Roblox Corporation (RBLX) on Q1 2023 Results - Earnings Call Transcript
Operator: Good morning. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Roblox First Quarter 2023 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. [Operator instructions] Thank you. Stefanie Notaney, you may begin your conference. Stefanie Notaney: Thank you, Brent. Good morning, everyone, and thank you for joining our Q&A session to discuss Roblox's Q1 2023 results. With me today is Roblox Co-Founder and CEO, David Baszucki; and CFO, Michael 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 Web site 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 our expectations of our business, future financial results and business, and financial strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in our forward-looking statements, and such risks are described in our risk factors, included in our SEC filings, including our annual report 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 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, as well as in our supplemental slides. For our webcast participants, please note that question icon at the bottom of your screen where you can submit your questions. With that, I'll turn it over to Dave. David Baszucki: Thank you. Hey, and good morning, everyone. We are going to start with a prelude. And I want to talk a bit about bookings acceleration and the generation of cash, which is really exciting for our business. We're going to talk about our future bookings growth rate relative to cost of sales, infrastructure, and compensation expense, which is also a wonderful story. And then, finally, we'll touch base on innovation and what we've done since the start of this year. Our revenue in Q1 grew 22%, to $655 million. Our bookings grew 23% to $773 million. And I want to just highlight bookings is how we run the business. We run the business based on cash. Our bookings growth rate year-on-year over the last five quarters have gone from negative 3%, to negative 4%, to plus 10%, to plus 17%, to plus 23%. We believe this is being driven by eight quarters of innovation and awesome engineering that have expanded our platform. And our platform is growing in all directions, and I'll touch on that. GAAP loss was $268 million, while cash from operations was positive $173 million. We generated over $100 million of free cash and operational cash in the quarter, and this just highlights the difference between cash and our GAAP loss, which is driven by deferred revenue and other factors. Finally, our cash has been steady relatively over the last six quarters, and we have approximately $3 billion of cash with no external financing. On the user side, our DAUs are up 22%, with an all-time high of 66 million DAUs. Our hours are up 23% year-on-year, once again an all-time high of 14.5 billion hours of engagement in Q1. All regions are up, and I want to highlight that our 13-and-up segment is growing 31% year-on-year, which bodes very well for our future growth as that's an amazingly large available market for us. On the developer community, money flowing to our developer community increased 24% year-on-year to a record $182 million in Q1. We have some exciting things happening in our business. Our bookings growth year-on-year is already exceeding our cost of sales growth year-on-year. And we believe, in Q3 of this year, our year-on-year bookings growth will exceed our infrastructure year-on-year growth. This is a testament to the efficiency on our infrastructure spend and the way we have built out our redundant datacenter in [Ash] (ph). I want to highlight that we spent almost $400 million of cash on infrastructure over the last year, and we're still showing positive cash flow in Q1. Finally, we believe, in Q1 of 2024, our year-on-year bookings growth will pass our year-on-year compensation expense growth through just operational excellence. We have not suffered layoffs. We continue to highlight that we're being very thoughtful in hiring the best and growing our headcount efficiently. On the cash side, once again, I highlighted we're in an awesome cash position. And on the innovation side, we continue to innovate. Our vision is to bring together a billion people every day with optimism and civility, and we're very bullish about this vision. We continue to feel very positively about this opportunity. In the last eight quarters, we've driven a lot of innovation. I want to highlight on the innovation we've really executed on, since January 1 of this year. And that innovation falls in categories of cost control, revenue acceleration, AI-generative creation, international ageing up, and our vision of social communication. We've got a 15-year history of innovation. And we believe innovation is once again contributing to our bookings acceleration. On the cost efficiency, we've been using AI and machine learning for quite some time to drive the efficiency of our safety organization, which is really the primary focus of our business. And we've got to the point where we're highly automating reviews of 3D objects, audio, and images. On the revenue side, I want to highlight that our advertising system is now in test. We have over 200 developers that are participating. We're not going to share the number. We will make a small amount of advertising revenue in Q2 of this year. And I'll quote what the NFL shared with our advertising system is that, "Portals have helped the NFL reach and convert a high percentage of new users into their experience." We're really excited about this. It is a new ad format that complements image and video that is very immersive and native to Roblox. We've launched two AI-generative accelerators to help our creators create better and create more quickly. First is a material generator that allows developers to create any type