared both to Q2 2023 and Q3 2022,” said Michael Guthrie, chief financial officer of Roblox.

“In addition, we have largely completed our Ashburn, Virginia data center. Capital expenditures in Q3 2023 were $53.2 million, down 60% from $133.4 million in Q3 2022 and down 52% from $110.9 million of capital expenditures in Q2 2023. As a result, free cash flow was $59.5 million in Q3 2023, up from ($67.7) million in Q3 2022 and up from ($95.5) million in Q2 2023. While we continue to invest in innovation, we are now entering a new phase where we can slow the growth in operating expenses and capital expenditures, thereby generating operating leverage and free cash flow,” said Michael Guthrie, chief financial officer of Roblox.

____________________

¹ Net liquidity represents cash, cash equivalents, and short-term and long-term investments, less the carrying value of long-term debt, net.

² Covenant Adjusted EBITDA is used in certain covenant calculations specified in the indenture governing our senior notes due 2030 and is not calculated in accordance with GAAP and may not conform to the calculation of Adjusted EBITDA by other companies. Covenant Adjusted EBITDA should not be considered as a substitute for a measure of our financial performance or other liquidity measures prepared in accordance with GAAP and is also not indicative of income or loss calculated in accordance with GAAP.

Earnings Q&A Session

Roblox will host a live Q&A session to answer questions regarding their third quarter 2023 results on Wednesday, November 8, 2023 at 5:30 a.m. Pacific Time/8:30 a.m. Eastern Time. The webcast will be open to the public at ir.roblox.com or by clicking here.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our vision to connect one billion global DAUs, our efforts to improve the Roblox Platform, our immersive advertising efforts, the use of artificial intelligence (“AI”) on our platform, our efforts related to communications products, our economy and product efforts related to creator earnings tools, branding and new partnerships, our business, product, strategy and user growth, our investment strategy, including our opportunities for and expectations of improvements in financial and operating metrics, including operating leverage, free cash flow, operating expenses and capital expenditures, our expectation of successfully executing such strategies and plans, disclosures and future growth rates, benefits from agreements with third-party cloud providers, estimates about our data center capacity, our expectations of future net losses, net cash provided by operating activities, statements by our Chief Executive Officer and Chief Financial Officer, and our expectations on providing guidance in fiscal 2024. These forward-looking statements are made as of the date they were first issued and were based on current plans, expectations, estimates, forecasts, and projections as well as the beliefs and assumptions of management. Words such as “expect,” “vision,” “envision,” “evolving,” “drive,” “anticipate,” “intend,” “maintain,” “should,” “believe,” “continue,” “plan,” “goal,” “opportunity,” “estimate,” “predict,” “may,” “will,” “could,” and “would,” and variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond our control. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to risks detailed in our filings with the Securities and Exchange Commission (the “SEC”), including our annual reports on Form 10-K, our quarterly reports on Form 10-Q and other filings and reports we make with the SEC from time to time. In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: our ability to successfully execute our business and growth strategy; the sufficiency of our cash and cash equivalents to meet our liquidity needs, including the repayment of our senior notes; the demand for our platform in general; our ability to retain and increase our number of users, developers, and creators; the impact of the COVID-19 pandemic and the easing of restrictions related to the COVID-19 pandemic; the impact of inflation and global economic conditions on our operations; the impact of changing legal and regulatory requirements on our business, including the use of verified parental consent; our ability to develop enhancements to our platform, and bring them to market in a timely manner; our ability to develop and protect our brand and build new partnerships; any misuse of user data or other undesirable activity by third parties on our platform; our ability to maintain the security and availability of our platform; our ability to detect and minimize unauthorized use of our platform; the impact of AI on our platform, users, creators and developers; and the impact of requiring remote employees to relocate to our headquarters in the San Francisco Bay Area. Additional information regarding these and other risks and uncertainties that could cause actual results to differ materially from our expectations is included in the reports we have filed or will file with the SEC, including our annual reports on Form 10-K and our quarterly reports on Form 10-Q.

