Roblox misses Q4 expectations,the Metaverse Giant is Showing Signs of Slowing

Iverson_
2022-02-16

$Roblox Corporation(RBLX)$ , another metaverse giant, fell sharply after financial  report.In the fourth quarter, Roblox's revenue, earnings, user growth and 2022Q1 guidance all missed expectations, plunging by 15% before the market.

“lower consumption level” users increased,revenue slowdown

Roblox's main source of income is to sell Robux(a virtual game currency)to users. After their consumption, they share the income with developers. In the fourth quarter, Roblox's revenue was US $568.8 million, up 83% year-on-year, and the growth rate continued to decline from the high point in the first quarter.

Bookings was US $771 million, up 20% year-on-year, which was slightly less than expected. Bookings mainly includes revenue, deferred revenue and other non-cash adjustments. As part of the revenue obtained from the sale of virtual currency Robux may be included in deferred revenue, so bookings can predict the revenue in the future.

What needs to be more vigilant is that the bookings in January 2022 is between 220-230 million US dollars, an increase of only 2-3% year-on-year; ABPDAU ranged from $4.02 to $4.08, down 22% to 23% year-on-year. Judging from this set of data, the outlook for the first quarter is very bleak.

From the trend point of view, the growth in North America is blocked. Although the users in Asia-Pacific region are growing rapidly (yoy+117%), the consumption capacity of single user is only 1/10 of that in Europe and America. The increase of users whose consumption level is lower has lowered the overall average daily active user booking volume (ABPDAU decreased by US $1.8 compared with the same period of last year), and the future income growth rate will continue to fall under a high base.

In addition, the operating loss in this quarter was 139 million dollars, and the net loss was 143 million dollars, both of which increased significantly compared with 2020. The loss of $0.25 per share was much higher than the expected loss of $0.13 on Wall Street.

Resolve the pressure of user growth: higher age group and globalization

With the gradual lifting of epidemic isolation restrictions in North America, the reopening of schools and the increase of outdoor activities, the proportion of games in the lives of young people is declining. This quarter, the number of active users and user participation of Roblox fell short of Wall Street expectations.

Among them, Roblox had 49.5 million daily active users in the fourth quarter, an increase of 33% year-on-year, which seemed to be only 1 million fewer than expected. In January, DAU increased by 32% year-on-year to 54.7 million, which has recovered.

However, from the description in the shareholder letter, we clearly feel the pressure of user growth after the epidemic dispersed. The management even abandoned the quarterly earnings guidance and paid more attention to long-term value creation, pointing out that the three key goals are to develop the international market, attract older users and expand the application breadth of the platform. The side reflects that the growth of low-age users in Europe and America has seen the ceiling.

Facing the pressure of user growth, Roblox is accelerating the pace of users breaking the circle and globalization to the higher age group. From the results, the Asia-Pacific region has indeed propped up new users in the world and become a new growth point for driving company users. The growth rate this quarter is over 100%; Roblox users over the age of 13 are also growing rapidly. At present, the DAU of users over 13 years old has exceeded that of users under 13 years old, and the age of users has been successfully broken.

However, the decrease of user participation is difficult to change in the short term. In the fourth quarter, the user stickiness was lower than expected, and the total user usage time was 10.8 billion hours (yoy +28%, down from the previous month). With the opening of the economy, the game duration will further decline.

The road to metaverse is severe

In 2021, Meta burned $10 billion on metaverse, and recorded revenue of $2.27 billion for the whole year, accounting for less than 2% of the total revenue. The company allocates a lot of money and all available resources to the metaverse department, which is bound to weaken the traditional business while betting heavily on metaverse, and the market seems to not buy this gambling choice.

As the world's largest game UGC platform and the company closest to metaverse, Roblox's disappointing financial report once again shows that: The road to the universe is severe, which must be a lasting war of attrition. Whether the core business of the company can cover the huge capital expenditure is still questionable.

In addition, in order to realize metaverse, a real Internet world, it may not be a good choice for enterprises to fight their own battles.Huge expenses and it is difficult for one or two companies to complete the metaverse from the underlying technical architecture to the hardware entrance. Personally, it seems that the concept of speculation can come to an end before any decent products or breakthrough technologies come out in the short to medium term.

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Comments

  • GoESg
    2022-02-17
    GoESg
    My daughter used to play Roblox for past two years but is slowing growing out of it as she grows up.

    Consumers behaviour is indeed important, to assess the potential of such companies.

  • Tilon_Song
    2022-02-18
    Tilon_Song
    Metaverse takes time to build, plus it's a bit overvalued as people are too hype about it. Give it some time while waiting for it to reach its reasonable price range, then only enter
  • Nase
    2022-02-17
    Nase
    Sadly did not lost cut so plaNing to hold till 40$ Area and buy 10 more
  • henglaw
    2022-02-18
    henglaw
    Metaverse overhype?
  • adeley
    2022-02-17
    adeley
    overrated and takes time
  • Demong
    2022-02-17
    Demong
    [Miser] [Miser] [Miser] [What] [What] [Cool] [Cool] [Cool]
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