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Roblox files for IPO

Kid-focused, user-generated content platform has not yet turned a profit despite skyrocketing DAUs, bookings

Roblox has filed with the US Securities and Exchange Commission to make an initial public offering today, with the suggested ticker symbol RBLX.

In the filing, Roblox discloses its revenues from the last three years, and revealed that the company has not yet turned a profit since its founding in 2004.

Roblox brought in $312 million in revenue in 2018, which increased to $488 million in 2019, and is currently at $589 million for the nine months ending September 30, 2020 -- up 68% from the same period last year.

The company's net bookings were $499 million in 2018, $694 million in 2019, and have grown 171% from $458 million in the nine months ending September 30, 2019 to $1,240 million for the same period this year.

And it experienced a net loss of $97.2 million in 2018 and $86 million in 2019, and is current at a new loss of $203 million for the nine months ending September 30, 2020.

The company's user engagement has only been increasing over the years, with the UPO reporting Roblox DAUs have grown from 12 million in 2018 to 17.6 million in 2019, and are currently at 31 million for the nine months ending September 30 of this year. And there are nearly seven million active developers on the platform.

The IPO also gives some information about how creators on Roblox are earning money, with over 960,000 developers having earned some amount of the in-game currency, Robux, on the platform in the nine months ending in September this year.

Of those, over 1,050 earned $10,000 or more, and nearly 250 earned $100,000 or more.

In total, for the nine months ending September 30, 2020, Roblox developers earned $209 million, up from $72.2 million from the same period last year -- though the company notes that developers do not always cash out their Robux and instead will sometimes reinvest them into the game.

Roblox currently employs over 830 full-time employees, in addition to over 1,700 trust and safety agents worldwide.

The Roblox filing outlines a number of potential risk factors for the company, including fairly common risks for such filings in the gaming space such as seasonality of the business, its dependence on online networks, potential regulatory shifts, and the recent COVID-19 pandemic.

However, it also includes a handful of stand-out risks. For one, Roblox notes that it has "experienced rapid growth in recent periods" that may not be indicative of its future trajectory.

Roblox also states that it has incurred net losses since its start, expects to incur net losses in the near future, and it may not be able to achieve or maintain profitability.

"We also expect our operating expenses to increase significantly in future periods, and if our DAU growth does not increase to offset these anticipated increases in our operating expenses, our business, results of operations, and financial condition will be harmed, and we may not be able to achieve or maintain profitability," the filing states.

"We expect our costs and expenses to increase in future periods as we intend to continue to make significant investments to grow our business. These efforts may be more costly than we expect and may not result in increased revenue or growth of our business.

"In addition to the expected costs to grow our business, we also expect to incur significant additional legal, accounting, and other expenses as a newly public company. If we fail to increase our revenue to sufficiently offset the increases in our operating expenses, we will not be able to achieve or maintain profitability in the future."

Roblox also sites the dependency of its business model on maintaining a safe online environment for children, saying that if it cannot provide this, the business will suffer "dramatically." Roblox acknowledged in the filing that despite significant effort, it has struggled to fully keep its platform safe in the past, saying that sexual content involving children has been uploaded in the past, and that Roblox has been used by individuals in the past to seek out, groom, and eventually meet up with children off the platform.

Finally, Roblox points out that its joint venture with Tencent to create Roblox China may not realize the benefits expected due to ongoing tensions between the US and China, including legal action undertaken by bother governments to restrict trade and commerce.

The valuation of Roblox is currently unknown, though earlier this year sources speaking to CNBC suggested Roblox wants to double its most recent valuation, from $4 billion to $8 billion.

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