FALSE000131509800013150982024-02-072024-02-07
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
FORM 8-K
____________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 7, 2024
____________________________
Roblox Corporation
(Exact name of Registrant as Specified in Its Charter)
____________________________
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Delaware | 001-39763 | 20-0991664 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
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970 Park Place, San Mateo, California | | 94403 |
(Address of Principal Executive Offices) | | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (888) 858-2569
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
____________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Class A Common Stock, $0.0001 par value | | RBLX | | The New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On February 7, 2024, Roblox Corporation (the “Company”) issued a press release announcing financial results for its fourth quarter and year ended December 31, 2023 as well as guidance for its full year and first quarter 2024. The Company also posted on its investor relations website (ir.roblox.com) a shareholder letter and supplemental materials for its fourth quarter and year ended December 31, 2023. A copy of the press release and shareholder letter are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K and are incorporated by reference herein. Information on the Company’s website is not, and will not be deemed, a part of this report or incorporated into this or any other filings that the Company makes with the Securities and Exchange Commission.
Item 7.01 Regulation FD Disclosure.
The Company also reported guidance for its full year and first quarter 2024 in its press release and shareholder letter, which were issued on February 7, 2024, copies of which are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K and are incorporated by reference herein.
The information in Item 2.02 and Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d)Exhibits
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Exhibit Number | | Description |
99.1 | | |
99.2 | | |
104 | | Cover Page Interactive Data File (formatted as inline XBRL) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| ROBLOX CORPORATION | |
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Date: February 7, 2024 | By: | /s/ Michael Guthrie | |
| | Michael Guthrie Chief Financial Officer (Principal Financial Officer) | |
Exhibit 99.1
Roblox Reports Fourth Quarter and Full Year 2023 Financial Results
Strong year over year growth in Daily Active Users, Hours Engaged, Revenue, and Bookings
SAN MATEO, Calif., February 7, 2024 - Roblox Corporation (NYSE: RBLX), a global platform bringing millions of people together through shared experiences, released its fourth quarter and full year 2023 financial and operational results and issued its full year and first quarter 2024 guidance today. Separately, Roblox posted a letter to shareholders and supplemental materials on the Roblox investor relations website at ir.roblox.com.
Fourth Quarter 2023 Financial, Operational, and Liquidity Highlights
•Revenue was $749.9 million, up 30% year-over-year.
•Bookings were $1,126.8 million, up 25% year-over-year.
•Net loss attributable to common stockholders was $323.7 million.
•Net cash provided by operating activities was $143.3 million, up 20% year-over-year.
•Average Daily Active Users (“DAUs”) were 71.5 million, up 22% year-over-year.
•Average monthly unique payers were 15.9 million, up 18% year-over-year, and average bookings per monthly unique payer was $23.65, up 6% year-over-year.
•Hours engaged were 15.5 billion, up 21% year-over-year.
•Average bookings per DAU was $15.75, up 3% year-over-year.
•Net liquidity1 was $2.2 billion; Covenant Adjusted EBITDA2 was $259.6 million, up 42% year-over-year.
Full Year 2023 Financial, Operational, and Liquidity Highlights
•Revenue was $2,799.3 million, up 26% year-over-year.
•Bookings were $3,520.8 million, up 23% year-over-year.
•Net loss attributable to common stockholders was $1,151.9 million.
•Net cash provided by operating activities was $458.2 million, up 24% year-over-year.
•DAUs were 68.4 million, up 22% year-over-year.
•Average monthly unique payers were 14.5 million, up 17% year-over-year, and average bookings per monthly unique payer was $81.05, up 4% year-over-year.
•Hours engaged were 60.0 billion, up 22% year-over-year.
•Average bookings per DAU was $51.50, flat year-over-year.
•Covenant Adjusted EBITDA2 was $431.7 million, up 21% year-over-year.
“We finished 2023 with another strong quarter of growth as we continue to drive innovation and new experiences across the Roblox platform. We enter 2024 with even more conviction of being able to achieve our long-term goal of attracting over 1 billion daily active users with optimism and civility. We continue to benefit from the strong network effects in content, social connection, and communication, as well as our investments in immersive experiences, advertising, and AI,” said David Baszucki, founder and CEO of Roblox.
1 Net liquidity represents cash and cash equivalents, short-term investments, and long-term investments, less the carrying value of long-term debt, net.
2 Covenant Adjusted EBITDA is used in certain covenant calculations specified in the indenture governing our senior notes due 2030 and is not calculated in accordance with GAAP and may not conform to the calculation of Adjusted EBITDA by other companies. Covenant Adjusted EBITDA should not be considered as a substitute for a measure of our financial performance or other liquidity measures prepared in accordance with GAAP and is also not indicative of income or loss calculated in accordance with GAAP.
“We ended the year with our strongest rate of quarterly bookings growth in two years and delivered our first quarter of $1 billion in bookings. We are scaling our operations efficiently, thereby improving our margins and cash flow, and we expect those trends to continue in 2024,” said Michael Guthrie, chief financial officer of Roblox.
Forward Looking Guidance
Roblox provides its initial full year and first quarter 2024 GAAP and non-GAAP guidance:
Full Year 2024 Guidance
•Revenue between $3,300 million and $3,400 million.
•Bookings between $4,140 million and $4,280 million.
•Consolidated net loss between $(1,400) million and $(1,365) million.
•Adjusted EBITDA between $(150) million and $(115) million (A), which includes:
◦Increase in deferred revenue between $852 million and $892 million.
◦Increase in deferred cost of revenue between $(172) million and $(177) million.
◦The total of these changes in deferrals between $680 million and $715 million. (B)
(A) + (B) = Covenant Adjusted EBITDA2
First Quarter 2024 Guidance
•Revenue between $755 million and $780 million.
•Bookings between $910 million and $940 million.