of 3D material purely by using a few words. If a creator on Roblox says, "I would like a brick wall that's a little bit covered with moss," that's enough to generate a 3D material. We're proud that we did this early this year. And we're also launching code generation. Roblox has an amazing repository of Lua code. And we're using this to train a code generator that won't just help people auto-complete, but really helps create and script on Roblox. On the international side, we continue to drive the vision that Roblox is a platform that will work around the world. And also drive the vision that anyone's creation can go live in many, many countries. I want to highlight Japan, which is now growing at over 100% year-on-year on daily active. It's been driven by some advances we've made on semantic search and the quality of our translation. We continue, behind the scenes, to drive the quality, the performance, and efficiency of our Core 3D engine. And we've made enormous strides on our vision of social communication as well. Since the start of the year, voice on Roblox is now being used by almost 10% of over-13 daily users in the U.S.A., 9% to be exact. And we've rolled out lip sync as well on our journey to fully animating avatars on the platform, either using lip-sync or ultimately camera. A fun other thing just to highlight. By day seven, based on all the work we've don't on contacts and friend-finding, people are finding 10% more real-life friends on the platform in the first seven days than they were a year ago. Just want to once again recap, and then we'll start answering questions. Long-term mission is a billion users every day connected with optimism and civility. We're focusing on driving bookings growth with innovation. Behind that bookings growth, we have an enormous focus on operational excellence and efficiency. And once again, we believe, by Q1 of next year, bookings on a year-on-year basis will be growing more quickly than cost of sales, infrastructure expense or headcount compensation expense. And then finally, the cash that we spin-off, as much as possible, we want to really share with the creator community to drive innovation. With that, we'll open up for questions. Thank you. Operator: [Operator Instructions] Your first question is from the line of Andrew Crum with Stifel. Your line is open. Operator: Your next question is from the line of Omar Dessouky with Bank of America. Your line is open. Operator: Your next question comes from the line of Matthew Thornton with Truist Securities. Your line is open. Operator: Your next question is from the line of Matthew Cost with Morgan Stanley. Your line is open. Operator: Your next question is from the line of Clark Lampen with BTIG. Your line is open. Operator: Your next question is from the line of Bernie McTernan with Needham. Your line is open. Operator: Your next question is from the line of Andrew Uerkwitz with Jefferies. Your line is open. Operator: Your next question comes from the line of Tom Champion with Piper Sandler. Your line is open. Operator: Your next question is from the line of Jonathan Kees from Daiwa. Your line is open. Operator: We have time for one more question from the line of Brandon Ross with LightShed Partners. Your line is open. Stefanie Notaney: Thank you for joining us today. And that's a wrap. Bret, you can close it out. Operator: Thank you. This does conclude today's conference call. Thank you for your participation. You may now disconnect.
Roblox Corporation (NYSE:RBLX) Faces Legal Challenges Amid Positive Outlook from Wells Fargo
- Wells Fargo maintains an "Overweight" rating on Roblox Corporation (NYSE:RBLX), raising its price target from $46 to $54.
- Roblox is currently under investigation by The Schall Law Firm for potential securities law violations.
- Edelson Lechtzin LLP is also investigating Roblox for potential securities fraud and breach of fiduciary duty claims.
Roblox Corporation (NYSE:RBLX) is a leading online gaming platform that allows users to create and play games created by other users. It has gained significant popularity, especially among younger audiences. As of October 8, 2024, Wells Fargo maintained an "Overweight" rating for Roblox, with the stock priced at $40.51. The bank also raised its price target from $46 to $54, as highlighted by TheFly.
Despite the positive outlook from Wells Fargo, Roblox is currently facing legal challenges. The Schall Law Firm has launched an investigation into potential securities law violations by Roblox. This investigation seeks to determine if the company issued false or misleading statements or failed to disclose important information to investors. Shareholders are encouraged to participate in this investigation to address any potential infractions.
Additionally, Edelson Lechtzin LLP is conducting a separate investigation into potential securities fraud and breach of fiduciary duty claims against Roblox. This investigation is on behalf of investors holding common stock in the company. These legal proceedings could have significant implications for Roblox and its shareholders.
The current stock price of Roblox is $40.51, reflecting a decrease of 2.13% or $0.88. The stock has fluctuated between a low of $37.51 and a high of $40.52 today. Over the past year, Roblox has seen a high of $48.43 and a low of $29.55. The company's market capitalization is approximately $26.22 billion, with a trading volume of 29.37 million shares.
Roblox Stock Drops 9% on Hindenburg Report Alleging Inflated User Metrics and Safety Concerns
Roblox Corporation (NYSE:RBLX) shares plunged over 9% intra-day today following a critical short report from Hindenburg Research, which accuses the online gaming company of inflating user metrics, struggling to manage its finances, and failing to safeguard young users on its platform.
