Roblox Corporation — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021; unaudited. Roblox operates a user-generated 3D social and gaming platform monetized primarily through Robux and virtual items. Unless noted, amounts are USD.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $509.3 million | $251.9 million | $1,350.4 million | $613.9 million |
| Bookings | $637.8 million | $496.5 million | $1,955.6 million | $1,240.2 million |
| Operating loss | $(77.4) million | $(51.5) million | $(355.4) million | $(197.5) million |
| Consolidated net loss | $(77.2) million | $(50.0) million | $(356.2) million | $(197.2) million |
| Net loss per share, basic and diluted | $(0.13) | $(0.26) | $(0.73) | $(1.09) |
| Operating cash flow | Not separately provided here | Not separately provided here | $536.9 million | $345.3 million |
| Free cash flow | Not separately provided here | Not separately provided here | $480.7 million | $292.6 million |
Margins: Operating loss was 15% of revenue in Q3 versus 20% a year earlier; for the nine months, 26% versus 32%. Roblox remained loss-making. Net loss attributable to common stockholders was $74.0 million in Q3 and $348.4 million for the nine months. Q3 EPS improved year over year alongside the substantially higher weighted-average share count following the March 2021 direct listing.
Balance sheet and liquidity: At September 30, cash and cash equivalents were $1,925.6 million, current assets $2,511.6 million, current liabilities $1,917.6 million, total liabilities $2,666.4 million, and accumulated deficit $840.6 million. Deferred revenue totaled $2,171.3 million, including $1,621.2 million expected to be recognized over the next 12 months. No amounts were drawn under the $50 million revolving facility before it was terminated in February 2021.
Debt subsequent to quarter-end: On October 29, 2021, Roblox issued $1.0 billion of unsecured 3.875% senior notes due 2030, receiving approximately $987.4 million net proceeds after issuance costs. Interest is payable semiannually; proceeds are intended for general corporate purposes.
Material changes and operating trends
- Q3 revenue increased 102% year over year; nine-month revenue increased 120%. Management attributed growth primarily to more daily paying users: approximately 676,000 in Q3 versus 555,000, and approximately 675,000 for the nine months versus 457,000.
- Bookings grew 28% in Q3 and 58% for the nine months. Bookings exceed recognized revenue in part because most virtual-item proceeds are initially deferred and durable-item revenue is recognized over an estimated 23-month paying-user lifetime.
- Q3 average daily active users were 47.3 million. Management said growth and engagement had begun moderating in some markets as pandemic restrictions eased and children returned to school. It reported that 49% of Q3 DAUs were under 13.
- Q3 cost of revenue was 26% of revenue, unchanged year over year. Developer exchange fees fell to 26% of revenue from 34%; infrastructure and trust-and-safety costs fell to 23% from 28%. Research and development rose to 27% from 21%, and general and administrative costs to 10% from 6%.
- Stock-based compensation was $89.3 million in Q3 and $221.7 million for the nine months, versus $13.3 million and $63.0 million, respectively, in 2020. Nine-month results also included $50.6 million in direct-listing fees and $53.8 million in fees related to certain legal settlements in the company’s adjusted EBITDA reconciliation.
- Nine-month operating cash flow benefited substantially from a $616.4 million increase in deferred revenue; it also reflected a $134.5 million increase in deferred cost of revenue. The cash flow increase should therefore be considered alongside bookings and deferred balances.
Outlook, risks, and unusual items
- Management expects operating losses to continue in the foreseeable future as it invests in employees, platform development, infrastructure, trust and safety, and its developer and creator community. It stated existing cash and expected operating cash flows should meet needs for the next 12 months. No specific quarterly or annual financial guidance is provided in the filing.
- Management warned that pandemic-driven engagement and monetization may not persist, growth rates may moderate, and results can be seasonal, with historically higher sales in Q4. Mobile app-store fees and a shift toward mobile distribution may pressure costs.
- The company settled the National Music Publishers’ Association copyright lawsuit; the settlement cost was accrued in Q2 and paid in Q3. The agreement includes good-faith license negotiations over the following six months with participating publishers.
- Roblox disclosed a previously identified material weakness in revenue-recognition controls. Remediation was ongoing, and management concluded disclosure controls were not effective as of September 30, 2021, while stating the filed financial statements fairly presented the periods shown.
- Other significant risks include child safety and content moderation, privacy and data regulation, platform availability and cybersecurity, reliance on mobile operating systems and payment channels, competition, and uncertainty around the China joint venture. The filing also disclosed a platform outage beginning October 28, 2021, lasting approximately three calendar days.
- Guilded was acquired on August 16 for consideration valued at $77.6 million, including cash and shares. The acquisition added goodwill and identifiable intangible assets.
Important facts for investors to verify
- Whether bookings, paying-user trends, DAUs, and engagement remain strong as pandemic-related comparisons normalize; the filing does not provide clear values here for hours engaged or ABPDAU.
- How deferred revenue and related deferred costs affect the timing and quality of reported revenue and operating cash flow.
- The scale, duration, and potential dilution of stock-based compensation, including the CEO performance award, and the path toward profitability.
- Progress and independent validation of remediation of the material weakness in financial reporting controls.
- Final obligations and costs under the music-publishing settlement, as well as exposure from other legal, safety, privacy, and regulatory matters.
- Debt-service implications of the 2030 notes and whether the new proceeds and cash generation support planned investment needs.