•Consolidated net loss between $(347) million and $(342) million.
•Adjusted EBITDA between $(55) million and $(50) million (A), which includes:
◦Increase in deferred revenue between $158 million and $163 million.
◦Increase in deferred cost of revenue between $(33) million and $(35) million.
◦The total of these changes in deferrals between $125 million and $128 million. (B)
(A) + (B) = Covenant Adjusted EBITDA2
Earnings Q&A Session
Roblox will host a live Q&A session to answer questions regarding its fourth quarter and full year 2023 results on Wednesday, February 7, 2024 at 5:30 a.m. Pacific Time/8:30 a.m. Eastern Time. The webcast will be open to the public at ir.roblox.com or by clicking here.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our vision to connect one billion global DAUs, our efforts to improve the Roblox Platform, our immersive advertising efforts, the use of artificial intelligence (“AI”) on our platform, our efforts related to communications products, our economy and product efforts related to creator earnings tools, branding and new partnerships, our business, product, strategy and user growth, our investment strategy, including our opportunities for and expectations of improvements in financial and operating metrics, including operating leverage, free cash flow, operating expenses and capital expenditures, our expectation of successfully executing such strategies and plans, disclosures and future growth rates, benefits from agreements with third-party cloud providers, estimates about our data center capacity, our expectations of future net losses and net cash provided by operating activities, statements by our Chief Executive Officer and Chief Financial Officer, and our outlook and guidance for first quarter and full year 2024, and future periods. These forward-looking statements are made as of the date they were first issued and were based on current plans, expectations, estimates, forecasts, and projections as well as the beliefs and assumptions of management. Words such as “expect,” “vision,” “envision,” “evolving,” “drive,” “anticipate,” “intend,” “maintain,” “should,” “believe,” “continue,” “plan,” “goal,” “opportunity,” “estimate,” “predict,” “may,” “will,” “could,” and “would,” and variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond our control. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to risks detailed in our filings with the Securities and Exchange Commission (the “SEC”), including our annual reports on Form 10-K, our quarterly reports on Form 10-Q and other filings and reports we make with the SEC from time to time. In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: our ability to successfully execute our business and growth strategy; the sufficiency of our cash and cash equivalents to meet our liquidity needs, including the repayment of our senior notes; the demand for our platform in general; our ability to retain and increase our number of users, developers, and creators; the impact of inflation and global economic conditions on our operations; the impact of changing legal and regulatory requirements on our business, including the use of verified parental consent; our ability to develop enhancements to our platform, and bring them to market in a timely manner; our ability to develop and protect our brand and build new partnerships; any misuse of user data or other undesirable activity by third parties on our platform; our ability to maintain the security and availability of our platform; our ability to detect and minimize unauthorized use of our platform; and the impact of AI on our platform, users, creators and developers. Additional information regarding these and other risks and uncertainties that could cause actual results to differ materially from our expectations is included in the reports we have filed or will file with the SEC, including our annual reports on Form 10-K and our quarterly reports on Form 10-Q.
The forward-looking statements included in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments will cause our views to change. However, we undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.
ROBLOX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par values)
(unaudited)
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| As of December 31, |
| 2023 | | 2022 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 678,466 | | | $ | 2,977,474 | |
Short-term investments | 1,514,808 | | | — | |
Accounts receivable—net of allowances | 505,769 | | | 379,353 | |
Prepaid expenses and other current assets | 74,549 | | | 61,641 | |
Deferred cost of revenue, current portion | 501,821 | | | 420,136 | |
Total current assets | 3,275,413 | | | 3,838,604 | |
Long-term investments | 1,043,399 | | | — | |
Property and equipment—net | 695,360 | | | 592,346 | |
Operating lease right-of-use assets | 665,107 | | | 526,030 | |
Deferred cost of revenue, long-term | 283,326 | | | 225,132 | |
Intangible assets, net | 53,060 | | | 54,717 | |
Goodwill | 142,129 | | | 134,335 | |
Other assets | 10,284 | | | 4,323 | |
Total assets | $ | 6,168,078 | | | $ | 5,375,487 | |
Liabilities and Stockholders’ equity | | | |
Current liabilities: | | | |
Accounts payable | $ | 60,087 | | | $ | 71,182 | |
Accrued expenses and other current liabilities | 271,121 | | | 236,006 | |
Developer exchange liability | 314,866 | | | 231,704 | |
Deferred revenue—current portion | 2,406,292 | | | 1,941,943 | |
Total current liabilities | 3,052,366 | | | 2,480,835 | |
Deferred revenue—net of current portion | 1,373,250 | | | 1,095,291 | |
Operating lease liabilities | 646,506 | | | 494,590 | |
Long-term debt, net | 1,005,000 | | | 988,984 | |
Other long-term liabilities | 22,330 | | | 10,752 | |
Total liabilities | 6,099,452 | | | 5,070,452 | |
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Stockholders’ equity | | | |
Common stock, $0.0001 par value; 5,000,000 authorized as of December 31, 2023 and December 31, 2022, 631,221 and 604,674 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively; Class A common stock—4,935,000 shares authorized as of December 31, 2023 and December 31, 2022, 581,135 and 553,337 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively; Class B common stock—65,000 shares authorized as of December 31, 2023 and December 31, 2022, 50,086 and 51,337 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively | 61 | | | 59 | |
Additional paid-in capital | 3,134,946 | | | 2,213,603 | |
Accumulated other comprehensive income/(loss) | 1,536 | | | 671 | |
Accumulated deficit | (3,060,253) | | | (1,908,307) | |
Total Roblox Corporation Stockholders’ equity | 76,290 | | | 306,026 | |
Noncontrolling interests | (7,664) | | | (991) | |
Total Stockholders’ equity | 68,626 | | | 305,035 | |
Total Liabilities and Stockholders’ equity | $ | 6,168,078 | | | $ | 5,375,487 | |