The report underscores Roblox’s financial struggles, highlighting losses of $1.07 billion in the past year alone. Despite a market valuation of about $27 billion, Hindenburg argues that Roblox’s 8.6x sales multiple far exceeds that of its gaming industry peers and reflects unsustainable growth and profit expectations.
Hindenburg alleges that Roblox has consistently overstated its user base, inflating its key metrics by between 25% and 42%. They further claim that the platform’s engagement hours are also overstated, with data suggesting they could be exaggerated by over 100%.
The short report also raises concerns over safety, pointing to inadequate content moderation that may expose young users to inappropriate material and potentially predatory behaviors. According to Hindenburg, these vulnerabilities compromise Roblox’s reputation and increase regulatory risk, casting a shadow over the company’s operational integrity and future viability.
MoffettNathanson Maintains Neutral Rating on Roblox, Highlights AI-Driven Ambitions
MoffettNathanson analysts reaffirmed their Neutral rating on Roblox Corp. (NYSE:RBLX) with a price target of $31. The analysts' valuation framework is based on a multi-year discounted cash flow (DCF) model, factoring in the impact of stock-based compensation and assigning a 26x adjusted unlevered free cash flow multiple for 2028. The analysts also highlighted Roblox's deep investment in artificial intelligence, particularly generative AI, to enhance content creation on its platform.
Tools like Roblox Studio and features such as Roblox Party are designed to improve user experience, especially on lower-spec mobile devices in developing regions, while fostering the platform's social ecosystem. Despite current challenges, Roblox continues to aim high, with aspirations to capture 10% of the global video game content market—a goal that would rival major industry players like PlayStation and surpass Nintendo.
Further Guidance Cuts for Roblox Are Unlikely, Says BofA
Roblox (NYSE:RBLX) saw a significant decline in shares last month after announcing a reduction in its bookings growth outlook for 2024 from 20% to 15%.
Despite this, Bank of America analysts maintain a positive outlook on the stock, stating that another reduction in guidance for this calendar year is "highly unlikely." The bank reaffirmed its Buy rating on Roblox on Thursday and increased its Q2 bookings growth estimates. The bank now expects Roblox’s bookings to grow by 17.5% year-over-year in the second quarter, up from the previous estimate of 15%. This revision is based on their belief that core markets will sustain a growth rate of over 20% year-over-year for the remainder of Q2.
The analysts emphasized that their projections exceed the upper range of the company's guidance (15.3% year-over-year) and the highest consensus estimate (14.9% year-over-year). They also highlighted that Roblox reported on its Q1 call that US and Canada bookings growth had recovered to above 20% in late April and early May.
Bank of America has also increased its full-year 2024 growth estimate for Roblox to 17% year-over-year from 16.5% year-over-year. This adjustment reflects the potential that Roblox might not yet consider its search and discovery upgrades fully complete.
Two factors contribute to this assessment: Roblox will have only 15 weeks of data before issuing its next guidance, and the search and discovery improvements have not been fully implemented in some non-core regions.
Citigroup Upgrades Roblox to Buy and Sets a New Price Target
- Citigroup upgrades Reblox to Buy from Hold, adjusting the price target to $40.
- Roblox's stock has declined by 9.2% over the past month, underperforming the S&P 500.
- The importance of earnings estimates revisions highlighted as a key indicator of future performance.
On Thursday, May 16, 2024, Citigroup updated its stance on NYSE:RBLX, changing its grade to Buy while maintaining a hold action. This adjustment was announced when the stock was priced at $32.76. In conjunction with this grade change, Citigroup also revised its price target for Roblox, lowering it to $40 from the previous $52. This information was reported by TheFly, providing insights into the financial analysis conducted by Citigroup on Roblox.
Roblox Corporation, a key player in the gaming industry, has been under the spotlight recently, drawing significant attention from investors. The company's stock has seen a decline of 9.2% over the past month, a notable contrast to the S&P 500 composite's increase of 5%. This decline in Roblox's stock, amidst a slight decrease of 1.2% in the gaming industry overall, signals a challenging period for the company. Citigroup's revised outlook and price target adjustment reflect these market dynamics and broader industry trends.
The importance of earnings estimates revisions as a critical indicator of a company's future performance cannot be overstated. Although specific details on the earnings estimates revisions for Roblox were not provided, such financial metrics are crucial for making informed investment decisions. Citigroup's analysis, leading to the adjustment in Roblox's stock grade and price target, likely took into account these and other financial indicators to gauge the company's potential market performance.