The forward-looking statements included in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments will cause our views to change. However, we undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

ROBLOX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par values)
(unaudited)

	As of
	September 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	580,049		$	2,977,474
Short-term investments		1,576,293			—
Accounts receivable—net of allowances		285,315			379,353
Prepaid expenses and other current assets		65,004			61,641
Deferred cost of revenue, current portion		462,795			420,136
Total current assets		2,969,456			3,838,604
Long-term investments		959,260			—
Property and equipment—net		709,382			592,346
Operating lease right-of-use assets		662,379			526,030
Deferred cost of revenue, long-term		244,547			225,132
Intangible assets, net		56,794			54,717
Goodwill		141,800			134,335
Other assets		10,512			4,323
Total assets	$	5,754,130		$	5,375,487
Liabilities and Stockholders’ equity
Current liabilities:
Accounts payable	$	86,781		$	71,182
Accrued expenses and other current liabilities		260,395			236,006
Developer exchange liability		239,428			231,704
Deferred revenue—current portion		2,208,531			1,941,943
Total current liabilities		2,795,135			2,480,835
Deferred revenue—net of current portion		1,188,815			1,095,291
Operating lease liabilities		629,756			494,590
Long-term debt, net		1,004,666			988,984
Other long-term liabilities		15,904			10,752
Total liabilities		5,634,276			5,070,452
Stockholders’ equity
Common stock, $0.0001 par value; 5,000,000 authorized as of September 30, 2023 and December 31, 2022, 623,588 and 604,674 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively; Class A common stock—4,935,000 shares authorized as of September 30, 2023 and December 31, 2022, 573,502 and 553,337 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively; Class B common stock—65,000 shares authorized as of September 30, 2023 and December 31, 2022, 50,086 and 51,337 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		60			59
Additional paid-in capital		2,878,160			2,213,603
Accumulated other comprehensive income/(loss)		(15,879	)		671
Accumulated deficit		(2,736,555	)		(1,908,307	)
Total Roblox Corporation Stockholders’ equity		125,786			306,026
Noncontrolling interests		(5,932	)		(991	)
Total Stockholders’ equity		119,854			305,035
Total Liabilities and Stockholders’ equity	$	5,754,130		$	5,375,487

ROBLOX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2023			2022			2023			2022
Revenue⁽¹⁾	$	713,225		$	517,707		$	2,049,335		$	1,646,048
Cost and expenses:
Cost of revenue⁽¹⁾⁽²⁾		163,581			126,437			477,451			405,226
Developer exchange fees		170,719			151,470			519,002			441,740
Infrastructure and trust & safety		218,968			190,986			655,051			490,576
Research and development		321,613			235,551			912,469			625,070
General and administrative		97,508			81,165			291,279			217,613
Sales and marketing		40,874			32,105			97,957			87,708
Total cost and expenses		1,013,263			817,714			2,953,209			2,267,933
Loss from operations		(300,038	)		(300,007	)		(903,874	)		(621,885	)
Interest income		36,442			12,764			102,288			17,206
Interest expense		(10,268	)		(10,005	)		(30,409	)		(29,895	)
Other income/(expense), net		(4,262	)		(4,302	)		(1,425	)		(7,732	)
Loss before income taxes		(278,126	)		(301,550	)		(833,420	)		(642,306	)
Provision for/(benefit from) income taxes		682			352			177			350
Consolidated net loss		(278,808	)		(301,902	)		(833,597	)		(642,656	)
Net loss attributable to noncontrolling interests		(1,650	)		(4,104	)		(5,349	)		(8,216	)
Net loss attributable to common stockholders	$	(277,158	)	$	(297,798	)	$	(828,248	)	$	(634,440	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.45	)	$	(0.50	)	$	(1.35	)	$	(1.07	)
Weighted-average shares used in computing net loss per share attributable to common stockholders—basic and diluted		619,350			597,779			612,938			593,452

(1)		In the first quarter of 2022, we updated our estimated paying user life from 23 months to 25 months, which was subsequently updated again to 28 months in the third quarter of 2022, where it remained through the third quarter of 2023. Based on the carrying amount of deferred revenue and deferred cost of revenue as of June 30, 2022, the third quarter 2022 change in estimated paying user life resulted in a decrease in revenue of $111.0 million and a decrease in cost of revenue of $25.5 million during the three months ended September 30, 2022.

		Based on the carrying amount of deferred revenue and deferred cost of revenue as of December 31, 2021, both changes in estimated paying user lives during 2022 resulted in a decrease in revenue of $329.7 million and a decrease in cost of revenue of $76.4 million during the nine months ended September 30, 2022.