ROBLOX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
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| Three Months Ended | | Twelve Months Ended |
| December 31, | | December 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
Revenue(1) | $ | 749,939 | | | $ | 579,004 | | | $ | 2,799,274 | | | $ | 2,225,052 | |
Cost and expenses: | | | | | | | |
Cost of revenue(1)(2) | 171,664 | | | 142,432 | | | 649,115 | | | 547,658 | |
Developer exchange fees | 221,750 | | | 182,115 | | | 740,752 | | | 623,855 | |
Infrastructure and trust & safety | 223,310 | | | 198,505 | | | 878,361 | | | 689,081 | |
Research and development | 341,129 | | | 248,407 | | | 1,253,598 | | | 873,477 | |
General and administrative | 98,776 | | | 79,704 | | | 390,055 | | | 297,317 | |
Sales and marketing | 48,503 | | | 29,740 | | | 146,460 | | | 117,448 | |
Total cost and expenses | 1,105,132 | | | 880,903 | | | 4,058,341 | | | 3,148,836 | |
Loss from operations | (355,193) | | | (301,899) | | | (1,259,067) | | | (923,784) | |
Interest income | 39,530 | | | 21,636 | | | 141,818 | | | 38,842 | |
Interest expense | (10,298) | | | (10,008) | | | (40,707) | | | (39,903) | |
Other income/(expense), net | 898 | | | 1,988 | | | (527) | | | (5,744) | |
Loss before income taxes | (325,063) | | | (288,283) | | | (1,158,483) | | | (930,589) | |
Provision for/(benefit from) income taxes | 277 | | | 3,202 | | | 454 | | | 3,552 | |
Consolidated net loss | (325,340) | | | (291,485) | | | (1,158,937) | | | (934,141) | |
Net loss attributable to noncontrolling interests | (1,642) | | | (1,559) | | | (6,991) | | | (9,775) | |
Net loss attributable to common stockholders | $ | (323,698) | | | $ | (289,926) | | | $ | (1,151,946) | | | $ | (924,366) | |
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.52) | | | $ | (0.48) | | | $ | (1.87) | | | $ | (1.55) | |
Weighted-average shares used in computing net loss per share attributable to common stockholders—basic and diluted | 626,817 | | | 601,859 | | | 616,445 | | | 595,559 | |
(1)In the first quarter of 2022, we updated our estimated paying user life from 23 months to 25 months, which was subsequently updated again to 28 months in the third quarter of 2022, where it remained throughout 2023. Based on the carrying amount of deferred revenue and deferred cost of revenue as of December 31, 2021, these changes resulted in a $15.2 million and $344.9 million decrease in revenue during the three and twelve months ended December 31, 2022, respectively and a $2.9 million and $79.3 million decrease in cost of revenue during the same period, respectively.
(2)Depreciation of servers and infrastructure equipment included in infrastructure and trust & safety.
ROBLOX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Twelve Months Ended December 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
Cash flows from operating activities: | | | | | | | |
Consolidated net loss | $ | (325,340) | | | $ | (291,485) | | | $ | (1,158,937) | | | $ | (934,141) | |
Adjustments to reconcile net loss including noncontrolling interests to net cash and cash equivalents provided by operations: | | | | | | | |
Depreciation and amortization | 54,531 | | | 42,538 | | | 208,142 | | | 130,083 | |
Stock-based compensation expense | 250,679 | | | 169,456 | | | 867,967 | | | 589,498 | |
Operating lease non-cash expense | 26,262 | | | 19,985 | | | 97,063 | | | 69,100 | |
(Accretion)/amortization on marketable securities, net | (20,943) | | | — | | | (73,162) | | | — | |
Amortization of debt issuance costs | 334 | | | 321 | | | 1,316 | | | 1,261 | |
Impairment expense, (gain)/loss on investment and other asset sales, and other, net | 1,222 | | | 395 | | | 8,969 | | | 361 | |
Changes in operating assets and liabilities, net of effect of acquisitions: | | | | | | | |
Accounts receivable | (219,346) | | | (192,427) | | | (126,172) | | | (72,479) | |
Accounts payable | (7,330) | | | 18,633 | | | (3,475) | | | 10,302 | |
Prepaid expenses and other current assets | (10,909) | | | 8,835 | | | (12,770) | | | (33,769) | |
Other assets | 228 | | | (1,719) | | | (5,961) | | | (1,221) | |
Developer exchange liability | 75,438 | | | 63,337 | | | 83,162 | | | 67,798 | |
Accrued expenses and other current liabilities | 11,279 | | | 12,578 | | | 8,680 | | | 19,560 | |
Other long-term liability | 6,426 | | | 10,738 | | | 11,397 | | | 10,159 | |
Operating lease liabilities | (3,617) | | | (14,886) | | | (50,454) | | | (47,875) | |
Deferred revenue | 382,196 | | | 325,450 | | | 742,294 | | | 662,378 | |
Deferred cost of revenue | (77,805) | | | (52,530) | | | (139,879) | | | (101,719) | |
Net cash and cash equivalents provided by operating activities | 143,305 | | | 119,219 | | | 458,180 | | | 369,296 | |
Cash flows from investing activities: | | | | | | | |
Acquisition of property and equipment | (65,197) | | | (157,205) | | | (320,667) | | | (426,163) | |
Payments related to business combination, net of cash acquired | — | | | (7,223) | | | (3,859) | | | (13,388) | |
Purchases of intangible assets | — | | | — | | | (13,500) | | | (1,500) | |
Purchases of investments | (788,063) | | | — | | | (4,591,974) | | | — | |
Maturities of investments | 686,709 | | | — | | | 1,642,719 | | | — | |
Sales of investments | 115,416 | | | — | | | 462,182 | | | — | |
Net cash and cash equivalents used in investing activities | (51,135) | | | (164,428) | | | (2,825,099) | | | (441,051) | |
Cash flows from financing activities: | | | | | | | |
Proceeds from issuance of common stock | 5,910 | | | 3,046 | | | 53,226 | | | 45,752 | |
| | | | | | | |
Payment of withholding taxes related to net share settlement of restricted stock units | — | | | — | | | — | | | (150) | |
Proceeds from debt issuances | — | | | — | | | 14,700 | | | — | |
Payment of debt issuance costs | — | | | — | | | — | | | (154) | |
Payments related to business combination, after acquisition date | — | | | — | | | (750) | | | (150) | |
Other financing activities | — | | | (1,236) | | | — | | | (1,656) | |
Net cash and cash equivalents provided by financing activities | 5,910 | | | 1,810 | | | 67,176 | | | 43,642 | |
Effect of exchange rate changes on cash and cash equivalents | 337 | | | (634) | | | 735 | | | 1,287 | |
Net increase/(decrease) in cash and cash equivalents | 98,417 | | | (44,033) | | | (2,299,008) | | | (26,826) | |
Cash and cash equivalents | | | | | | | |
Beginning of period | 580,049 | | | 3,021,507 | | | 2,977,474 | | | 3,004,300 | |
End of period | $ | 678,466 | | | $ | 2,977,474 | | | $ | 678,466 | | | $ | 2,977,474 | |
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Non-GAAP Financial Measures
This press release and the accompanying tables contain the non-GAAP financial measure bookings, the non-GAAP financial measure free cash flow, and the non-GAAP financial measure Adjusted EBITDA.
