Roblox Corp

Previous wording

Consistent with our free to play business model, a small portion of our users have historically been payers. For example, in the three months ended March 31, 2024, of our 77.7 million average DAUs, only approximately 914,000 represented our average daily unique paying users. Similarly, in the three months ended March 31, 2024, our average daily bookings per DAU was $0.13, whereas our average daily bookings per daily unique paying user was $11.10. We believe that maintaining and growing our overall number of users, including the number of users who may not purchase and spend Robux, is important to the success of our business. As a result, we believe that the number of users who choose to purchase and spend Robux will continue to constitute a small portion of our overall users.

Current wording

Consistent with our free to play business model, a small portion of our users have historically been payers. For example, in the three months ended June 30, 2024, of our 79.5 million average DAUs, only approximately 983,000 represented our average daily unique paying users. Similarly, in the three months ended June 30, 2024, our average daily bookings per DAU was $0.13, whereas our average daily bookings per daily unique paying user was $10.68. We believe that maintaining and growing our overall number of users, including the number of users who may not purchase and spend Robux, is important to the success of our business. As a result, we believe that the number of users who choose to purchase and spend Robux will continue to constitute a small portion of our overall users.

Previous wording

Our primary areas of investment have been, and we expect will continue to be, our developer and creator community, and the people, technology, and infrastructure required to keep improving the Roblox Platform. These areas of focus are how we drive the business and are reflected in our operating cost structure, which primarily consists of four major areas: payment processing and other fees, compensation and benefits, developer earnings, and direct infrastructure.

Current wording

Our primary areas of investment have been, and we expect will continue to be, our developer and creator community, and the people, technology, and infrastructure, including our trust and safety systems, required to keep improving the Roblox Platform while maintaining and building a safe and civil online community. These areas of focus are how we drive the business and, along with payment processing fees, represent our primary operating costs.

Previous wording

Acquisition of property and equipment primarily includes servers, infrastructure equipment, tenant improvements, and capitalized software licenses.

Current wording

Acquisition of property and equipment primarily includes tenant improvements, servers, infrastructure equipment, and capitalized software licenses.

Previous wording

At the onset of each quarter, we complete an assessment of our estimated average lifetime of a paying user, which is used for revenue recognition of durable virtual items and calculated based on historical monthly retention data for each paying user cohort to project future participation on the Roblox Platform. The estimated average lifetime of a paying user was 28 months for the three months ended March 31, 2024 and 2023.

Current wording

At the onset of each quarter, we complete an assessment of our estimated average lifetime of a paying user, which is used for revenue recognition of durable virtual items and calculated based on historical monthly retention data for each paying user cohort to project future participation on the Roblox Platform. Following that assessment and effective April 1, 2024, the average lifetime of a paying user was estimated to be 27 months, a decrease compared to the previous estimate of 28 months. The estimated paying user life was also 28 months during the three and six months ended June 30, 2023.

Previous wording

Based on the carrying amount of deferred revenue and deferred cost of revenue as of March 31, 2024, the April 1, 2024 change in estimate will result in an increase in revenue and cost of revenue of $58.9 million and $12.4 million, respectively, during the three months ended June 30, 2024 and an increase in revenue and cost of revenue of $98.0 million and $20.4 million, respectively, during the twelve months ended December 31, 2024.

Current wording

Based on the carrying amount of deferred revenue and deferred cost of revenue as of March 31, 2024, the change resulted in an increase in revenue and cost of revenue during the three months ended June 30, 2024 of $58.9 million and $12.4 million, respectively. It is estimated that this change will increase our fiscal year 2024 revenue and cost of revenue by $98.0 million and $20.4 million, respectively.

Previous wording

Personnel costs generally include employee expenses (salaries, benefits, and stock-based compensation expense) and contractor expenses, and are reflected in each expense category, with the exception of cost of revenue and developer exchange fees. In the three months ended March 31, 2024, personnel costs were $466.9 million, and during the three months ended March 31, 2023, were $373.0 million.

