Upstart gaming platform Roblox (RBLX 6.57%) recently released its fourth-quarter and full-year earnings results for the quarter and the year ended Dec. 31, 2021. Annual revenue more than doubled to $1.9 billion, and free cash flow for the year came in 36% higher at $558 million.
These were the headline numbers from the Q4 report's release. But there was much more about Roblox contained in the report. Here are three important takeaways that investors should note.
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1. Roblox is generating continued growth but at a more moderate pace
Roblox got a lot of attention from investors since its direct listing in mid-March 2021, in part because of what many see as an immense growth opportunity riding on the metaverse tailwind. The attention was deserved as Roblox delivered some incredible growth data in the first nine months of 2021 -- revenue was up more than 100% year over year in every single quarter!
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Key Data Points
Roblox continued to deliver strong numbers in the final quarter of 2021. Revenue jumped 83% year over year to $569 million, while bookings improved 20% to $770 million. Operationally, average daily active users (DAUs) improved 33% year over year to 50 million, and hours engaged rose 28% to 10.8 billion hours. That's solid growth across the board.
Still, it is worth noting that while these numbers are impressive individually, they have been demonstrating a descending trend. For example, revenue grew year over year at 140%, 127%, and 102%, respectively, for the first, second, and third quarters of 2021. The latest quarterly numbers continued the downward trend. As economies reopened from pandemic lockdowns, users spent less time on Roblox as they returned to activities outside their homes. The more reasonable pace of growth reflects that.
2. Roblox is adding users in the right areas
Roblox started its business as a gaming platform catering more toward children in the U.S. and Europe. While that focus has served the company well over the last few years, Roblox has recently begun to invest heavily to expand the demographics of its users. In particular, it aims to significantly grow its international and older-users groups to keep its growth machine running in the coming years.
While it is still early, there are clear indicators that Roblox is moving in the right direction. To start, DAUs grew at 101% in the Asia Pacific region and 46% for the rest of the world region. These rates were much higher than the companywide growth rate of 33%. Users continue to trend older, with 52% of DAUs over the age of 13 in the latest quarter, up from 46% in the same quarter in 2020.
Roblox management said it has a long-term aspiration to reach 1 billion users. To reach that goal, it's going to have to attract and retain older users and new users from overseas. The latest results suggest that the company is still on track.
3. More users are spending money on Roblox
Roblox has historically grown DAUs steadily over time. The period during the worst of the COVID-19 pandemic was an outlier, where a stepped-up growth took place for a few quarters. While it is great for the company to have grown its DAUs massively, investors have concerns about its ability to retain these new users, let alone get them spending money on its platform.
Fortunately, the latest results suggest those concerns might be overblown. The payer user base grew from 9.5 million in the final quarter of 2020 to 11.9 million in 2021. In fact, Roblox reported growth in paying users in each of the last four quarters. Roblox is definitely converting these new users into paying customers. On top of that, 89% of these payers are returning payers, the highest percentage achieved since 2018, which indicates that new users are not only becoming payers but also more loyal to the platform over time.
All told, Roblox continued to diversify its user community and convert many of them into paying users. If it can sustain such execution over time, it has a good shot at becoming a major player in the metaverse race.