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.
Bookings is defined as revenue plus the change in deferred revenue during the period and other non-cash adjustments. Substantially all of our bookings are generated from sales of virtual currency, which can ultimately be converted to virtual items on the Roblox Platform. Sales of virtual currency reflected as bookings include one-time purchases and monthly subscriptions purchased via payment processors or through prepaid cards. Bookings also include an insignificant 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. Free cash flow represents the net cash provided by operating activities less purchases of property, equipment, and intangible assets acquired through asset acquisitions. 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 acquired through asset acquisitions, can be used for strategic initiatives. Adjusted EBITDA represents our GAAP consolidated net loss, excluding interest income, interest expense, other income/(expense), provision for/(benefit from) income taxes, depreciation and amortization expense, stock-based compensation expense, and certain other nonrecurring adjustments and differs from Covenant Adjusted EBITDA which is used in certain covenant calculations specified in the indenture governing our senior notes due 2030. We believe that, when considered together with reported GAAP amounts, Adjusted EBITDA is useful to investors and management in understanding our ongoing operations and ongoing operating trends. Our definition of Adjusted EBITDA may differ from the definition used by other companies and therefore comparability may be limited. Refer to the Liquidity section below for further discussion on and the calculation of Covenant Adjusted EBITDA.
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.
Reconciliation tables of the most comparable GAAP financial measure to the non-GAAP financial measure used in this press release are included below. We encourage investors and others to review our business, results of operations, and financial information in their entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measures.
Liquidity
Covenant Adjusted EBITDA is used in certain covenant calculations specified in the indenture governing our senior notes due 2030 that is not calculated in accordance with GAAP and may not conform to the calculation of EBITDA or adjusted EBITDA by other companies. Covenant Adjusted EBITDA should not be considered as a substitute for net loss as determined in accordance with GAAP and by other companies. We believe that, when considered together with reported amounts, Covenant Adjusted EBITDA is useful for our investors and management for purposes of analyzing our compliance with certain covenants specified in the indenture governing our senior notes due 2030 and may influence our ability to issue additional debt and enter into certain other transactions in the future. Covenant Adjusted EBITDA should be considered in connection with our condensed consolidated financial statements and results presented in accordance with GAAP. Refer to the Liquidity and Capital Resources of our Annual Report on Form 10-K for the year ended December 31, 2023 for more information.
GAAP to Non-GAAP Reconciliations and Calculation of Covenant Adjusted EBITDA
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 December 31, | | Twelve Months Ended December 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
Reconciliation of revenue to bookings: | | | | | | | |
Revenue | $ | 749,939 | | | $ | 579,004 | | | $ | 2,799,274 | | | $ | 2,225,052 | |
Add (deduct): | | | | | | | |
Change in deferred revenue | 382,196 | | | 325,450 | | | 742,308 | | | 662,378 | |
Other | (5,313) | | | (5,020) | | | (20,802) | | | (15,172) | |
Bookings | $ | 1,126,822 | | | $ | 899,434 | | | $ | 3,520,780 | | | $ | 2,872,258 | |
The following table presents a reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow, for each of the periods presented (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Twelve Months Ended December 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | |
Reconciliation of net cash provided by operating activities to free cash flow: | | | | | | | |
Net cash provided by operating activities | $ | 143,305 | | | $ | 119,219 | | | $ | 458,180 | | | $ | 369,296 | |
Deduct: | | | | | | | |
Acquisition of property and equipment | (65,197) | | | (157,205) | | | (320,667) | | | (426,163) | |
Purchases of intangible assets | — | | | — | | | (13,500) | | | (1,500) | |
Free cash flow | $ | 78,108 | | | $ | (37,986) | | | $ | 124,013 | | | $ | (58,367) | |
The following table presents the calculation of Covenant Adjusted EBITDA in accordance with the terms of the indenture governing our senior notes due 2030, for each of the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Twelve Months Ended December 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | |
Calculation of Covenant Adjusted EBITDA: | | | | | | | |
Consolidated net loss | $ | (325,340) | | | $ | (291,485) | | | $ | (1,158,937) | | | $ | (934,141) | |
Add (deduct): | | | | | | | |
Interest income | (39,530) | | | (21,636) | | | (141,818) | | | (38,842) | |
Interest expense | 10,298 | | | 10,008 | | | 40,707 | | | 39,903 | |
Other (income)/expense, net | (898) | | | (1,988) | | | 527 | | | 5,744 | |
Provision for/(benefit from) income taxes | 277 | | | 3,202 | | | 454 | | | 3,552 | |
Depreciation and amortization | 54,531 | | | 42,538 | | | 208,142 | | | 130,083 | |
Stock-based compensation expense | 250,679 | | | 169,456 | | | 867,967 | | | 589,498 | |
RTO severance charge(1) | 5,228 | | | — | | | 5,228 | | | — | |
Other non-cash charges(2) | — | | | — | | | 6,988 | | | — | |
Change in deferred revenue | 382,196 | | | 325,450 | | | 742,308 | | | 662,378 | |
Change in deferred cost of revenue | (77,805) | | | (52,530) | | | (139,879) | | | (101,719) | |
Covenant Adjusted EBITDA | $ | 259,636 | | | $ | 183,015 | | | $ | 431,687 | | | $ | 356,456 | |
(1)Relates to cash severance costs associated with the Company’s return-to-office (“RTO”) plan announced in October 2023, which requires a subset of the Company’s remote employees to begin working from the San Mateo headquarters for three days a week, beginning in the summer of 2024.
