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Roblox has reported its fourth quarter results for 2022, pleasing investors with the news that bookings and engagement are up dramatically both on a quarterly and annual basis. While the top line numbers are generally positive, Roblox is also ramping up its spending to future-proof its operations.
Top line numbers
In the fourth quarter, Roblox bookings totaled $899.4 million, up 17% compared to Q4 2021’s $770.1 million. Controlling for inflation, this would have reached 21% year over year growth. Likely this was driven by Roblox’s growing audience. In Q4 2022, Daily Active Users (DAUs) reached 58.8 million, up 19% compared to this period last year. This tracked with hours engaged which rose to 12.8 billion (up 18%), but average bookings per DAU (ABPDAU) was down 2% to $15.29, from $15.57 in Q4 2021. This drop was driven by inflation as this would have grown 2% on a constant currency basis.
Roblox’s annual performance also showed impressive growth. Bookings reached $2.9 billion, up 5% compared to 2021’s $2.7 billion. Again, without inflation, this growth would have reached 9% year over year. Growth for the company is at a more sustainable level compared to 2021’s bookings growth of 45%. This suggests that Roblox is maturing as a company after the pandemic-era boom.
That being said, engagement is on the rise. Roblox’s 2022 DAUs grew 23% to 56.0 million and hours engaged reach 49.3 billion (19% growth). Despite this increased engagement, spending per user (ABPDAU) fell to $51.29. This is down 14% year over year. While inflation played a role — on a constant currency basis the drop would have been 11% — that doesn’t explain the full picture.
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Roblox’s geographic expansion into new markets could be impacting the average spending. Roblox is seeing the most user growth in Europe and APAC while hours engaged is growing quickest in Europe and the U.S. and Canada. Much of this growth came from 17-24 year olds (+31%) who accounted for 22% of DAUs and 22% of bookings in Q4.
Meanwhile, monthly unique payers (MUPs) reached an all-time high of 13.4 million in Q4 2022, up nearly 14% compared to Q4 2021. Similarly, average bookings per monthly unique payer (ABPMUP) was $22.31 in Q4 2022, a 3% increase year over year. This is just shy of Q4 2020’s all time high during COVID, when ABPMUP was just 1% higher. This means that both player and payer numbers are on the rise, but player growth is outpacing payer growth.
While Roblox is reporting increased revenue ($2.2 billion in 2022, up 16% year over year), the company reported a net cash loss of $58.3 million in 2022. Overall, Roblox’s costs are increasing.
Roblox is investing in talent. Not including stock-based compensation, personnel costs totaled $590.9 million, up 45% compared to 2021. This is partially driven by a 32% headcount increase. Similarly, Developer exchange fees grew to $623.9 million, up 16% compared to 2021. This is key as creators now make 90% of items published in Roblox’s Marketplace.
However, stock-based compensation could be a huge factor for Roblox in the future. In 2022, Roblox awarded $589.5 million in stock-based compensation to employees — nearly doubling its balance sheet expenses. While this is not a cash expense, it results in diluted value for current shareholders and it could impact employee morale if the share price falls.
Another factor in Roblox’s increased spending is its investments in infrastructure and trust & safety. In 2022 — and excluding personnel costs, stock-based compensation expenses and depreciation — the company spent $460.3 million, up 46% from 2021’s $315.1 million. In its shareholder letter, Roblox pointed to investments in its Ashburn, Virginia data center and other investments in real estate which should continue through 2023.
“Our investment decisions are generally based on levels of bookings, we expect to continue to report net losses for the foreseeable future even as we anticipate generating net cash from operating activities,” Roblox explained in its shareholder letter. This shows that Roblox is setting itself up to support a growing player base.
In the company’s earnings call, David Baszucki, CEO and founder of Roblox was bullish on the company’s future strategy.
“With 65 million daily active users in January, we are driving towards our vision to reimagine the way people come together by enabling deeper forms of expression, communication and immersion,” he said. “We believe this is the next generation of communication following from audio calls, texting, messaging.”
Roblox is arguably the most successful metaverse experience available on the market. Baszucki is doubling down on the company’s immersive communication strategy. As a result, Roblox seems to be targeting messaging companies such as WhatsApp and Discord as competitors.
AI was also a hot topic in the Investor call. Roblox indicated future plans to use AI technology for in-experience creation tools, avatar creation, customer service and more.
While Roblox clearly plans to invest in infrastructure and future innovation, investors will need to be comfortable with the company burning cash in the short term. At the time of writing, Roblox’s stock is up more than 20% in response to the report.
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