(2)		Depreciation of servers and infrastructure equipment included in infrastructure and trust & safety.

ROBLOX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
		2023			2022			2023			2022
Cash flows from operating activities:
Consolidated net loss	$	(278,808	)	$	(301,902	)	$	(833,597	)	$	(642,656	)
Adjustments to reconcile net loss including noncontrolling interests to net cash and cash equivalents provided by operations:
Depreciation and amortization		53,600			34,052			153,611			87,545
Stock-based compensation expense		220,022			161,359			617,288			420,042
Operating lease non-cash expense		26,048			18,815			70,801			49,115
(Accretion)/amortization on marketable securities, net		(20,474	)		—			(52,219	)		—
Amortization of debt issuance costs		331			318			982			940
Impairment expense, (gain)/loss on investment and other asset sales, and other, net		1,578			(1,515	)		7,747			(34	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		(29,454	)		1,630			93,174			119,948
Accounts payable		2,279			2,304			3,855			(8,331	)
Prepaid expenses and other current assets		4,298			(15,681	)		(1,861	)		(42,604	)
Other assets		502			(266	)		(6,189	)		498
Developer exchange liability		18,880			21,175			7,724			4,461
Accrued expenses and other current liabilities		19,745			2,642			(2,599	)		6,982
Other long-term liability		2,685			—			4,971			(579	)
Operating lease liabilities		(15,994	)		(11,259	)		(46,837	)		(32,989	)
Deferred revenue		130,943			187,991			360,098			336,928
Deferred cost of revenue		(23,477	)		(32,519	)		(62,074	)		(49,189	)
Net cash and cash equivalents provided by operating activities		112,704			67,144			314,875			250,077
Cash flows from investing activities:
Acquisition of property and equipment		(53,196	)		(133,356	)		(255,470	)		(268,958	)
Payments related to business combination, net of cash acquired		(3,859	)		—			(3,859	)		(6,165	)
Purchases of intangible assets		—			(1,500	)		(13,500	)		(1,500	)
Purchases of investments		(761,151	)		—			(3,803,911	)		—
Maturities of investments		632,000			—			956,010			—
Sales of investments		117,487			—			346,766			—
Net cash and cash equivalents used in investing activities		(68,719	)		(134,856	)		(2,773,964	)		(276,623	)
Cash flows from financing activities:
Proceeds from issuance of common stock		16,209			12,830			47,316			42,706
Payment of withholding taxes related to net share settlement of restricted stock units		—			—			—			(150	)
Proceeds from debt issuances		—			—			14,700			—
Payment of debt issuance costs		—			—			—			(154	)
Payments related to business combination, after acquisition date		—			(150	)		(750	)		(150	)
Payment of term license related obligations		—			—			—			(420	)
Net cash and cash equivalents provided by financing activities		16,209			12,680			61,266			41,832
Effect of exchange rate changes on cash and cash equivalents		(409	)		1,064			398			1,921
Net increase/(decrease) in cash and cash equivalents		59,785			(53,968	)		(2,397,425	)		17,207
Cash and cash equivalents
Beginning of period		520,264			3,075,475			2,977,474			3,004,300
End of period	$	580,049		$	3,021,507		$	580,049		$	3,021,507

Use of Non-GAAP Financial Measures

This press release and the accompanying tables contain the non-GAAP financial measure bookings and non-GAAP financial measure free cash flow.

We use this non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial information may be helpful to investors because it provides consistency and comparability with past financial performance.

Bookings is defined as revenue plus the change in deferred revenue during the period and other non-cash adjustments. Substantially all of our bookings are generated from sales of virtual currency, which can be converted to virtual items on the Roblox Platform. Sales of virtual currency reflected as bookings include one-time purchases and monthly subscriptions purchased via payment processors or through prepaid cards. Bookings also include an insignificant amount from advertising and licensing arrangements. We believe bookings provide a timelier indication of trends in our operating results that are not necessarily reflected in our revenue as a result of the fact that we recognize the majority of revenue over the estimated average lifetime of a paying user. The change in deferred revenue constitutes the vast majority of the reconciling difference from revenue to bookings. By removing these non-cash adjustments, we are able to measure and monitor our business performance based on the timing of actual transactions with our users and the cash that is generated from these transactions. Free cash flow represents the net cash provided by operating activities less purchases of property, equipment, and intangible assets acquired through asset acquisitions. We believe that free cash flow is a useful indicator of our unit economics and liquidity that provides information to management and investors about the amount of cash generated from our core operations that, after the purchases of property, equipment, and intangible assets acquired through asset acquisitions, can be used for strategic initiatives.

