Roblox (RBLX)

Came across this article today on Yahoo. I know there are a few folks on here who have been watching this for their IPO. Looks like they are not doing their IPO anymore but coming in with a Direct Listing. Unfortunately looks like the market is really frothy. They were valued at 4 billion in Feb 20 while today it was valued at 29.5 billion. Not sure how a company grows from a 4 to a almost 30 billion value in less than a year with below skeleton details.

Active users went to 31 million up 82% in a year and revenue went from 350 to 589 million. Loss ballooned from 46 to 203 million which without the details am assuming may be R & D and S, G & A.

I had this on my watch list but am tempted to now pass if it comes at that valuation and see if there is a dip in the market that would make this trend lower

The link to the article is below

Thanks

https://finance.yahoo.com/news/roblox-switches-direct-listin…

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I am skeptical on their active users, my 10 years old is huge fan of Roblox, what I learned from her is that as long as you login in once a day for a period of time, you will get some free stuff. I honestly have only spent 20 dollars on her roblox play and that’s the time she said she wanted to create games. There was privacy and security issue, one of my daughter’s classmate account got hacked, someone has been treating a girl of little girls ,one of the girl used her school email and the hacker hacked some of the school email system . It was a chaotic situation. As a parent I know their games are addictive, I am very conscious about the time limit she can play and who she can play with etc. not sure if this is the case for majority of parents out there .

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I would be ecstatic if I can buy in at 30B. They amortize billings over 24 months, so Q4 will be 282m rev if bookings were flat QoQ, which is a 110% YoY increase, and 19% QoQ increase. Given it is the holiday season, bookings are likely going to be higher than prior Q.

Losses will look bad when the company is rapidly growing because they recognize most of their expenses up front (with only cost of revenue paid to Apple and Google Play being amortized with revenue), and revenue over two years (which is insanely conservative) - for example, developer exchange fees (what RBLX pays to developers) was 44% and 34% of revenue in Q2 and Q3, respectively, but 17% and 16% of bookings. Infrastructure/safety and R&D spend was 54% and 49% of revenue in Q2/Q3, versus 21% and 24% of bookings

So they got cash in the door the first nine months of 2020 of $1,240 million (which by the way is almost 3X the $458 million from the first nine months of 2019), but only recognized $589 million in revenue (that’s less than half!) because some accountant said they have to wait 2 years. Free cash flow as a result is an enormous $292 million year to date, versus GAAP loss of $203 million.

add it all up and I hope you can see why I’m enormously excited about this business at this price

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My now-7-year-old daughter’s birthday is dec 10th and between that and Christmas she received and spent something like $300 in Robux gift cards. It is all she wanted and so easy to gift during a pandemic.

I am not worried at all about game addiction. I do not want to start a discussion on the addictive aspects of gaming though as personal views can become too-passionate arguments. I only bring this up in reply and to say I find many of the games to be either creative or build coordination, teamwork or require strategy or even teach real life skills, like earning, saving, budgeting, fair play, etc. She is also learning to use a laptop with mouse and keyboard skills. This has lead to us enrolling her in an online Scratch programming class! As a long time computer graphics artist and programmer I am proud to see her engaged in creative problem solving and art (Scratch is visual programming and kids can draw and edit sprites and create animations…not Roblox but it is all connected and positive in my eyes, with some screen time limits of course :grinning:).

I do love watching her play Bloxberg though; a game where you design and decorate houses and get a job to fund it all! I try to join her in some games like this one to enjoy some quality time and teach her some things.

My daughter plays with friends and cousins, who are on the other side of the globe, borrowing my wife’s iPad to video call (I think using Line).

We are in the very early stages of the long-anticipated convergence of digital and social interaction and Roblox is a very real and early winner for an age group that needs a safe a curated environment. When a parent can mostly trust a platform, and kids can jump through endless types of games with friends, and the platform can monetize and provide endless content at no cost beyond the platform itself (not even needing to wait for big high-end development cycles), that is a powerful recipe!

In other words, at this age group the users aren’t really looking for things outside the platform once there. Spending the digital currency to buy digital assets only adds to the stickiness.

If nothing else I’ll be buying some shares with my daughter to start teaching her about stock investing. I’ve already set aside some birthday and holiday money.

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