Roblox Posts Poor Q2 Earnings as Bookings and Users Decline

Roblox RBLX posted a poor second quarter, as bookings declined year over year and users fell sequentially. The platform displayed decent underlying metrics, with global daily active users, or DAUs, at 52.2 million, down from 51.1 million last quarter but up from 43.2 million a year ago. Roblox continued to improve in reach among older gamers, as 53.1% of users were over the age of 13 versus 49.5% a year ago. Engagement also improved to over 11.3 billion hours, up 16% versus a year ago. We slightly lower our fair value estimate to $75 from $80 to account for marginally lower bookings per DAU and higher investment in infrastructure and security. Shares are trading at a significant discount to our updated fair value estimate, providing some margin of safety, but we expect the stock to remain highly volatile.

Profitability remained weaker than we’d projected, with adjusted EBITDA margin dropping to 8.8% in the quarter from 27.1% last year due to the ongoing investment in workforce, spending on safety measures, and increased developer payouts. We expect the pace of hiring to slow down as the firm catches up on the DAU explosion of the past two or three years. Developer exchange fees exceeded 22% of bookings, up from 19.5% a year ago. While higher than we previously expected, we still don’t project that the firm will consistently hit its 25% target without changing the Robux payout ratio.

Bookings fell 4% versus last year to $640 million, but the firm continues to retain the majority of its pandemic-influenced gains, as that figure is up sharply from $494 million in the same quarter of 2020. That quarter in 2020 was the first to benefit from the lockdown restrictions, as Roblox posted a 229% year-over-year increase. Geographic diversity advanced, with DAUs in Asia-Pacific jumping by 71% versus last year to 12.3 million and now representing 24% of the total versus 17% a year ago. The region also posted strong engagement growth of 62% to 2.8 billion hours.