Non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial information as a tool for comparison. As a result, our non-GAAP financial information is presented for supplemental informational purposes only and should not be considered in isolation from, or as a substitute for financial information presented in accordance with GAAP.

Reconciliation tables of the most comparable GAAP financial measure to the non-GAAP financial measure used in this press release are included below. We encourage investors and others to review our business, results of operations, and financial information in their entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measures.

The following table presents a reconciliation of revenue, the most directly comparable financial measure calculated in accordance with GAAP, to bookings, for each of the periods presented (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
		2023			2022			2023			2022

Reconciliation of revenue to bookings:
Revenue	$	713,225		$	517,707		$	2,049,335		$	1,646,048
Add (deduct):
Change in deferred revenue		130,957			187,991			360,112			336,928
Other		(4,729	)		(3,982	)		(15,489	)		(10,152	)
Bookings	$	839,453		$	701,716		$	2,393,958		$	1,972,824

The following table presents a reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow, for each of the periods presented (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
		2023			2022			2023			2022

Reconciliation of net cash provided by operating activities to free cash flow:
Net cash provided by operating activities	$	112,704		$	67,144		$	314,875		$	250,077
Deduct:
Acquisition of property and equipment		(53,196	)		(133,356	)		(255,470	)		(268,958	)
Purchases of intangible assets		—			(1,500	)		(13,500	)		(1,500	)
Free cash flow	$	59,508		$	(67,712	)	$	45,905		$	(20,381	)

Liquidity

Covenant Adjusted EBITDA is used in certain covenant calculations specified in the indenture governing our senior notes due 2030 that is not calculated in accordance with GAAP and may not conform to the calculation of EBITDA or adjusted EBITDA by other companies. Covenant Adjusted EBITDA should not be considered as a substitute for net loss as determined in accordance with GAAP and by other companies. We believe that, when considered together with reported amounts, Covenant Adjusted EBITDA is useful for our investors and management for purposes of analyzing our compliance with certain covenants specified in the indenture governing our senior notes due 2030 and may influence our ability to issue additional debt and enter into certain other transactions in the future. Covenant Adjusted EBITDA should be considered in connection with our condensed consolidated financial statements and results presented in accordance with GAAP. Refer to the Liquidity and Capital Resources of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 for more information.

The following table presents the calculation of Covenant Adjusted EBITDA in accordance with the terms of the indenture governing our senior notes due 2030, for each of the periods presented:

	Three Months Ended September 30,						Nine Months Ended September 30,
		2023			2022			2023			2022

Calculation of Covenant Adjusted EBITDA:
Consolidated net loss	$	(278,808	)	$	(301,902	)	$	(833,597	)	$	(642,656	)
Add (deduct):
Interest income		(36,442	)		(12,764	)		(102,288	)		(17,206	)
Interest expense		10,268			10,005			30,409			29,895
Other (income)/expense, net		4,262			4,302			1,425			7,732
Provision for/(benefit from) income taxes		682			352			177			350
Depreciation and amortization		53,600			34,052			153,611			87,545
Stock-based compensation expense		220,022			161,359			617,288			420,042
Other non-cash charges⁽¹⁾		—			—			6,988			—
Change in deferred revenue		130,957			187,991			360,112			336,928
Change in deferred cost of revenue		(23,477	)		(32,519	)		(62,074	)		(49,189	)
Covenant Adjusted EBITDA	$	81,064		$	50,876		$	172,051		$	173,441

(1)

For 2023, “Other non-cash charges” includes impairment expenses related to certain operating lease right-of-use assets and related property and equipment.

About Roblox

Roblox is an immersive platform for connection and communication. Every day, millions of people come to Roblox to create, play, work, learn, and connect with each other in experiences built by our global community of creators. Our vision is to reimagine the way people come together – in a world that’s safe, civil, and optimistic. To achieve this vision, we are building an innovative company that, together with the Roblox community, has the ability to strengthen our social fabric and support economic growth for people around the world. For more about Roblox, please visit corp.roblox.com.

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