Current wording

Personnel costs generally include employee expenses (salaries, benefits, and stock-based compensation expense) and contractor expenses, and are reflected in each expense category, with the exception of cost of revenue and developer exchange fees. In the three and six months ended June 30, 2024, personnel costs were $456.5 million and $923.3 million, respectively, and during the three and six months ended June 30, 2023, were $416.7 million and $789.7 million, respectively.

Previous wording

Cost of revenue as a percentage of revenue is affected by shifts in user purchasing preferences and trends. While in recent years, we saw a shift of our sales toward prepaid card distribution channels and credit card sales directly through our website, which are subject to lower processing fees compared to other distribution channels, such as the Apple App Store, Google Play Store, and consoles such as Xbox and PlayStation, we have seen this trend moderate over the last several quarters. We expect to see the overall distribution channel mix shift to higher processing fees continue in future periods with some seasonal variations.

Current wording

Cost of revenue as a percentage of revenue is affected by shifts in user purchasing preferences and trends. While in recent years, we saw a shift of our sales toward prepaid card distribution channels and credit card sales directly through our website, which are subject to lower processing fees compared to other distribution channels, such as the Apple App Store, Google Play Store, and consoles such as Xbox and PlayStation, we have seen this trend moderate over the last several quarters with some seasonal variations. We expect to see the overall distribution channel mix shift to higher processing fees continue in future periods with some seasonal variations.

Previous wording

In order to be qualified for our Developer Exchange Program and eligible to exchange earned Robux for real-world currency, developers and creators must meet certain conditions, such as having earned the minimum amount of Robux required to qualify for the program, a verified developer account, and an account in good standing. On January 31, 2022, we reduced the minimum amount of earned Robux required to qualify for the program from 100,000 Robux to 50,000 Robux and subsequently on January 31, 2023, we further reduced the minimum requirement from 50,000 Robux to 30,000 Robux. We believe these reductions in the minimum amounts required further incentivize our developer and creator community, and promote the long term growth and the health of such community. As of March 31, 2024, over 18,000 developers and creators qualified for and were registered in our Developer Exchange Program.

Current wording

In order to be qualified for our Developer Exchange Program and eligible to exchange earned Robux for real-world currency, developers and creators must meet certain conditions, such as having earned the minimum amount of Robux required to qualify for the program, a verified developer account, and an account in good standing. On January 31, 2022, we reduced the minimum amount of earned Robux required to qualify for the program from 100,000 Robux to 50,000 Robux and subsequently on January 31, 2023, we further reduced the minimum requirement from 50,000 Robux to 30,000 Robux. We believe these reductions in the minimum amounts required further incentivize our developer and creator community, and promote the long term growth and the health of such community. As of June 30, 2024, over 20,000 developers and creators qualified for and were registered in our Developer Exchange Program.

Previous wording

Infrastructure and trust & safety expenses consist primarily of expenses related to the operation of our data centers and technical infrastructure. These costs include third-party service providers costs, such as cloud computing or other hosting and data storage, facilities-related expenses for our co-located data centers and edge data centers that we lease and operate, and network and bandwidth costs, as well as depreciation and associated support and maintenance costs of our servers and infrastructure equipment. Depreciation and amortization expense related to infrastructure and trust & safety in the three months ended March 31, 2024 and 2023 was $46.2 million and $41.0 million, respectively. Infrastructure and trust & safety expenses also include personnel costs and moderation and customer support related costs, as well as allocated overhead expenses, to support our infrastructure and trust & safety initiatives.

Current wording

Infrastructure and trust & safety expenses consist primarily of expenses related to the operation of our data centers and technical infrastructure. These costs include third-party service providers costs, such as cloud computing or other hosting and data storage, facilities-related expenses for our co-located data centers and edge data centers that we lease and operate, and network and bandwidth costs, as well as depreciation and associated support and maintenance costs of our servers and infrastructure equipment. Depreciation and amortization expense related to infrastructure and trust & safety in the three months ended June 30, 2024 and 2023 was $45.4 million and $45.8 million, respectively, and in the six months ended June 30, 2024 and 2023 was $91.6 million and $86.8 million, respectively.

