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Roblox earnings flop: Is it game over for RBLX as user growth slows?

By Joyanta Acharjee

17:00, 10 August 2022

The Roblox logo on a field of in-game screen shots
Roblox earnings dragged down the stock as quarterly numbers showed declining users and transaction revenue – Photo: Roblox

An online videogame stock has plunged as its latest earnings showed slowing user growth and virtual currency transactions.

With US videogame spending set to drop this year, could it be game over for Roblox?

Roblox (RBLX) stock was down 15% in pre-market US trading on Wednesday, recovering to nearly flat on a day but trailing majpor market indexes. The stock is down 52% for the year so far and 64% off its all-time high of $134.72 reached in November 2021, during the Covid-19 pandemic.

Roblox (RBLX) stock price

Founded in 2004, Roblox is both an online virtual world and a software engine that is open to individuals making content.

A screen shot from in-game action on RobloxRoblox

Roblox is free to play and does not require an expensive graphics card to run. It is available on Mac, PC, video games consoles plus Apple and Android smartphones. Additional in-game purchases can be through its “Robux” virtual currency.

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Q2 numbers

Slide showing latest quarterly bookings revenueRoblox

Bookings - a measure of the amount of virtual in-game currency purchased by users - fell 4% to $639.9m (£523m, €619m) in the second quarter ended 30 June.

The rate of daily active users slowed in the most recent quarter to an average of 52.2 million users, a 4% drop from the 54.1 million users online over the prior quarter. Average bookings per active user was down 21% to $12.25.

Slide showing latest quarterly Roblox user dataRoblox

Analysts had been expecting $657.2m of bookings and 54 million average active users, according to figures widely available on financial news sites.

"We remain positive about Roblox’s first mover advantage in the Metaverse, its large user base, its technology, and the potential for M&A, but have concerns about its high platform fees, the younger composition of its user base (which could decrease loyalty to Roblox, although it is aging up), and elevated levels of investment," Wedbush Securities analyst Nick McKay wrote in a note obtained by Capital.com.

"With the shares trading at such frothy valuation multiples, we believe that it is more prudent to remain on the sidelines for the time being, and are maintaining our Neutral rating as a result."

Games such as Roblox gained enormous popularity in recent years due to Covid-19 pandemic-related lockdowns which made people stay at home and spend more time gaming, resulting in bookings reaching a peak of $2.7bn for 2021.

Turning to its financial statement, Roblox reported a loss of 30 cents per share on revenue which rose 30% on the prior year to $591.2m. Analysts were expecting a loss of 25 cents per share.

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“We are driving record levels of users and engagement globally as we execute on our innovation roadmap and broaden the appeal of Roblox across geographies and age groups,” Roblox CEO David Baszucki said in a statement.  

As Covid-19 lockdowns have ended, consumers are spending less time at home playing videogames with rising prices resulting in fewer in-game transactions and new game purchases.

Consumer spending on videogames in the US is projected to reach $55.5bn this year, a decline of 8.7%, research firm NPD Group said last month.

 

Latest numbers

The latest Roblox gamer data could be a glimmer of hope for the company and investors.

According to the latest data for the month of July, bookings were up almost 10% at $243m to $247m and daily average users up 26% to 58.5 million.

“As a result of strong results in July, we are now at peak numbers globally for users and hours, and in the US/Canada - the absolute level of users and engagement hours in July exceeded those of any prior month even during the peak lockdown periods of the pandemic,” the company said in a separate letter to shareholders.

Roblox credits this improvement to “certain product initiatives and better operational focus” with higher levels of bookings growth coming from the 17-24 age demographic due to more “aged up” content and features such as voice chat and layered clothing.

"We attribute the increases to technological advances, the gradual emergence of stronger developers, and summer’s school breaks," Wedbush's McKay wrote.

Investors will be able to dig into more details at a Roblox investor day scheduled for September.

Markets in this article

RBLX
Roblox Corp
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-1.05 -2.560%

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