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Roblox, the kids’ video game company, faced a significant drop in its stock price, plunging about 10% in after-hours trading on Tuesday, following the release of disappointing first-quarter results. The company reported performance metrics below analysts’ expectations, highlighting the challenges it has encountered:
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Earnings: Roblox reported a loss of 27 cents per share, which fell short of the expected loss of 21 cents per share, as anticipated by analysts.
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Revenue: The company’s revenue for the quarter reached $631.2 million, slightly missing analysts’ estimates of $645 million. This revenue figure, referred to as bookings by Roblox, encompasses sales recognized during the quarter and deferred revenue.
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The decline in bookings by 3% during the quarter illustrates the cooling off of Roblox’s business compared to the pandemic period when children spent more time at home and on their screens.
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Roblox derives its revenue from the sale of its virtual currency called Robux, which players use to enhance their avatars and acquire premium features within the games.
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Roblox reported 54.1 million average daily active users in the first quarter, reflecting a 28% increase from the previous year but falling slightly short of the StreetAccount consensus of 55 million. Users collectively spent 11.8 billion hours engaged in Roblox, representing a 22% increase.
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The average bookings per daily active user saw a 25% decline, dropping to $11.67, which was in line with analysts’ expectations at $11.65.
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During the pandemic, Roblox experienced a surge in bookings, exceeding 200%, as schools and offices closed. In 2021, the company’s stock was in high demand, with its market capitalization approaching $80 billion at its peak.
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However, as the economy reopened and market conditions shifted, the stock price began to decline, experiencing an over 80% drop from its record high.
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Roblox estimated that its bookings for April were between $221 million and $224 million, marking an 8% to 10% decline.
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The company addressed the situation by stating, “While Covid and the subsequent re-opening have contributed to slowing growth in several of our metrics, based on third party data we believe we are gaining share on both users and hours relative to certain other companies in gaming and social media that compete for our users’ attention.”
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Executives planned to discuss these results in detail during a conference call with analysts scheduled for 8:30 a.m. ET on Wednesday.