(2)Includes impairment expenses related to certain operating lease right-of-use assets and related property and equipment.
Forward Looking Guidance
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):
| | | | | | | | | | | | | | | | | | | | | | | |
| Guidance |
| Three Months Ended March 31, 2024 | | Twelve Months Ended December 31, 2024 |
| Low | | High | | Low | | High |
Reconciliation of revenue to bookings: | | | | | | | |
Revenue | $ | 755,000 | | | $ | 780,000 | | | $ | 3,300,000 | | | $ | 3,400,000 | |
Add (deduct): | | | | | | | |
Change in deferred revenue | 158,000 | | | 163,000 | | | 852,000 | | | 892,000 | |
Other | (3,000) | | | (3,000) | | | (12,000) | | | (12,000) | |
Bookings | $ | 910,000 | | | $ | 940,000 | | | $ | 4,140,000 | | | $ | 4,280,000 | |
The following table presents a reconciliation of consolidated net loss, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA, for each of the periods presented (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Guidance |
| Three Months Ended March 31, 2024 | | Twelve Months Ended December 31, 2024 |
| Low | | High | | Low | | High |
Reconciliation of consolidated net loss to Adjusted EBITDA: | | | | | | | |
Consolidated net loss | $ | (347,000) | | | $ | (342,000) | | | $ | (1,400,000) | | | $ | (1,365,000) | |
Add (deduct): | | | | | | | |
Interest income | (38,000) | | | (38,000) | | | (160,000) | | | (160,000) | |
Interest expense | 11,000 | | | 11,000 | | | 42,000 | | | 42,000 | |
| | | | | | | |
Provision for/(benefit from) income taxes | 1,000 | | | 1,000 | | | 4,000 | | | 4,000 | |
Depreciation and amortization | 58,000 | | | 58,000 | | | 224,000 | | | 224,000 | |
Stock-based compensation expense | 260,000 | | | 260,000 | | | 1,140,000 | | | 1,140,000 | |
Adjusted EBITDA(1) | $ | (55,000) | | | $ | (50,000) | | | $ | (150,000) | | | $ | (115,000) | |
(1)Adjusted EBITDA includes the impact from changes in deferred revenue and deferred cost of revenue; refer to the Liquidity section above for further discussion on and the calculation of Covenant Adjusted EBITDA, which is used in certain covenant calculations specified in the indenture governing our senior notes due 2030, and excludes the impact from changes in deferred revenue and deferred cost of revenue.
About Roblox
Roblox is an immersive platform for connection and communication. Every day, millions of people come to Roblox to create, play, work, learn, and connect with each other in experiences built by our global community of creators. Our vision is to reimagine the way people come together– in a world that is safe, civil, and optimistic. To achieve this vision, we are building an innovative company that, together with the Roblox community, has the ability to strengthen our social fabric and support economic growth for people around the world. For more about Roblox, please visit corp.roblox.com.
CONTACTS
Stefanie Notaney
Roblox Corporate Communications
press@roblox.com
ROBLOX and the Roblox logo are among the registered and unregistered trademarks of Roblox Corporation in the United States and other countries. © 2024 Roblox Corporation. All rights reserved.