Previous wording

We plan to continue increasing the capacity, capability, and reliability of our infrastructure to support more sophisticated content, more users, and increased engagement. We expect to moderate our investment in infrastructure in fiscal year 2024, but generally expect to increase the dollar amount of our investment in infrastructure for the foreseeable future thereafter as we continue to build out our global infrastructure. We intend to achieve scalability by building and maintaining our own technical infrastructure, while generally generating operating leverage over the long-term.

Current wording

We plan to continue increasing the capacity, capability, and reliability of our infrastructure to support more sophisticated content, more users, and increased engagement. We also have been, and expect to continue, moderating our investment in infrastructure throughout fiscal year 2024, but generally expect to increase the dollar amount of our investment in infrastructure for the foreseeable future thereafter as we continue to build out our global infrastructure. We intend to achieve scalability by building and maintaining our own technical infrastructure, while generally generating operating leverage over the long-term.

Previous wording

Research and development expenses consist primarily of personnel costs and allocated overhead expenses for our engineering, design, product management, data science, and other employees engaged in maintaining and enhancing the functionality of the Platform. Research and development expenses also include costs associated with our Game Fund program, which funds certain developers upfront to develop new experience types for the Platform. We plan to increase research and development expenses for the foreseeable future primarily driven by increased headcount to develop new features, functionality, and innovation of our product. However, we plan to slow our headcount growth rate and expect to generate operating leverage beginning in fiscal year 2024 and generally through the end of fiscal year 2025.

Current wording

Research and development expenses consist primarily of personnel costs and allocated overhead expenses for our engineering, design, product management, data science, and other employees engaged in maintaining and enhancing the functionality of the Platform. Research and development expenses also include costs associated with our Game Fund program, which funds certain developers upfront to develop new experience types for the Platform. We plan to increase research and development expenses for the foreseeable future primarily driven by increased headcount to develop new features, functionality, and innovation of our product. However, we have been, and expect to continue, slowing our headcount growth rate throughout fiscal year 2024 and expect to continue to generate operating leverage generally through the end of fiscal year 2025.

Previous wording

General and administrative expenses consist primarily of personnel costs and allocated overhead for our finance and accounting, legal, human resources, talent acquisition, and other administrative teams. General and administrative expenses also include professional services fees such as outside legal, accounting, audit, and outsourcing services, and other corporate expenses, as well as certain accruals and settlements associated with legal proceedings. We expect to moderate our headcount growth in fiscal year 2024, but generally expect to increase general and administrative expenses for the foreseeable future thereafter to support the growth of the business.

Current wording

General and administrative expenses consist primarily of personnel costs and allocated overhead for our finance and accounting, legal, human resources, talent acquisition, and other administrative teams. General and administrative expenses also include professional services fees such as outside legal, accounting, audit, and outsourcing services, and other corporate expenses, as well as certain accruals and settlements associated with legal proceedings. We have been, and expect to continue, moderating our headcount growth in fiscal year 2024, but generally expect to increase general and administrative expenses for the foreseeable future thereafter to support the growth of the business.

Previous wording

Provision for/(benefit from) income taxes consists primarily of state, U.S. federal and foreign income taxes. We maintain a full valuation allowance on our federal, state, and foreign deferred tax assets as we have concluded that it is not likely that the deferred assets will be utilized.

Current wording

Provision for/(benefit from) income taxes consists primarily of income taxes in foreign jurisdictions and U.S. federal and state income taxes. We maintain a full valuation allowance on our federal, state, and foreign deferred tax assets as we have concluded that it is not likely that the deferred assets will be utilized.

