Introducing Roblox S-1

S-1 can be found here:…

Summary: Roblox seems to have the same benefit/risk analysis as companies like PTON/ETSY where the business is growing gangbusters as a result of COVID, but unsure if trends will stick. Being a gaming/social platform with the majority of its users being under 13 also is a risk due to the fickle nature of the category and user demographics.

Roblox, started in 2004, is a social gaming platform where developers (over 7 million) create 3D digital worlds for players (average 36 million daily) to play and interact. The majority of its users are under 13, with a growing segment in 17-24. These are estimates due to COPPA, which inhibit complete data collection on its users.

The platform consists of the Roblox Client, the Roblox Studio, and the Roblox Cloud.
Roblox Client is the application that allows users to explore 3D digital worlds.
Roblox Studio is the toolset 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 platform

Stats from prior 8 quarters (someone better with tables can maybe repost this with a better format, table is on page 106 of S-1)
Revenue: 96 – 107 - 116 - 127 - 138 - 157 - 190 – 242
Average sequential growth: 14% (10% pre-pandemic)
Average YoY growth: 62% (56% pre-pandemic, including 43% 4Q19 and 46% 1Q20)
3Q20 YoY growth: 91%

Now the good part and why I’m taking a look at the company, bookings is the equivalent of prepaid gift cards (they are non-refundable), and is recognized to revenue over 23 months (page 113-114)
Bookings: 142 – 150 – 165 – 236 – 250 – 494 – 496
Average sequential growth: 23% (13% pre-pandemic)
Average YoY growth: 94% (45% pre-pandemic, including acceleration 66% 4Q19 and 76% 1Q20)
3Q20 YoY growth: 200% (as in 3x prior year)

Basically, since bookings doubled in the last 2 quarters, revenue is guaranteed to be growing close to 100% over the next year even if bookings remain flat.

A few more user statistics
Daily Average Users: 14 – 16 – 17 – 18 – 19 – 24 – 33 – 36
Average sequential growth: 15% (12% pre-pandemic)
Average YoY growth: 70% (36% 4Q19 and 50% 1Q20 so was already accelerating)
3Q20 YoY growth: 100%

Bookings per user hovered around $9-$10 pre-pandemic, and was $14.81 and $13.73 the last two quarters

I was not able to find any retention/cohort data in the S-1, but given they amortize bookings over 23 months, the average user probably sticks around on the platform about 2 years so around 4% average churn per cohort.
The company did just introduce Roblox Premium, which is a subscription service. However I’m skeptical this affects retention in any way since most users will probably just choose between the subscription service or one off credit purchases depending on their usage pattern.

The company is still losing money on a GAAP basis, but is already generating significant free cash flow ($35m in 2018, $15m in 2019, and $293m so far in 2020)

Haven’t dived too deep into management yet, figure I would catch up over time listening to calls and making a judgment then.

Overall, the demographics of the user base gives me a little bit of heartburn, but the guaranteed revenue growth seems to counteract this a bit.
The category (gaming/social) is also prone to change of tastes so is also a big risk imo, but the two sided nature of the platform and content being completely user generated does alleviate this a bit.
I am guessing going forward the DAU and bookings numbers will drive the stock price.
I will keep an eye on this after the IPO. Hope this is helpful to some of you.


This is one I will be watching. My about-to-be-7-year-old has been playing Roblox for a year on her iPad.

  • She watches YouTube channels built on Roblox content more than she watches cartoons.
  • She borrows my wife’s iPad to call friends using Messenger for Kids (a safe video conferencing app for kids) and plays Roblox with her friends, something that has helped a lot during pandemic distancing!
  • She video conferences with her cousins living on the other side of the globe to play Roblox together.
  • She keeps asking to do chores to earn Robucks (you only get these from paying real money, no other way), where real money doesn’t interest her.
  • She asked for a laptop because of Roblox and we gave her an old 2011 MacBook Pro and she is now learning a regular keyboard and mouse/pointer
  • We have a Nintendo Switch and she almost never touches it.
  • Now I’m playing it with her too! (Mostly Dungeon Quest) I even bought her and a friend a $15 in-game-purchase as a fun surprise. This was in one of the games directly and there are endless games.

This platform has clearly hit a chord with its combination of simple graphics (but has some depth to the developer platform too!) and activities. You want to try and climb an endless tower of balance beams, avoiding lasers? Build an airport and fly planes? Drive cars? Pretend you are a baby or adult and take care of each other? Run from a murderous pig? Take turns jumping through a wall with shapes cut out to be the last team standing? There really are endless ideas and kids can join their friends in any of them with a single button press.


I talked to my daughter about Roblox. She is ten, but had a very interesting insight that I was unaware of. She said, “I would invest in them. They are smart. In Fortnite the developers have to come up with all the ideas, so they have a cool event every few months. In Roblox, the community builds all the games, so there is always something new to try out. Then the youtubers pull an audience to the new game. Here is the smart part. The community earns some off the game, but the company takes most of the profit. It is a publicly produced game that pays out enough to make people want to create popular games, but they make most of the money.”


Let me just tack onto this:
Hands down I Will be sticking a large chunk in $RBLX…

My now 13 year old plays… She has played in various forms since she was 7 or 8. She has friends from around the world…there is huge international appeal. She now runs a discord server where they set up events. She designs and sells outfits on there. The girls play an incredible array of social games on there, of some serious complexity. They would easily spend 5 hours / day on there if allowed… they don’t watch any TV.

