Roblox Q4’23 Earnings Update

Estimated reading time: 4 minutes

Intro

Roblox had a great Q4’23. Results were outstanding with revenue, bookings, and all meaningful metrics up quite a bit. I’ll keep this earnings update short and sweet with an emphasis on looking forward.

Let’s dive in.

Metric Growth

From the 8-K:

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.

Roblox Q4’23 Earnings (8-K)

This is all great stuff. Roblox is growing (obviously), but more than that, David and the team are executing on a strategy that is starting to do what it’s designed to do: grow. I wrote about this in my initial writeup.

They still aren’t profitable, but the strong growth together with the final goal is very attainable:

“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.

One of the things that jumps out at me with this from the earnings call: “We continue to invest in innovation and simultaneously invest very thoughtfully in the growth rate of those investments.”

Apart from these investments, Roblox is FCF positive and growing per share. I think this is the pulse that really matters for so many businesses:

Looking Forward: Beyond Q4’23

I value the past performance of a business more than its future projections. The historical data is a better indicator of the business’s potential than the CEO’s statements. As the saying goes, “Actions speak louder than words.”

Based on the actions of leadership until now, Roblox is continuing to empower users and creators, enable them with state-of-the-art technology, and finally get out of the way. They have always had this mindset, and it’s got them this far, and it’s worked very well.

This strategy creates a natural cycle of users becoming creators (they’re one in the same), and these creators bringing in new users, who then become creators. It’s akin to YouTube, only better, and more future proof. It’s weird to think about, but in the future we’ll have people paying for digital experiences the same way we have people paying for yearly vacations or cruises.

“But what about AR and VR headsets?” This is a huge plus for Roblox. They’re already on the Meta Quest 3, and Apple mobile, so I assume they’ll be on Apple Vision Pro if Apple offers a true VR experience in the headset. If all the AVP does is cast screens, then it might be a moot point. However, the Roblox strategy of “Roblox Everywhere” suggests that if it makes sense, Roblox will eventually be an option on Apple Vision Pro:

On Roblox everywhere, in Q4, we released Roblox on PlayStation and on Meta Quest, both of them attracted new users and continued on our vision that we want Roblox everywhere. In our vibrant economy expansion, in Q4, we delivered developer subscriptions. We’re moving consistent with the vision of everything is creator-driven.

RBLX: 2024 Earnings call 4 2023 Transcript, 2024-2-7

Users Get What Users Want

Side note: we need a new term for user/creator, because they’re the same thing.

This closeness of user-creator makes a certain dynamic in Roblox that shows us what people really want in games. I did some digging and the highest grossing games in Roblox don’t have great graphics. They’re still mostly blocky. Then why are people playing these games so much, and paying good money for them? Because they’re fun.

The analysis may appear simplistic, but it is accurate. The analogy applies to many domains, such as movies. Many of the best movies in the world have minimal special effects or extravagant budgets, yet they remain timeless classics. The same goes for books, destinations, and even friends. We appreciate people, things, and experiences not merely for their appearance, but for our interaction with them. This is Roblox’s strength. Users get what they ultimately desire. No frills, all substance.

Conclusion

Roblox has earned its place in the portfolio for the time being. (The complete portfolio is available here.)

My only concern about Roblox and its CEO David Baszucki is their ability to execute flawlessly, as I believe most companies face unforeseen challenges that affect their long-term performance. I think the key for Roblox is to keep a strategy that supports and motivates user-creators over time.