Previous wording

Comparison of the Three Months Ended March 31, 2024 and 2023

Current wording

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Previous wording

Revenue increased $146.0 million, or 22%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase is primarily due to a higher amortization of prior period deferred revenue and an increase in bookings in the current period. The increase in bookings was primarily driven by a higher average number of daily unique paying users during the current period, which increased from approximately 812,000 during the three months ended March 31, 2023 to approximately 914,000 during the three months ended March 31, 2024. The average number of daily unique paying users represents the number of user accounts that made a payment on the Platform, including via redemption of prepaid cards for Robux, on an average daily basis during the respective period.

Current wording

The increase in bookings during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily driven by a higher average number of daily unique paying users during the current period, which increased from approximately 790,000 during the three months ended June 30, 2023 to approximately 983,000 during the three months ended June 30, 2024. The average number of daily unique paying users represents the number of user accounts that made a payment on the Platform, including via redemption of prepaid cards for Robux, on an average daily basis during the respective period.

Previous wording

Cost of revenue increased $27.0 million, or 18%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase is primarily due to anet increase of $26.8 million in expense for payment processing fees, primarily driven by a higher amortization of prior period deferred cost of revenue and an increase in current period payment processing fees from the related growth in bookings.

Current wording

Cost of revenue increased $36.5 million, or 23%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase is primarily due to anet increase of$41.5 million in expense for payment processing fees, primarily driven by a higher amortization of prior period deferred cost of revenue and an increase in current period payment processing fees from the related growth in bookings. The increase in the amortization of prior period deferred cost of revenue was supplemented by the decrease of the estimated average lifetime of a paying user to 27 months in the second quarter of 2024. Refer to the heading “Changes in Accounting Estimate” earlier in this section above for more information on the change in paying user life estimates in fiscal year 2024.

Previous wording

Developer exchange fees increased $20.0 million, or 11%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase is primarily driven by an increase in amounts earned by developers and creators due to the growth in bookings over the same period. However, the growth in bookings exceeded the growth in developer exchange fees, primarily driven by slower growth in our Engagement-Based Payouts program relative to overall bookings growth.

Current wording

Developer exchange fees increased $62.4 million, or 18%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Theincrease is primarily driven by an increase in amounts earned by developers and creators due to the growth in bookings over the same period. However, the growth in bookings exceeded the growth in developer exchange fees, primarily driven by changes in non-USD pricing, which impacts the amount of developer exchange fees incurred.

Previous wording

Research and development expenses increased $86.5 million, or 31%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase is primarily due to an increase of $70.4 million in personnel costs, which includes an increase of $44.0 million in stock-based compensation expense, primarily due to continued growth in headcount supporting our engineering, design, and product teams. The increase was further supplemented by an increase of $8.8 million in facilities-related costs, primarily driven by higher rent expense associated with our office leases.

Current wording

Research and development expenses increased $46.4 million, or 15%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase is primarily due to an increase of $33.5 million in personnel costs, which includes an increase of $32.8 million in stock-based compensation expense, primarily due to growth in headcount supporting our engineering, design, and product teams. The increase was further supplemented by an increase of $7.8 million in facilities-related costs, primarily driven by higher rent expense associated with our office leases.

Previous wording

General and administrative expenses increased $0.3 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase is primarily due to an increase of $2.8 million in professional services expense and $1.8 million in personnel costs, which includes an increase of $1.0 million in stock-based compensation expense. The increase was offset by an impairment charge of $7.0 million related to the operating lease right-of-use asset and related leasehold improvements of a portion of our San Mateo headquarters for which a sub-lease agreement was executed during the first quarter of 2023.

Current wording

General and administrative expenses increased $9.7 million, or 5%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase is primarily due to an increase of $7.7 million in professional services, $3.0 million from a newly enacted digital services tax in Canada, $2.6 million of withholding-related taxes, and $2.4 million in facilities-related costs. The increase was offset by an impairment charge of $7.0 million related to the operating lease right-of-use asset and related leasehold improvements of a portion of our San Mateo headquarters for which a sub-lease agreement was executed during the first quarter of 2023.

