Roblox(US:RBLX)2025-02-18 13:44Part I Business Overview Roblox operates a free-to-use immersive platform for connection and communication, driven by user-generated content and social network effects. - Roblox operates a free-to-use immersive platform where millions of users create, play, and connect in experiences built by a global community of creators. The platform is comprised of the Roblox Client, Roblox Studio, and Roblox Cloud3940 Key User Metrics (Year Ended Dec 31, 2024) | Metric | Value | | :--- | :--- | | Average Daily Active Users (DAUs) | 82.9 million | | Countries with DAUs | Over 180 | | Total Hours Engaged | 73.5 billion | | Average Hours per DAU per Day | 2.4 hours | | Average Daily Unique Paying Users | ~1.0 million | Developer and Creator Earnings | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Developer & Creator Earnings | $922.8 million | $740.8 million | | Registered in DevEx Program | >24,500 | >16,500 | | Exchanged Robux for Fiat | >17,000 | N/A | - The company reduced the minimum Robux required for the Developer Exchange Program from 50,000 to 30,000 on January 31, 2023, to incentivize the creator community51 Products and Technology The Roblox Platform is built on three core elements: the Roblox Client for user experience, Roblox Studio for creation, and Roblox Cloud for infrastructure. - The platform consists of three main components: Roblox Client (user application), Roblox Studio (free creation toolset), and Roblox Cloud (services and infrastructure)4056 - As of December 31, 2024, the Roblox Cloud uses over 140,000 servers and operates from data centers in 23 cities across North America, Asia-Pacific, and Europe73 - Roblox Studio leverages AI tools like Assistant, Code Assist, and Materials Generator to simplify content creation for developers of all skill levels78 The Roblox Economy and Business Model Roblox's economy is built on its virtual currency, Robux, with revenue generated from a small percentage of paying users. - The business model is free-to-use, with revenue generated from a small portion of users purchasing Robux. In 2024, only ~1.0 million of the 82.9 million average DAUs were daily unique paying users102103 Monetization Metrics (Year Ended Dec 31, 2024) | Metric | Value | | :--- | :--- | | Avg. Daily Bookings per DAU | $0.14 | | Avg. Daily Bookings per Daily Unique Paying User | $11.48 | - Developers and creators can convert earned Robux to fiat currency at an exchange rate of $0.0035 per Robux as of December 31, 2024, through the Developer Exchange Program107 - When a virtual item is sold, the creator typically receives 30% of the Robux, the seller/distributor receives 40%, and the platform receives 30%. If a creator sells their own item in their own experience, they receive 70%106 Safety and Digital Civility Roblox prioritizes creating a safe and civil online environment through a multi-layered moderation system and compliance with regulations. - Safety is the highest priority, with strict policies and a multi-layered moderation system combining AI and thousands of human moderators to review content and enforce Community Standards9499 - During the year ended December 31, 2024, the company evaluated over 400 million assets (images, audio, video) before they appeared on the platform91 - The company partners with leading safety groups like WeProtect Global Alliance and the Technology Coalition, and is a founding member of the Lantern program for cross-platform signal sharing to promote child safety96 Competition Roblox competes for user attention and developer talent with a wide range of global technology, entertainment, and gaming companies. - Competes for user attention with tech giants (Amazon, Apple, Meta, Google), entertainment companies (Disney), gaming companies (Activision Blizzard, Epic Games), and social platforms (TikTok, Instagram)116 - Competes for developers and creators with game engine and distribution platforms such as Epic Games, Unity, and Valve Corporation117 Human Capital As of December 31, 2024, Roblox employed 2,474 full-time employees, with a majority in product and engineering roles. - As of December 31, 2024, the company had 2,474 full-time employees, with approximately 77% (over 1,800) in product and engineering functions133 - The company completed its return-to-office (RTO) plan in the summer of 2024, requiring certain remote employees to relocate to the San Mateo headquarters134 Risk Factors The company faces significant risks, including a history of net losses, reliance on third-party platforms, and evolving global regulations. - Financial Risk: The company has a history of net losses ($1.15 billion in 2023, $935.4 million in 2024) and may not achieve future profitability due to increasing operating expenses143 - Regulatory Risk: The business is subject to evolving laws worldwide concerning online safety (UK's OSA, EU's DSA), privacy (GDPR, CCPA), and protection of minors (COPPA), which could increase costs, require platform changes, or restrict operations147149242244 - Operational Risk: Dependence on third-party operating systems (Apple, Google) and their app stores is a major risk, as they control distribution and take a significant