Roblox Corporation's stock performance, with a recent trading price of $32.76 and a slight decrease of $0.25, showcases the volatility and the challenges the company faces in the stock market. The stock's fluctuation between a low of $32.68 and a high of $33.775 during the trading session, along with its peak of $47.2 and a low of $24.88 over the past year, highlights the fluctuating investor confidence in the company. With a market capitalization of around $20.97 billion and a trading volume of 8.27 million shares, Roblox remains a significant entity in the gaming industry, navigating through its ups and downs in the stock market.
Roblox Plunges 22% on Disappointing Guidance, Overshadowing Q1 Beat
Roblox (NYSE:RBLX) reported first-quarter results that exceeded analyst expectations for both earnings and revenue, but disappointing bookings guidance for the second quarter led to a dramatic 22% drop in its share price yesterday.
The company posted a Q1 loss of $0.43 per share, which was better than the anticipated loss of $0.53 per share. Revenue for the quarter was $801.3 million, surpassing the expected $769 million and showing a 22% increase year-over-year. Bookings for Q1 increased by 19.4% year-over-year to $923.8 million, falling within the company's forecast range of $910 million to $940 million.
Despite these strong Q1 results, Roblox's forecast for second-quarter bookings, ranging from $870 million to $900 million, did not meet the analyst consensus of $902.5 million, prompting a steep decline in its stock. However, the revenue guidance for the same quarter is set between $855 million and $880 million, which is well above the consensus of $805.2 million.
The first quarter saw a 37% year-over-year increase in net cash from operating activities, reaching $238.9 million, and a record 133% year-over-year rise in free cash flow to $191.1 million. The platform's average daily active users (DAUs) grew by 17% year-over-year to 77.7 million, and the average bookings per DAU saw a slight increase of 2% year-over-year to $11.89.
For the full year of 2024, Roblox anticipates revenue between $3.45 billion and $3.525 billion, with bookings expected to range from $4 billion to $4.1 billion.
Roblox Corporation (RBLX) Earnings Report: A Mixed Bag of Results
On Thursday, May 9, 2024, Roblox Corporation (RBLX) unveiled its earnings before the market opened, presenting a mixed bag of results that caught the attention of investors and analysts alike. The company reported an earnings per share (EPS) of -$0.43, surpassing the anticipated -$0.53, indicating a better-than-expected performance in terms of profitability. Despite this positive surprise in earnings, Roblox's revenue for the quarter was $801.3 million, which did not meet the expected figure of $922.75 million. This discrepancy between earnings and revenue highlights the challenges and dynamics the company faced during the quarter.
According to Zacks Investment Research, Roblox's financial performance for the first quarter ended March 2024 was closely scrutinized against Wall Street estimates and the company's performance in the previous year. The analysis revealed that Roblox managed to narrow its loss per share to -$0.43 from -$0.44 a year ago, marking a slight improvement in its profitability. However, the company's revenue of approximately $923.76 million, although representing an increase from the $773.82 million reported in the year-ago period, fell short of the Zacks Consensus Estimate by 0.78%. This mixed performance underscores the volatility and unpredictability in the gaming industry, where Roblox operates.
The financial details further reveal that Roblox experienced a significant drop in its stock price, plunging 29.2% in premarket trading following the earnings announcement. This sharp decline was attributed to the company's revenue falling substantially short of expectations and a pessimistic outlook for the current quarter. The net losses reported by Roblox amounted to $270.6 million, or 43 cents per share, a slight increase from the previous year's losses of $268.3 million, or 44 cents per share. This financial situation paints a picture of the challenges Roblox faces in maintaining profitability and meeting investor expectations.
Delving deeper into Roblox's financial health, the company's gross profit stood at approximately $622.4 million, with a reported operating income of around -$302.3 million. The EBITDA, a measure of a company's overall financial performance, also reflected a similar figure of approximately -$302.3 million. These figures, coupled with a cost of revenue of about $178.9 million and an income before tax showing a loss of approximately $270.9 million, highlight the financial pressures Roblox is under. Despite these challenges, the company's ability to outperform earnings estimates suggests a potential for recovery and growth in the future.
In summary, Roblox Corporation's latest earnings report presents a complex picture of a company navigating the ups and downs of the gaming industry. While the better-than-expected EPS offers a glimmer of hope, the shortfall in revenue and the subsequent stock price drop reflect the ongoing challenges Roblox faces. As the company looks to the future, it will be crucial for it to address these challenges and capitalize on opportunities to improve its financial health and operational achievements.