Previous wording

Sales and marketing expenses increased $8.8 million, or 33%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase is primarily due to an increase of$5.5 million in personnel costs, which includes anincrease in stock-based compensation expense of$1.9 million, primarily due to continued growth in headcount to support our sales and marketing teams, as well as an increase of $1.7 million in advertising and promotional expenses.

Current wording

Sales and marketing expenses increased $6.0 million, or 20%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase is primarily due to an increase of $3.5 million in advertising and promotional expenses and$2.3 million in personnel costs, which includes anincrease of$1.5 millionin stock-based compensation expense, primarily due to continued growth in headcount to support our sales and marketing teams.

Previous wording

Interest expense, other income/(expense), net, and provision for/(benefit from) income taxes, net were all relatively flat (in terms of amount) for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, respectively.

Current wording

Interest expense and provision for/(benefit from) income taxes, net were all relatively flat (in terms of amount) for the three and six months ended June 30, 2024 compared to the same periods of the prior year.

Previous wording

As of March 31, 2024 and December 31, 2023, our principal sources of liquidity were cash and cash equivalents and short-term and long-term investments of $3.5 billion and $3.2 billion, respectively, which were primarily held for working capital purposes, capital expenditures, and acquisitions. Our investment policy and strategy are focused on the preservation of capital and supporting our liquidity requirements. We do not enter into investments for trading or speculative purposes.

Current wording

As of June 30, 2024 and December 31, 2023, our principal sources of liquidity were cash and cash equivalents and short-term and long-term investments of $3.6 billion and $3.2 billion, respectively, which were primarily held for working capital purposes, capital expenditures, and acquisitions. Our investment policy and strategy are focused on the preservation of capital and supporting our liquidity requirements. We do not enter into investments for trading or speculative purposes.

Previous wording

As of March 31, 2024, contractual obligations related to the 2030 Notes are remaining payments of $38.8 million in 2024 and $38.8 million each year from 2025 through 2029 and $1,019.4 million due in 2030. These amounts represent principal and interest cash payments over the term of the 2030 Notes based on the stated maturity date. Any future redemption of the 2030 Notes could impact the amount or timing of our cash payments. For more information regarding the 2030 Notes, see Note 9, “Debt” to the notes to condensed consolidated financial statements.

Current wording

As of June 30, 2024, contractual obligations related to the 2030 Notes are remaining payments of $19.4 million in 2024 and $38.8 million each year from 2025 through 2029 and $1,019.4 million due in 2030. These amounts represent principal and interest cash payments over the term of the 2030 Notes based on the stated maturity date. Any future redemption of the 2030 Notes could impact the amount or timing of our cash payments. For more information regarding the 2030 Notes, see Note 9, “Debt” to the notes to condensed consolidated financial statements.

Previous wording

During the three months ended March 31, 2024, net cash and cash equivalents provided by operating activities was $238.9 million, which consisted of consolidated net loss of $271.9 million, adjusted by non-cash charges of $302.4 million and net cash inflows from the change in net operating assets and liabilities of $208.5 million. The non-cash charges were primarily comprised of stock-based compensation expense of $240.5 million and depreciation and amortization expense of $53.7 million. The net cash and cash equivalents inflow from the change in our net operating assets and liabilities was primarily due to a $174.1 million decrease in accounts receivable, primarily driven by collection of outstanding accounts receivable and partially offset by an increase in accounts receivable from bookings generated in the current period. The increase was further supplemented by a $129.2 million increase in deferred revenue, primarily due to bookings generated in the current period. The overall increase was offset by a $33.4 million increase in deferred cost of revenue, primarily due to payment processing fees incurred in the current period, and a $22.2 million decrease in our developer exchange liability, primarily driven by payments and partially offset by the developer exchange fees expense generated in the current period.