share of revenue (up to 30%). Platform outages or security breaches could severely harm user trust and business operations157160178 - Reputational Risk: The ability to provide a safe online environment, particularly for children, is critical. Failure to prevent inappropriate content or behavior could dramatically harm the brand and business164 - Concentration Risk: Voting control is concentrated in the company's Founder, David Baszucki, who holds 100% of the Class B common stock, each with 20 votes per share, limiting public stockholders' influence286 Cybersecurity Roblox maintains an enterprise-wide information security program to manage cybersecurity risks, overseen by its CISO and the Audit and Compliance Committee. - The company has an enterprise-wide security program to identify, protect, detect, and respond to cybersecurity threats, integrated into its overall risk management305 - Oversight is managed by the Chief Information Security Officer (CISO) and the Audit and Compliance Committee (ACC) of the Board of Directors, which receives at least quarterly briefings from the CISO307312315 - During the last fiscal year, the company did not identify any cybersecurity threats that had a material effect on its business strategy, results of operations, or financial condition317 Properties As of January 1, 2025, Roblox relocated its corporate headquarters to a new leased office complex in San Mateo, California. - The company relocated its corporate headquarters to a new 752,546 sq. ft. leased facility in San Mateo, CA, on January 1, 2025319 - Roblox operates several data centers in the U.S. and internationally in locations including France, Germany, Hong Kong, Japan, Singapore, the Netherlands, India, Australia, and the UK321 Legal Proceedings The company is involved in various legal proceedings, including a consolidated class action lawsuit alleging minors used third-party virtual casinos. - A putative class action, Colvin v. Roblox, was filed on August 1, 2023, alleging that minors used third-party virtual casinos to gamble Robux. A similar case, Gentry v. Roblox, was filed and consolidated with it619620 - The court dismissed fraud-based claims but allowed claims for negligence, unjust enrichment, and violations of California's Unfair Competition Law to proceed. The company denies the claims and discovery is underway620 Part II Market for Common Equity and Related Matters Roblox's Class A common stock trades on the NYSE, and the company has never paid cash dividends, retaining earnings for business expansion. - Class A common stock trades on the NYSE under the symbol "RBLX" since March 10, 2021327 - The company has never declared or paid cash dividends and does not expect to in the foreseeable future331 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) In fiscal year 2024, Roblox saw continued growth in user engagement and monetization, with revenue increasing 29% to $3.60 billion. Key Financial and Operating Metrics (FY 2024 vs FY 2023) | Metric | FY 2024 | FY 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $3,602.0 M | $2,799.3 M | 29% | | Bookings (Non-GAAP) | $4,369.1 M | $3,520.8 M | 24% | | Net Loss | ($935.4 M) | ($1,151.9 M) | (19%) | | Adjusted EBITDA (Non-GAAP) | $180.2 M | ($170.7 M) | N/A | | Free Cash Flow (Non-GAAP) | $641.3 M | $124.0 M | 417% | | Avg. DAUs | 82.9 M | 68.9 M | 20% | | Hours Engaged | 73.5 B | 60.0 B | 22% | - Effective April 1, 2024, the company updated its estimated paying user life from 28 months to 27 months. This change increased fiscal year 2024 revenue by $98.0 million and cost of revenue by $20.4 million380512 Results of Operations (2024 vs. 2023) For the year ended December 31, 2024, revenue grew by $802.7 million (29%) to $3.6 billion, while total costs and expenses rose 15%. Comparison of Results of Operations (in thousands) | Line Item | FY 2024 | FY 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $3,601,979 | $2,799,274 | 29% | | Cost of revenue | $801,162 | $649,115 | 23% | | Developer exchange fees | $922,821 | $740,752 | 25% | | Infrastructure and trust & safety | $915,418 | $878,361 | 4% | | Research and development | $1,444,207 | $1,253,598 | 15% | | General and administrative | $407,507 | $390,055 | 4% | | Sales and marketing | $174,181 | $146,460 | 19% | | Total costs and expenses | $4,665,296 | $4,058,341 | 15% | | Loss from operations | ($1,063,317) | ($1,259,067) | (15%) | | Net loss attributable to common stockholders | ($935,384) | ($1,151,946) | (19%) | - The 4% increase in Infrastructure and trust & safety costs was driven by higher personnel and data center expenses, but was significantly offset by a $25.7 million decrease in moderation and customer support costs due to efficiency gains from AI-driven tools412413 Liquidity and Capital Resources As of December 31, 2024, Roblox's principal sources of liquidity were $4.0 billion in cash, cash equivalents, and investments. Cash and Investments (in billions) | As of December 31, | 2024 | 2023 | | :--- | :--- | :--- | | Cash, cash equivalents, and investments | $4.0 | $3.2 | Summary of Cash Flows (in millions) | Cash Flow | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $822.3 | $458.2 | | Net