My 8 year old boy got interested, - he plays other games on there – they have a few that are of World of Wardcraft style play - other builders, other first person shooters. There is one game on there that is the equivalent complexity of EverQuest – one of the original MMPORGs from years ago… The difference is the devs can build it out and not deal with any infrastructure.

And they all watch streamers on it.

My kids both probably spend $20 / month on roblox. And the ability to accessibly build your own game is incredible. The community is not easily duplicated – Minecraft and the custom minecraft servers are the closest similar item. other than that, it is like MMPORGs with more flexibility.


Thanks for this.

Any idea when this is due ?

I looked and could not find a date.



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I agree. My 11-year old and 7-year old play it all the time. Plus they spend ALL their allowance money on it. It has nothing to do with pandemic.


What are RBLX’s Gross Margins?

They list revenues and then cost and expenses together to come up with operating margin. I came up with a GM of 6.6% for the 3 qtrs ending 9/30/2020.

One of their biggest expenses is developer exchange fees. As I understand it, developers are third party developers who develop and create worlds, experiences or items on the RBLX platform. When a customer, using “Robuxs”, buys something that a developer creates, the developer is credited with 70% of that purchase. The Company keeps the other 30%. Some developers use Robux to buy other stuff but most probably convert Robux to cash. The conversion is something like .0034 USD to Roblux. I’m not sure the economics of buying Robux and the conversion (i.e., how much a Robux cost to buy by a customer and if they are taking a conversion fee etc). In any case, the developer cost is pretty big - $209.228 million for the 3 Qtrs ending 9/30/20. Developer costs were 35.54% of total revenues.

3 months ending 9/30/2020 (millions):

Revenues: $588,675
Cost of Revenues: $549,636
(I used Costs of Revenues; Developer Charges; Infrastructure, Trust & Safety)
R&D, GSMA Costs: $107,199
Loss from Ops: -$206,234

Gross Margin is around 6.6% which is down from 24% for the 3 qtrs ending 2019. This sticks out as a bit troubling. Anther issues I noted on the S-1 that could cause issues evaluating performance was the amount of deferred revenues. Might be hard to compare YOY or sequential growth - albeit I didn’t look too much at this issue.

Finally, I note that Buszucki, founder/CEO, is 57 and will hold 12% of class A and 70% of class B shares. He will effectively control the company. I usually like that, but don’t know anything about him.

Agree/disagree with GM issues?



FYI, found this on a link from Starrob,

While Roblox reported a 68% surge in revenue for the first nine months of 2020, losses for the period more than quadrupled.
Roblox reported revenue of $588.7 million and a loss of $203.2 million in the period, compared with $349.9 million in revenue and a loss of $46.3 million for the first nine months of 2019. Roblox reported revenue of$488.2 million and a narrower loss of $86 million in 2019, compared with revenue of $312.8 million and a loss of $97.2 million in 2018…


That’s a good article/overview. I also noticed an error in my numbers (related to R&D and GSMA). Here are the corrected ones.

Revenues: $588,675
Cost of Revenues: $549,636
(I used Costs of Revenues; Developer Charges; Infrastructure, Trust & Safety)
R&D, GSMA Costs: $254,273
Loss from Ops: -$206,234


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I believe Infrastructure, Trust & Safety would belong below the Gross Margin line. It’s an overhead type expense that won’t scale with the revenues.

Quotes from the S-1 to support my interpretation:
“Infrastructure and trust & safety expenses consist primarily of expenses related to the operation of our data centers and technical infrastructure.”

“Infrastructure and trust & safety expenses also include personnel costs and allocated overhead for employees and team members whose primary responsibilities relate to supporting our infrastructure and trust & safety initiatives. As of September 30, 2020, we have a global customer service team with over 1,700 trust & safety agents supporting users.”

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What are RBLX’s Gross Margins?

Hi Ckelly,

It’s going to be very tough to nail down exact GM for RBLX from GAAP financials simply because of the timing mismatch between how the company reports revenue and expenses. They report expenses AS INCURRED, so on a cash basis. The developer fees, for example, are reported when the in app currency is spent on one of the programs. If you assume most in app currency is spent immediately after purchase, then you’d have a case of expenses recognized up front, while revenue for the period is deferred for (23 total MINUS 3 months of current quarter) 20 more months.

Best I can figure from comparing the billings table to costs is cost of revenue (fees paid to Apple or Google store or other platform providers) is around 22-25% of revenue, and developer fees as a percentage of bookings is around 13-15% of revenue. So you’re looking at GM of 60-65% before infrastructure/safety, research, and SGA

To be honest, I hope that there is some lack of awareness by market participants regarding this mismatch, as it should result in a much lower valuation of RBLX during the current hyper growth phases

Hope this was helpful


For those still interested, the direct listing will be “on or about March 10th”

They also amended their S-1 to include Q4 results, and they are spectacular. Recall that bookings for the first 9 months of 2020 were 250 - 494 - 496, well Q4 of 2020 they received bookings of $642 million, which is 172% YoY over last year’s holiday season and 29% QoQ. The QoQ number is most likely inflated because of seasonality, as Q2 and Q3 2020 YoY growth rates were 229% and 200%. Still, monster business which will debut at a monster valuation. (although hopefully not SNOW levels)

Free cash flow was $293 million for the first 3 quarters, and ended the year at $411 million, so $118 million for Q4.

Here is the amended S-1:…

They did change their revenue recognition policy slightly to account separately for different purchase types at SEC’s command, but overall the bookings number will be the one to watch, not revenue.

I will take a small position on direct listing date regardless of price, and hope to add on any dips