Source: Roblox Corporation
Shareholder Letter Q4 2023 FY 2023 February 7, 2024 .2Exhibit 99.2
To Our Shareholders: In this shareholder letter, we will cover our operating results for Q4 2023 as well as for the entire 2023 fiscal year. We will also provide guidance on key metrics for Q1 2024 and for FY 2024. We are excited about our performance in 2023 and believe we take a great deal of momentum into 2024. During our Investor Day last November, we communicated some key financial themes: 1. We expect to compound our top line by 20% per year through at least 2027 2. By managing the growth in our fixed costs (headcount and infrastructure), we are targeting margin expansion of 100 - 300 basis points each year 3. We are able to moderate capital expenditures now that we are through a significant investment cycle As a result, we believe we are well positioned to deliver increasing amounts of cash flow while carefully managing stock dilution. Q4 and FY 2023 Results: Our fourth quarter and full year 2023 results were consistent with comments we shared at Investor Day: ● Fourth quarter revenue totaled $749.9 million and grew by 30% over revenue in Q4 2022. Bookings in Q4 2023 totaled $1,126.8 million, an increase of 25% over Q4 2022. This was the highest rate of year-over-year bookings growth in over two years. For FY 2023, revenue was $2,799.3 million, up 26% year-over-year, and bookings totaled $3,520.8 million, an increase of 23% over bookings in fiscal 2022. ● Consolidated net loss in Q4 2023 was $325.3 million, compared to a consolidated net loss of $291.5 million in Q4 2022. For FY 2023, consolidated net loss was $1,158.9 million compared to a consolidated net loss of $934.1 million in FY 2022. We report net losses despite generating positive operating cash flows in part because the vast majority of our bookings are deferred and recognized into revenue over the average lifetime of a paying user - which was 28 months in Q4 2023 - while the majority of our expenses are recognized during the period incurred. Therefore, we expect to continue to report net losses for the foreseeable future even as we anticipate generating net cash provided by operating activities. 1
● In Q4 2023, cash provided by operating activities was $143.3 million, an increase of 20% over Q4 2022. For FY 2023, cash provided by operating activities was $458.2 million, up 24% over FY 2022. ● Free cash flow for Q4 was $78.1 million compared to $38.0 million in Q4 2022, an improvement of $116.1 million. For FY 2023, free cash flow totaled $124.0 million compared to $58.4 million in FY 2022, an increase of $182.4 million. ● In Q4 2023, Covenant Adjusted EBITDA was $259.6 million, 42% higher than in Q4 2022. For the full year 2023, Covenant Adjusted EBITDA was $431.7 million, an increase of 21% compared to FY 2022. Cash and cash equivalents, short-term investments, and long-term investments totalled $3,236.7 million as of December 31, 2023 while long-term debt was $1,005.0 million. Thus, total cash and investments, net of debt, as of December 31, 2023 was $2,231.7 million. Our liquidity has never been better. ● Our fully diluted share count, consisting primarily of shares issued and outstanding of Class A and Class B common stock, stock options outstanding, and unvested RSUs outstanding, was 715.0 million shares as of December 31, 2023, an increase of 3.7% as of December 31, 2022. The results in Q4 2023 were strong for a number of reasons: First, our growth is driven by two mutually reinforcing network effects: content and social. Great content attracts large audiences and a lot of engagement. In 2023, we had more experiences with daily audiences of greater than one million than we have ever had. In Q4 2023, daily active users DAUs) reached 71.5 million, an all-time high and an increase of 22% year-over-year; hours engaged were 15.5 billion, a record for any fourth quarter on Roblox and an increase of 21% year-over-year. Both metrics were disproportionately driven by growth among older users and users in international markets. Second, monthly unique payers MUPs) grew by 18% in Q4 to 15.9 million and average bookings per MUP grew by 6% to an all-time high of $23.65. Per payer monetization was 5% higher than the prior peak in Q4 2020, which occurred during the pandemic. Third, consistent with our goal of reaching users on all platforms, in Q4, Roblox became available on Meta Quest and Sony Playstation. Our platform expansion efforts allowed us to attract new users and that made the overall network more useful and valuable. Fourth, consistent with our recent messaging, the growth rates in operating expenses related to certain infrastructure and trust & safety, and personnel (excluding stock-based compensation expense) were slower than the growth rate of bookings. 2
Finally, capital expenditures in Q4 2023 were $65.2 million, down significantly from capital expenditures of $157.2 million in Q4 2022. In general, we expect these trends to continue - we believe the amount of high quality content on Roblox will continue to grow; more users will become payers and payers will generally spend more as time goes on; and we will benefit from the growth of both Meta Quest and Sony Playstation. In addition, we expect to scale our brand-related microtransaction and advertising business over time as more companies invest in building presence on Roblox. As a result, as we said at Investor Day last November, we believe we can maintain 20% year-over-year topline growth through 2027. Further, we have come through a major investment cycle and also believe we can continue to manage operating expense growth and capital expenditures, allowing us to increase margins by 100 - 300 basis points per year and deliver on our commitment to increase cash flow. 3
Liquidity: As of December 31, 2023, the balances of our liquidity components were: ● Cash and cash equivalents: $678.5 million ● Short-term investments: $1,514.8 million ● Long-term investments: $1,043.4 million ● Minus: Carrying amount of the senior notes due 2030 $990.3 million) and the portion of the non-eliminated carrying amount of notes due 2026 issued by the Company’s fully consolidated joint venture $14.7 million), or $1,005.0 million1 in total. ● Cash and cash equivalents plus short-term and long-term investments totaled $3,236.7 million in Q4 2023 and $2,977.5 million in Q4 2022 ● Net liquidity (cash, cash equivalents and investments less debt) was $2,231.7 million Our Covenant Adjusted EBITDA, which is used in certain covenant calculations specified in the indenture governing our senior notes due 2030, and is not calculated in accordance with GAAP, was $259.6 million in Q4 2023. See below for the calculation of our Covenant Adjusted EBITDA. For additional GAAP results see our Q4 2023 earnings release and supplemental materials accessible at ir.roblox.com and our Annual Report on Form 10K for the year ended December 31, 2023, when available. 1 $990.3 million represents the net carrying amount of the senior notes due 2030 and $14.7 million represents the portion of the non-eliminated carrying amount of notes due 2026 issued by the Company’s fully consolidated joint venture, each as of December 31 2023. The principal amounts of the 2030 Notes and 2026 Notes were $1.0 billion and $14.7 million, respectively. 4