Current wording

During the six months ended June 30, 2024, net cash and cash equivalents provided by operating activities was $390.4 million, which consisted of consolidated net loss of $479.1 million, adjusted by non-cash charges of $618.0 million and net cash inflows from the change in net operating assets and liabilities of $251.5 million. The non-cash charges were primarily comprised of stock-based compensation expense of $492.4 million and depreciation and amortization expense of $106.5 million. The net cash and cash equivalents inflow from the change in our net operating assets and liabilities was primarily due to a $197.7 million increase in deferred revenue, primarily due to bookings generated in the current period, and a $160.0 million decrease in accounts receivable, primarily driven by collection of outstanding accounts receivable and partially offset by an increase in accounts receivable from bookings generated in the current period. The overall increase was offset by a $52.6 million increase in deferred cost of revenue, primarily due to payment processing fees incurred in the current period, and a $29.3 million decrease in operating lease liabilities.

Previous wording

During the three months ended March 31, 2024, net cash and cash equivalents used in investing activities was $78.6 million, primarily consisting of $30.7 million of investment purchases– net of sales and maturities, capital expenditures of $46.7 million, and intangible asset purchases of $1.2 million.

Current wording

During the six months ended June 30, 2024, net cash and cash equivalents used in investing activities was $133.9 million, primarily consisting of $44.2 million of investment purchases– net of sales and maturities and capital expenditures of $86.4 million.

Previous wording

During the three months ended March 31, 2024, net cash and cash equivalents provided by financing activities was $28.2 million, primarily consisting of $32.7 million from the exercise of stock options and purchase of shares under our employee stock purchase plan, offset by $4.5 million of post-acquisition purchase consideration payments related to the satisfaction of certain post-acquisition conditions related to our third quarter 2023 acquisition of Speechly, Inc.

Current wording

During the six months ended June 30, 2024, net cash and cash equivalents provided by financing activities was $32.8 million, primarily consisting of $37.2 million from the exercise of stock options and purchase of shares under our employee stock purchase plan, offset by $4.5 million of post-acquisition purchase consideration payments related to the satisfaction of certain post-acquisition conditions related to our third quarter 2023 acquisition of Speechly, Inc.

Previous wording

The Company has letters of credit in connection with its office facilities in San Mateo, California and data center facilities in Ashburn, Virginia and Chicago, Illinois which are not reflected in the Company’s condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023. There have been no material changes to the Company’s letters of credit during the three months ended March 31, 2024. We did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other purposes.

Current wording

The Company has letters of credit in connection with its office facilities in San Mateo, California and data center facilities in Ashburn, Virginia and Chicago, Illinois which are not reflected in the Company’s condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023. There have been no material changes to the Company’s letters of credit during the six months ended June 30, 2024. We did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other purposes.

Previous wording

There have been no material changes to our critical accounting policies and estimates as compared to those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in the Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 21, 2024.

Current wording

Refer below for our revenue recognition accounting policy. For our stock-based compensation expense accounting policy, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in the Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 21, 2024.

Previous wording

Beginning April 1, 2024, the estimated average lifetime of a paying user changed from 28 months to 27 months. The decrease was partially attributed to COVID impacted payer cohorts dropping out of the estimated average lifetime of a paying user calculation (as we consider historical monthly retention data), whose average lives generally trended higher than more recent payer cohorts, along with the other qualitative factors including macroeconomic factors, competition, and availability of the Platform.

Current wording

The estimated average paying user life was 28 months from the third quarter of 2022 through the first quarter of 2024 and decreased to 27 months at the onset of the second quarter of 2024. The decrease in the estimated average lifetime of a paying user from 28 months to 27 months was partially attributed to COVID-19 impacted payer cohorts dropping out of the estimated average lifetime of a paying user calculation (as we consider historical monthly retention data), whose average lives generally trended higher than more recent payer cohorts, along with the other qualitative factors including macroeconomic factors, competition, and availability of the Platform. Refer to the heading “Change in Accounting Estimate” for discussion on the quantitative amount of the change in accounting estimates for the respective periods impacted.