For the first nine months ending 9/30/22, Roblox Corporation (NYSE: RBLX) revenue increased 22% to $1.65 billion. However, net loss was up to $634 million from a loss of $348 million for the first nine months of 2021.
Analysis
Roblox was one of the biggest gaming IPOs ever in March 2021 with an initial market value of over $38 billion. Obviously, performance standards for the company are high to justify the valuation.
A growth rate of 22% would normally be cause for excitement. However, third-quarter results showed growth slowing (growth was 2% for Q3 and down from Q2 22). Revenue in the U.S. and Europe was actually down slightly. In addition, average bookings per daily active user (DAU) were $11.94 for Q3 22 versus $13.73 and $13.49 in Q3 20 and Q3 21. Note revenue and bookings are not the same.
What is perhaps most interesting about Roblox is the potential to expand outside the U.S./Canada. Much of the decline in bookings per user can be attributed to growth outside North America. For the nine months that ended 9/30/22, 76% of DAUs were outside North America. However, this only accounted for 34% of revenue. In other words, 24% of users in the U.S. and Canada account for 66% of revenue.
The challenge with Roblox is the product goes after a younger audience and each country will have different regulations. This is on top of the many challenges faced with growing on a global basis.
Overall Roblox is a company that has suffered from unrealistic expectations. The initial stock value was beyond reasonable expectations and it is now coming back to earth.