cash used in investing activities | ($852.1) | ($2,825.1) | | Net cash from financing activities | $65.9 | $67.2 | - The company has $1.0 billion in aggregate principal of 3.875% Senior Notes due 2030. As of Dec 31, 2024, the net carrying amount was $991.7 million and the estimated fair value was $901.5 million605611613 Critical Accounting Policies and Estimates Roblox's critical accounting policies involve significant management judgment, particularly in revenue recognition and stock-based compensation. - Revenue Recognition: A critical estimate is the average lifetime of a paying user, used to recognize revenue from durable virtual items. This was updated from 28 to 27 months in Q2 2024442447448 - Stock-Based Compensation: The company uses the Black-Scholes model for options and ESPP rights, requiring subjective assumptions for expected term and volatility. The fair value of RSUs is based on the stock price at grant449450451 - On March 1, 2024, the company cancelled the original CEO Long-Term Performance Award and granted a new award. This was treated as a modification, with the remaining unrecognized expense of $84.4 million to be recognized over the new service period456647649 Consolidated Financial Statements and Supplementary Data The consolidated financial statements for the year ended December 31, 2024, present Roblox's financial position and results of operations. Consolidated Balance Sheet Data (in thousands) | As of December 31, | 2024 | 2023 | | :--- | :--- | :--- | | Total Assets | $7,175,003 | $6,168,078 | | Total Current Assets | $3,728,030 | $3,275,413 | | Total Liabilities | $6,966,349 | $6,099,452 | | Deferred Revenue (Current + Long-term) | $4,571,976 | $3,779,542 | | Long-term debt, net | $1,006,371 | $1,005,000 | | Total Stockholders' Equity | $208,654 | $68,626 | Consolidated Statement of Operations Data (in thousands) | For the Year Ended December 31, | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Revenue | $3,601,979 | $2,799,274 | $2,225,052 | | Total costs and expenses | $4,665,296 | $4,058,341 | $3,148,836 | | Loss from operations | ($1,063,317) | ($1,259,067) | ($923,784) | | Consolidated net loss | ($940,614) | ($1,158,937) | ($934,141) | | Net loss per share, basic and diluted | ($1.44) | ($1.87) | ($1.55) | - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion and identified Revenue Recognition as a Critical Audit Matter due to the significant judgment in estimating customer life and the allocation between consumable and durable virtual items473474475 Note 11: Stock-Based Compensation Total stock-based compensation expense for 2024 was $1.016 billion, up from $868 million in 2023, with the majority allocated to R&D. Stock-Based Compensation Expense (in thousands) | Category | 2024 | 2023 | | :--- | :--- | :--- | | Infrastructure and trust & safety | $113,708 | $92,147 | | Research and development | $723,326 | $607,593 | | General and administrative | $138,444 | $131,577 | | Sales and marketing | $40,316 | $36,650 | | Total | $1,015,794 | $867,967 | - On March 1, 2024, the CEO's 2021 Long-Term Performance Award was cancelled and replaced with a new PSU and RSU award. This modification resulted in $84.4 million of unrecognized stock-based compensation to be expensed over the new award's vesting period647649 - In Q1 2024, new PSU awards were granted to executives tied to cumulative bookings and Adjusted EBITDA performance over a two-year period ending Dec 31, 2025654 Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2024. - Management concluded that both disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2024694695 - The independent registered public accounting firm issued an unqualified audit report on the effectiveness of the company's internal control over financial reporting695 Other Information Several key executives and directors adopted Rule 10b5-1 trading arrangements during the fourth quarter of 2024. - Several directors and officers adopted Rule 10b5-1 trading plans in Q4 2024, including: - CEO David Baszucki: Sale of up to 8,781,047 shares and gift of up to 1,914,015 shares, expiring Feb 2026699700 - CFO Michael Guthrie: Sale of up to 500,000 shares, expiring Nov 2025701 - Director Anthony Lee: Sale of up to 660,000 shares, expiring Mar 2026702 - Director Greg Baszucki: Sale of up to 1,168,650 shares and gift of up to 350,595 shares, expiring Mar 2026703 - CLO Mark Reinstra: Sale of up to 310,000 shares, expiring May 2026704 - CPSO Arvind Chakravarthy: Sale of up to 143,194 shares plus additional shares from vested equity, expiring Dec 2025705 Part III Directors, Executive Compensation, and Corporate Governance Information related to Directors, Executive Officers, and Corporate Governance is incorporated by reference from the company's forthcoming 2025 proxy statement. - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the forthcoming 2025 Proxy Statement709710711712713 Part IV Exhibits and Financial Statement Schedules This section lists the exhibits filed as part of the Annual Report on Form 10-K, with financial statement schedules omitted. - This section contains the index of all exhibits filed with or incorporated by reference into the Form 10-K716718