Losses at Roblox rose 16% to $161.7 million in the first-quarter from $136.1 million last year as the benefit of Covid-related bookings waned.

However, revenues at the popular US children’s gaming platform jumped 39% in the first-quarter to $537m, compared to the same period last year ($386.9 million).

That said, Roblox admitted it expects to post losses “for the foreseeable future” even as it anticipates “generating net cash from operating activities”. Shares in the gaming company fell 4% on the day of results, although they recovered some ground on Monday.

"We remained focused on delivering our innovation roadmap to unlock the full potential of the Roblox platform and drive long-term returns for investors," David Baszucki, Roblox’s chief executive officer told investors. "Over the past two quarters, we have launched a number of notable innovations, including spatial voice and layered clothing that will continue driving user growth, engagement and monetization."

Roblox’ Covid fillip wanes

Hours engaged increased by 22% to 11.8 billion from the same period in 2021, while daily active user numbers rose by 28% to 54.1 million in the quarter. Roblox says two-thirds (77%) of its users hail from outside North America, while users aged over 13 increased by 38% year-on-year and accounted for over half of daily active users.

However, bookings in the first-quarter fell 3% to $631.2 million due to tough comparative figures in the same period last year when stronger Covid restrictions were in place. These figures were lower than analysts had forecast.

In the first-quarter, free cash flow stood at $104.6 million, while earnings before interest, tax, depreciation and amortisation fell to $67.9 million. Management says both figures fell “significantly” compared to last year as the company invested in headcount, infrastructure and developer expenses but bookings remained flat.

Riding the Metaverse wave

Roblox looks set to continue its investment going forward and is focusing heavily on the metaverse, which management believe is “an uncommon opportunity”. Indeed, the company told investors in its shareholders’ letter that it thinks this “new form of communication” will change how people connect with each other and that over the long-term, the opportunity is ultimately “potentially larger and more profound” than other innovations in social networking.

Analysts at broker Jefferies raised their second-quarter earnings forecasts to losses of -$0.25 per share (from $0.30 a share). They currently have a $50 price target on the shares.

Roblox shares are down 51% in the past year to $34.39 and remain well off their highs of $141.60 seen in November 2021. They could travel the crest of the metaverse wave and many other US companies, such as Meta and even Wendy’s, are investing heavily in the virtual world. However, with losses likely to continue for some time, it’s unclear when the shares may receive a much-needed short-term boost.

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*Based on revenue excluding FX (published financial statements, June 2020).

Piper Terrett | Financial writer, London
17 May 2022