MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the fiscal year ended
December 31, 2021included in the Annual Report on Form 10-K, filed with the SECon February 25, 2022. This discussion and analysis and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements, such as those relating to our plans, objectives, expectations, intentions, and beliefs, that involve risks, uncertainties and assumptions. Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed in the section titled "Risk Factors," "Special Note Regarding Forward-Looking Statements", and "Special Note Regarding Operating Metrics" included elsewhere in this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any periods in the future. Unless the context otherwise requires, all references in this report to " Roblox," the "Company", "we," "our," "us," or similar terms refer to Roblox Corporationand its subsidiaries. Amounts reported in millions are rounded based on the amounts in thousands. As a result, the sum of the components reported in millions may not equal the total amount reported in millions due to rounding. In addition, percentages presented are calculated from the underlying numbers in thousands and may not add to their respective totals due to rounding.
People from around the world come to
Robloxevery day to connect with friends. Together they play, learn, communicate, explore, and expand their friendships, all in 3D digital worlds that are entirely user-generated, built by our community of developers. We call this emerging category "human co-experience," which we consider to be the new form of social interaction we envisioned back in 2004. Our Platform is powered by user-generated content and draws inspiration from gaming, entertainment, social media, and even toys.
allows users to explore 3D digital worlds.
that allows developers and creators to build, publish, and operate 3D
experiences and other content accessed with the Roblox Client. Roblox Cloud
includes the services and infrastructure that power our human co-experience
Our mission is to connect a billion people with optimism and civility. We are constantly improving the ways in which the Roblox Platform supports shared experiences, ranging from how these experiences are built by an engaged community of developers, to how they are enjoyed and safely accessed by users across the globe. Our primary areas of investment are our developer and creator community, and the people, technology, and infrastructure required to keep improving the
RobloxPlatform. These areas of focus are how we drive the business and are reflected in our operating cost structure, which primarily consists of four major areas: payment processing and other fees, compensation and benefits, developer earnings, and direct infrastructure.
March 24, 2022, we signed a definitive purchase agreement to acquire Hamul, Inc.("Hamul"), a privately held company providing a platform for connecting gaming communities. The acquisition closed on April 1, 2022and we paid a total purchase price of approximately $19.3 millionin a combination of cash and stock.
We believe our performance is dependent upon many factors, including the key metrics described below that we track and review to measure our performance, identify trends, formulate financial projections, and make strategic decisions.
We manage our business by tracking several operating metrics, including DAUs, hours engaged, and ABPDAU. As a management team, we believe each of these operating metrics provides useful information to investors and others. For definition of these metrics, refer to the section titled "Special Note Regarding Operating Metrics." 28
Table of Contents
Daily Active Users
We define a DAU as a user who has logged in and visited
Robloxthrough our website or application on a unique registered account on a given calendar day. We track DAUs as an indicator of the size of the audience engaged on our Platform. DAUs are also broken out by geographic region to help us understand the global engagement on our Platform. [[Image Removed: rblx-20220331_g1.jpg]]
[[Image Removed: rblx-20220331_g2.jpg]][[Image Removed: rblx-20220331_g3.jpg]]
[[Image Removed: rblx-20220331_g4.jpg]][[Image Removed: rblx-20220331_g5.jpg]]
Table of Contents
We define hours engaged as the time spent by our users on the Platform, which includes time spent in experiences, which refer to the titles that have been created by developers, and also within Platform features such as chat and avatar personalization.
We believe that the growth in hours engaged on our Platform reflects the
increasing value of our Platform.
[[Image Removed: rblx-20220331_g6.jpg]]
Average bookings per daily active user
We define average bookings per DAU, or ABPDAU, as bookings in a given period divided by the DAUs for such period. We use ABPDAU as a way to understand how we are monetizing across all of our users through the sale of virtual currency and subscriptions. [[Image Removed: rblx-20220331_g7.jpg]] 30
Table of Contents
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP financial measures are useful in evaluating our performance. 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. However, 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.
Bookings represent the sales activity in a given period without giving effect to certain non-cash adjustments. Substantially all of our bookings are generated from sales of virtual items on the Roblox Platform. Proceeds from the sale of virtual items are initially recorded in deferred revenue and recognized as revenues over the estimated period of time the virtual items are available on the Roblox Platform (estimated to be the average lifetime of a paying user) or as the virtual items are consumed. Bookings also include a minimal dollar 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. Over the long-term, the factors impacting our revenue and bookings trends are the same. However, in the short-term, there are factors that may cause revenue and bookings trends to differ in any period. Three Months Ended March 31, 2022 2021 (dollars in thousands) Bookings
$ 631,206 $ 652,277
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 March
Reconciliation of revenue to bookings: Revenue
$ 537,134 $ 386,976Add (deduct): Change in deferred revenue 96,797 269,439 Other (2,725) (4,138) Bookings $ 631,206 $ 652,277Free cash flow
We define free cash flow as net cash provided by operating activities less
purchases of property, equipment, and intangible assets. 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, can be used for strategic initiatives.
Three Months Ended March 31, 2022 2021 (dollars in thousands) Free cash flow
$ 104,646 $ 142,08031
Table of Contents
The following table presents a reconciliation of net cash from operating
activities, the most directly comparable financial measure calculated in
accordance with GAAP, to free cash flow, for each of the periods presented (in
Three Months Ended
Reconciliation of net cash from operating activities to free cash
Net cash provided by operating activities
$ 156,436 $ 164,469Add (deduct): Acquisition of property and equipment (51,790) (22,133) Purchases of intangible assets - (256) Free cash flow $ 104,646 $ 142,080
Acquisition of property and equipment primarily includes servers, infrastructure
equipment and tenant improvements.
Adjusted EBITDA for purposes of the table below is calculated in accordance with the calculation of "Consolidated EBITDA" as that term is defined in the Indenture. Adjusted EBITDA is a measure of operating performance as used in certain covenant calculations specified in the Indenture that is not calculated in accordance with GAAP and may not conform to the calculation of EBITDA in other circumstances. Adjusted EBITDA should not be considered as a substitute for net loss as determined in accordance with GAAP. Management believes that, when considered together with reported amounts, this measure is useful to investors and management in understanding our ongoing operations and operating trends for purposes of analyzing the covenants specified in the Indenture. This metric should be considered in addition to, and not as a replacement for, the most comparable GAAP measure. Adjusted EBITDA should be read in connection with our financial statements presented in accordance with GAAP. Three Months Ended
March 31, 20222021 (dollars in thousands)
© Edgar Online, source