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Use this table to research & handicap the odds of Roblox differentiation in numerous target markets and the peak economics that result
View above about Research Category: Dashboards for Roblox Corporation
The table below frames some of the swing factors in valuation based on the outlook for long-term cash flows, namely what the company's peak economics could be in different Market Segments depending on its level of differentiation ("Success Regime") in each segment, the odds of those Success Regimes in each Market Segment, and how the odds are related across Market Segments. You can read and add to research supporting each judgment on those economics and odds, you can change those judgments as desired, and you can update the Cases Study to see the effects of your changes on the odds for future cash flows and valuation.
Roblox spent $104M in capex in 2020 and is expected by Morgan Stanley to spend $93M in 2021 and grow revenue by $839M in 2021
View above about Model Issue: Start amount for expenses forecast and org Roblox Corporation and for issue Growth capex pct of incremental sales
1Q2021 Roblox COGS ex. D&A included $98M Cost of Rev + $119M Developer Ex Fees + $94M Infra - $13.7M Infra D&A
View above about Model Issue: Entered COGS ex. D&A and org Roblox Corporation and for quarter ending 03/31/2021
In 1Q21, Robox depreciation was $16.6M (incl. $13.7M for Infrastructure) on $387M revenue. That 4% rate may approximate maintenance capex.
View above about Model Issue: Start amount for expenses forecast and org Roblox Corporation and for issue Maintenance capex pct of total sales
Mauboussin argues that the best forecasts combine causal & statistical thinking, and he offers base rates for growth by industry & size
View above about Model Issue: Value of Quantifying Stories in Scenarios
Accurate forecasts combine causal and statistical thinking in proper measure. Statistical thinking relies on identifying an appropriate reference class of past outcomes. An overreliance on base rates can lead to faulty forecasts if the statistical properties of a reference class change over time. That said, we believe that forecasters don’t use base rates as frequently as they should . . . There are two main lessons for investors. First, it is important to be mindful of the potential shift in the base rate as the result of the rise of intangibles. Second, skillful investors may be able to identify the companies that will grow faster than expected, hence providing the potential for attractive returns.
Between Sept. 2018 and 2030, the global middle class may grow from 3.6B to 5.3B
View above about Model Issue: 2030 population aged 6-14 in developed world
Research Category: TAM and Industry Trends for Roblox Corporation
Something of enormous global significance is happening almost without notice. For the first time since agriculture-based civilization began 10,000 years ago, the majority of humankind is no longer poor or vulnerable to falling into poverty. By our calculations, as of this month, just over 50 percent of the world’s population, or some 3.8 billion people, live in households with enough discretionary expenditure to be considered “middle class” or “rich.” About the same number of people are living in households that are poor or vulnerable to poverty. So September 2018 marks a global tipping point. After this, for the first time ever, the poor and vulnerable will no longer be a majority in the world. Barring some unfortunate global economic setback, this marks the start of a new era of a middle-class majority. We make these claims based on a classification of households into those in extreme poverty (households spending below $1.90 per person per day) and those in the middle class (households spending $11-110 per day per person in 2011 purchasing power parity, or PPP). Two other groups round out our classification: vulnerable households fall between those in poverty and the middle class; and those who are at the top of the distribution who are classified as “rich" . . .
The middle class is already the largest segment of demand in the global economy. What makes it interesting for business is that it is also the most rapidly growing segment, projected to reach some 4 billion people by end 2020 and 5.3 billion people by 2030. Compared to today, the middle class in 2030 will have 1.7 billion more people, while the vulnerable group will have 900 million fewer people. Trends for the poor and the rich and more modest, at -150 million people and +100 million, respectively.
$387M revenue recognized in 1Q2021 divided by 9.7B hours engaged in the quarter
View above about Model Issue: Starting revenue per hour engaged and org Roblox Corporation and for customer Existing users
Research Category: Customer Traction and Sales Efficiency for Roblox Corporation
Revenue increased 140% over Q1 2020 to $387.0 million . . . Hours Engaged were 9.7 billion
9.7B hours engaged in 1Q2021 divided by 42.1M average DAU divided by 90 days
View above about Model Issue: Current daily hours engaged per DAU
Research Category: Customer Traction and Sales Efficiency for Roblox Corporation
Average Daily Active Users (DAUs) were 42.1 million, an increase of 79% year over year driven by: 87% growth in DAUs outside of the US/Canada 111% growth in DAUs over the age of 13 Hours Engaged were 9.7 billion, an increase of 98% year over year primarily driven by: 104% growth in engagement in markets outside of the US/Canada 128% growth from users over the age of 13
We can estimate 150 days of deferred revenue by dividing 1Q21 bookings of $652M by revenue of $387M and multiplying by 90 days / quarter
View above about Model Issue: Roblox Deferred Revenue days of sales
Research Category: Customer Traction and Sales Efficiency for Roblox Corporation
First Quarter 2021 Financial Highlights
- Revenue increased 140% over Q1 2020 to $387.0 million
- Net Loss for Q1 2021 was $134.2 million
- Net cash provided by operating activities increased nearly 4x over Q1 2020 to $164.5 million (including one-time direct listing expenses of $51.9 million). Exclusive of one-time expenses related to our direct listing, net cash provided by operating activities would have been $216.4 million.
- Bookings increased 161% over Q1 2020 to $652.3 million
- Free Cash Flow increased 4.1x over Q1 2020 to $142.1 million
- Average Daily Active Users (DAUs) were 42.1 million, an increase of 79% year over year driven by: 87% growth in DAUs outside of the US/Canada 111% growth in DAUs over the age of 13 Hours Engaged were 9.7 billion, an increase of 98% year over year primarily driven by: 104% growth in engagement in markets outside of the US/Canada 128% growth from users over the age of 13
- Average Bookings per DAU (ABPDAU) was $15.48, an increase of 46% year over year
Today > 90% of Roblox virtual goods purchases are for durable goods whose costs may be incurred over user lifetime, which averages 23 months
View above about Model Issue: Roblox Deferred Revenue days of sales
Research Category: Profitability and Margins for Roblox Corporation
Example user spends $25 to buy Roblox, spends that Roblox within 3 days, spends $2 of them on consumables used immediately, and spends $23 of them on durable goods used over the long-term. In month 1, Roblox shows $25 in bookings and $3 in revenue, including $2 from the consumables and $1 from the durables, amortizing the $23 spent over the 23-month average user lifetime.
In the US in 2019, most 5 year-wide age cohorts were about 7% of the population, so 6-14 year-olds may be ~10% of the developed world
View above about Model Issue: 2030 population aged 6-14 in developed world
Research Category: TAM and Industry Trends for Roblox Corporation
The estimated population of the U.S. was approximately 328.2 million in 2019, and the largest age group was adults aged 25 to 29. There were twelve million males in this age category and around 11.5 million females.