Guidance: When we announced at Investor Day that we would begin giving financial guidance, the most common question we received concerned our guidance strategy. We will try to strike a balance between being too conservative and calling into question our confidence in the business, and being too aggressive thereby increasing the risk of missing guidance. Over the course of 2023, our year-over-year bookings growth by quarter was: 23% in Q1; 22% in Q2; 20% in Q3; and 25% in Q4. For the full year, we grew bookings by 23%. Given those data points, our comments above, and the current visibility we have in our business, our bookings guidance for both Q1 2024 and the full year 2024 has 20% growth at the midpoint of our ranges. Further, we believe that we can add 100 - 300 basis points to margins each year while continuing to invest in innovation by hiring great talent, building reliable and performant infrastructure, ensuring the safety of our platform, and investing in the Roblox developer community. Management guidance is as follows: For fiscal 2024 ● Revenue of $3,300 million - $3,400 million. Our revenue guidance assumes that there are no material changes in estimates used in our revenue recognition, such as the average lifetime of a paying user. ● Bookings of $4,140 million - $4,280 million. At the midpoint of the range, bookings would be approximately 20% higher than FY 2023 bookings of $3,520.8 million. ● Consolidated net loss between $1,400 million - $1,365 million. ● Adjusted EBITDA between $150 million - $115 million A, which includes: - Increase in deferred revenue between $852 million - $892 million - Increase in deferred cost of revenue between $172 million - $177 million - The total of these changes in deferrals between $680 million - $715 million B A + B = Covenant Adjusted EBITDA2 2 Refer to the Liquidity section above for further discussion on and the calculation of Covenant Adjusted EBITDA, which is used in certain covenant calculations specified in the indenture governing our senior notes due 2030, and excludes the impact from changes in deferred revenue and deferred cost of revenue. 5
For Q1 2024 ● Revenue of $755 million - $780 million. Our revenue guidance assumes that there are no material changes in estimates used in our revenue recognition, such as the average lifetime of a paying user. ● Bookings between $910 million - $940 million which puts the middle of the range at 20% growth over Q1 2023 bookings of $773.8 million. ● Consolidated net loss between $347 million - $342 million. ● Adjusted EBITDA between $55 million - $50 million A, which includes: - Increase in deferred revenue between $158 million - $163 million - Increase in deferred cost of revenue between $33 million - $35 million - The total of these changes in deferrals between $125 million - $128 million B A + B = Covenant Adjusted EBITDA3 We believe bookings provide a timelier indication of trends in our operating results that are not necessarily reflected in our revenue, because 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. 3 Refer to the Liquidity section above for further discussion on and the calculation of Covenant Adjusted EBITDA, which is used in certain covenant calculations specified in the indenture governing our senior notes due 2030, and excludes the impact from changes in deferred revenue and deferred cost of revenue. 6
EARNINGS Q&A SESSION We will host a live Q&A session to answer questions regarding our fourth quarter 2023 and full fiscal year 2023 results on Wednesday, February 7, 2024 at 530 a.m. Pacific Time/830 a.m. Eastern Time. The live webcast and Q&A session will be open to the public at ir.roblox.com and we invite you to join us and to visit our investor relations website at ir.roblox.com to review supplemental information. 7
Forward-Looking Statements This letter and the live webcast and Q&A session which will be held at 530 a.m. Pacific Time/830 a.m. Eastern Time on Wednesday, February 7, 2024 contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our vision to connect one billion global DAUs, our efforts to improve the Roblox Platform, our immersive advertising efforts, the use of artificial intelligence (“AI”) on our platform, our efforts related to communications products, our economy and product efforts related to creator earnings tools, branding and new partnerships, our business, product, strategy and user growth, our investment strategy, including our opportunities for and expectations of improvements in financial and operating metrics, including operating leverage, free cash flow, operating expenses and capital expenditures, our expectation of successfully executing such strategies and plans, disclosures and future growth rates, benefits from agreements with third-party cloud providers, estimates about our data center capacity, our expectations of future net losses and net cash provided by operating activities, statements by our Chief Executive Officer and Chief Financial Officer, and our outlook and guidance for first quarter and full year 2024, and future periods. These forward-looking statements are made as of the date they were first issued and were based on current plans, expectations, estimates, forecasts, and projections as well as the beliefs and assumptions of management. Words such as “expect,” “vision,” “envision,” “evolving,” “drive,” “anticipate,” “intend,” “maintain,” “should,” “believe,” “continue,” “plan,” “goal,” “opportunity,” “estimate,” “predict,” “may,” “will,” “could,” and “would,” and variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond our control. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to risks detailed in our filings with the Securities and Exchange Commission (the “SEC”), including our annual reports on Form 10K, our quarterly reports on Form 10Q and other filings and reports we make with the SEC from time to time. In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: our ability to successfully execute our business and growth strategy; the sufficiency of our cash and cash equivalents to meet our liquidity needs, including the repayment of our senior notes; the demand for our platform in general; our ability to retain and increase our number of users, developers, and creators; the impact of inflation and global economic conditions on our operations; the impact of changing legal and regulatory requirements on our business, including the use of verified parental consent; our ability to develop enhancements to our platform, and bring them to market in a timely manner; our ability to develop and protect our brand and build new partnerships; any misuse of user data or other undesirable activity by third parties on our platform; our ability to maintain the security and availability of our platform; our ability to detect and minimize unauthorized use of our platform; and the impact of AI on our platform, users, creators, and developers. Additional information regarding these and other risks and uncertainties that could cause actual results to differ materially from our expectations is included in the reports we have filed or will file with the SEC, including our annual reports on Form 10K and our quarterly reports on Form 10Q. 8
The forward-looking statements included in this letter represent our views as of the date of this letter. We anticipate that subsequent events and developments will cause our views to change. However, we undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this letter. 9
Non-GAAP Financial Measures This letter contains the non-GAAP financial measure bookings, the non-GAAP financial measure free cash flow, and the non-GAAP financial measure Adjusted EBITDA. 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. Bookings is defined as revenue plus the change in deferred revenue during the period and other non-cash adjustments. Substantially all of our bookings are generated from sales of virtual currency, which can ultimately be converted to virtual items on the Roblox Platform. Sales of virtual currency reflected as bookings include one-time purchases and monthly subscriptions purchased via payment processors or through prepaid cards. Bookings also include an insignificant 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. Free cash flow represents the net cash provided by operating activities less purchases of property, equipment, and intangible assets acquired through asset acquisitions. 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 acquired through asset acquisitions, can be used for strategic initiatives. Adjusted EBITDA represents our GAAP consolidated net loss, excluding interest income, interest expense, other income/(expense), provision for/(benefit from) income taxes, depreciation and amortization expense, stock-based compensation expense, and certain other nonrecurring adjustments and differs from Covenant Adjusted EBITDA which is used in certain covenant calculations specified in the indenture governing our senior notes due 2030. We believe that, when considered together with reported GAAP amounts, Adjusted EBITDA is useful to investors and management in understanding our ongoing operations and ongoing operating trends. Our definition of Adjusted EBITDA may differ from the definition used by other companies and therefore comparability may be limited. Refer to the Liquidity section below for further discussion on and the calculation of Covenant Adjusted EBITDA. 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. 10
Reconciliation tables of the most comparable GAAP financial measure to the non-GAAP financial measure used in this letter are included at the end of this letter. We encourage investors and others to review our business, results of operations, and financial information in their entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measures. Liquidity Covenant Adjusted EBITDA is used in certain covenant calculations specified in the indenture governing our senior notes due 2030 that is not calculated in accordance with GAAP and may not conform to the calculation of EBITDA or adjusted EBITDA by other companies. Covenant Adjusted EBITDA should not be considered as a substitute for net loss as determined in accordance with GAAP and by other companies. We believe that, when considered together with reported amounts, Covenant Adjusted EBITDA is useful for our investors and management for purposes of analyzing our compliance with certain covenants specified in the indenture governing our senior notes due 2030 and may influence our ability to issue additional debt and enter into certain other transactions in the future. Covenant Adjusted EBITDA should be considered in connection with our consolidated financial statements and results presented in accordance with GAAP. Refer to the Liquidity and Capital Resources of our Annual Report on Form 10K for the quarter and year ended December 31, 2023 for more information. 11
GAAP to Non-GAAP Reconciliations and Calculation of Covenant Adjusted EBITDA 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: Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 Reconciliation of revenue to bookings: (dollars in thousands) (dollars in thousands) Revenue $ 749,939 $ 579,004 $ 2,799,274 $ 2,225,052 Add (deduct): Change in deferred revenue 382,196 325,450 742,308 662,378 Other 5,313 5,020 20,802 15,172 Bookings $ 1,126,822 $ 899,434 $ 3,520,780 $ 2,872,258 The following table presents a reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow, for each of the periods presented: Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 Reconciliation of net cash provided by operating activities to free cash flow: (dollars in thousands) (dollars in thousands) Net cash provided by operating activities $ 143,305 $ 119,219 $ 458,180 $ 369,296 Deduct): Acquisition of property and equipment 65,197 157,205 320,667 426,163 Purchases of intangible assets — — 13,500 1,500 Free cash flow $ 78,108 $ 37,986 $ 124,013 $ 58,367 12
The following table presents the calculation of Covenant Adjusted EBITDA in accordance with the terms of the indenture governing our senior notes due 2030, for each of the periods presented: Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 Calculation of Covenant Adjusted EBITDA (dollars in thousands) (dollars in thousands) Consolidated net loss $ 325,340 $ 291,485 $ 1,158,937 $ 934,141 Add (deduct): Interest income 39,530 21,636 141,818 38,842 Interest expense 10,298 10,008 40,707 39,903 Other (income)/expense, net 898 1,988 527 5,744 Provision for/(benefit from) income taxes 277 3,202 454 3,552 Depreciation and amortization 54,531 42,538 208,142 130,083 Stock-based compensation expense 250,679 169,456 867,967 589,498 RTO severance charge1 5,228 — 5,228 — Other non-cash charges2 — — 6,988 — Change in deferred revenue 382,196 325,450 742,308 662,378 Change in deferred cost of revenue 77,805 52,530 139,879 101,719 Covenant Adjusted EBITDA $ 259,636 $ 183,015 $ 431,687 $ 356,456 1 Relates to cash severance costs associated with the Company’s return-to-office (“RTO”) plan announced in October 2023, which requires a subset of the Company’s remote employees to begin working from the San Mateo headquarters for three days a week, beginning in the summer of 2024. 2 Includes impairment expenses related to certain operating lease right-of-use assets and related property and equipment. 13
Guidance 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: Three Months Ended March 31, 2024 Twelve Months Ended December 31, 2024 Low High Low High Reconciliation of revenue to bookings: (dollars in thousands) (dollars in thousands) Revenue $ 755,000 $ 780,000 $ 3,300,000 $ 3,400,000 Add (deduct): Change in deferred revenue 158,000 163,000 852,000 892,000 Other 3,000 3,000 12,000 12,000 Bookings $ 910,000 $ 940,000 $ 4,140,000 $ 4,280,000 The following table presents a reconciliation of consolidated net loss, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA, for each of the periods presented: Three Months Ended March 31, 2024 Twelve Months Ended December 31, 2024 Low High Low High Reconciliation of consolidated net loss to Adjusted EBITDA (dollars in thousands) (dollars in thousands) Consolidated net loss $ 347,000 $ 342,000 $ 1,400,000 $ 1,365,000 Add (deduct): Interest income 38,000 38,000 160,000 160,000 Interest expense 11,000 11,000 42,000 42,000 Provision for/(benefit from) income taxes 1,000 1,000 4,000 4,000 Depreciation and amortization 58,000 58,000 224,000 224,000 Stock-based compensation expense 260,000 260,000 1,140,000 1,140,000 Adjusted EBITDA1 $ 55,000 $ 50,000 $ 150,000 $ 115,000 1 Adjusted EBITDA includes the impact from changes in deferred revenue and deferred cost of revenue; refer to the Liquidity section above for further discussion on and the calculation of Covenant Adjusted EBITDA, which is used in certain covenant calculations specified in the indenture governing our senior notes due 2030, and excludes the impact from changes in deferred revenue and deferred cost of revenue. 14
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