🎮 ROBLOX $RBLX ANALYSIS 🎮
We examined Roblox cash flows using 3 models:
- Operating Cushion
- Core Operating Growth Profile
- Free Cash Flow Growth Profile
We found a tremendous business that gushes cash as it grows revenue.
Let's learn more 🧐
macro-ops.com/roblox-rblx-a-…
We examined Roblox cash flows using 3 models:
- Operating Cushion
- Core Operating Growth Profile
- Free Cash Flow Growth Profile
We found a tremendous business that gushes cash as it grows revenue.
Let's learn more 🧐
macro-ops.com/roblox-rblx-a-…
1/ Why Use These Cash Flow Models?
Each of the three models helps us see the true cash-generating power of RBLX's business model.
We can see if RBLX burns cash as it grows revenues and which levers it pulls to generate those cash returns.
Let's start w/ Operating Cushion.
Each of the three models helps us see the true cash-generating power of RBLX's business model.
We can see if RBLX burns cash as it grows revenues and which levers it pulls to generate those cash returns.
Let's start w/ Operating Cushion.
2/ Operating Cushion (OC)
OC is the percentage difference between your Gross Margin % and your SG&A %.
Two notes:
- Higher operating cushion = more cash as a biz grows top-line revenue
- Lower operating cushion = less cash a company generates as it grows top-line revenue
OC is the percentage difference between your Gross Margin % and your SG&A %.
Two notes:
- Higher operating cushion = more cash as a biz grows top-line revenue
- Lower operating cushion = less cash a company generates as it grows top-line revenue
3/ What Does $RBLX Tell Us?
Two things we can observe:
- $RBLX lost a mere 3% in Gross Margin after growing revenue 184%.
- SG&A as a % of revs declined over the last three years.
For every $1 the company generates in revenue, the company adds $0.58 in operating income.
Two things we can observe:
- $RBLX lost a mere 3% in Gross Margin after growing revenue 184%.
- SG&A as a % of revs declined over the last three years.
For every $1 the company generates in revenue, the company adds $0.58 in operating income.
4/ How Growth Impacts $RBLX Cash Flows
Two levers impact cash production:
- Growth: Increase top-line revenue at higher rates than its expenses
- Changes in Margin Percentage: Improve operations to generate more cash with fewer inputs (capital, labor, etc.)
Here's 2019-2020:
Two levers impact cash production:
- Growth: Increase top-line revenue at higher rates than its expenses
- Changes in Margin Percentage: Improve operations to generate more cash with fewer inputs (capital, labor, etc.)
Here's 2019-2020:
5/ What Can We Learn From Growth Impact?
A $415M growth in revenue resulted in:
- $297M cash inflow from gross margin impact
- $69M cash outflow from SG&A impact
Total Cash Impact of Growth & Margin Changes on Operating Cushion: ($244.62M – $15.68M) = +$228.94M
Not bad!
A $415M growth in revenue resulted in:
- $297M cash inflow from gross margin impact
- $69M cash outflow from SG&A impact
Total Cash Impact of Growth & Margin Changes on Operating Cushion: ($244.62M – $15.68M) = +$228.94M
Not bad!
6/ Accounting For Working Capital (WC) Requirements
To get Core Operating Growth Profile (COGP) we need the cash impact of WC requirements. That includes:
- Accounts Receivables (A/R)
- Accounts Payables (A/P)
- Inventory (I)
- Pre-paid exp.
- Deferred Revs (DR)
See below:
To get Core Operating Growth Profile (COGP) we need the cash impact of WC requirements. That includes:
- Accounts Receivables (A/R)
- Accounts Payables (A/P)
- Inventory (I)
- Pre-paid exp.
- Deferred Revs (DR)
See below:
7/ What WC Percentages Mean
- A/R: 73% of every revenue dollar went uncollected during the year.
- A/P: RBLX vendors financed 1.30% of every revenue dollar
- Deferred Revenue: 46% of every rev dollar RBLX collected upfront from its customers without recognizing it as revenue.
- A/R: 73% of every revenue dollar went uncollected during the year.
- A/P: RBLX vendors financed 1.30% of every revenue dollar
- Deferred Revenue: 46% of every rev dollar RBLX collected upfront from its customers without recognizing it as revenue.
8/ Cash Impact of WC From 2019 - 2020
Like GM & SG&A, we can see the cash impact of revenue growth on $RBLX WC requirements.
Interesting notes:
- A/R drained $110M more cash than the previous period
- RBLX had vendors finance ~$10M in revenue for the period (positive A/P).
Like GM & SG&A, we can see the cash impact of revenue growth on $RBLX WC requirements.
Interesting notes:
- A/R drained $110M more cash than the previous period
- RBLX had vendors finance ~$10M in revenue for the period (positive A/P).
9/ Cash Impact of Growth on GM, SG&A, and WC (2019-2020)
The changes in growth, margins, and operating efficiencies resulted in $83.03M of cash INFLOWS from its $415M in top-line growth.
Yet another example of how RBLX creates value from revenue growth.
Bring on COGP/FCFGP!
The changes in growth, margins, and operating efficiencies resulted in $83.03M of cash INFLOWS from its $415M in top-line growth.
Yet another example of how RBLX creates value from revenue growth.
Bring on COGP/FCFGP!
10/ Getting $RBLX COGP Figs
COGP/FCFGP are fwd-looking figures.
They report the $ of core operating cash flow/FCF that we can expect for any measured amount of growth in revs under the assumption that a firm’s operating cushion and operating working capital remain unchanged.
COGP/FCFGP are fwd-looking figures.
They report the $ of core operating cash flow/FCF that we can expect for any measured amount of growth in revs under the assumption that a firm’s operating cushion and operating working capital remain unchanged.
11/ What Our COGP Percentages Mean
Since COGP is forward-looking, we can assume that for every $1 in incremental revenue RBLX generates during 2021, ~80% of that should flow through to core operating cash flow.
That’s an astounding figure.
Since COGP is forward-looking, we can assume that for every $1 in incremental revenue RBLX generates during 2021, ~80% of that should flow through to core operating cash flow.
That’s an astounding figure.
12/ Calculating $RBLX FCFGP Figs
From here, we get FCFGP by subtracting CAPEX and taxes as a percentage of revenue.
The company’s FCFGP increased 16% since 2018 thanks to an 8% increase in COGP and an 8% decrease in CAPEX spend.
From here, we get FCFGP by subtracting CAPEX and taxes as a percentage of revenue.
The company’s FCFGP increased 16% since 2018 thanks to an 8% increase in COGP and an 8% decrease in CAPEX spend.
13/ Industry Comparables Analysis
We compared $RBLX COGP/FCFGP figures with three companies:
- Take-Two Interactive $TTWO
- Electronic Arts $EA
- Unity Software $U
Here were our results:
We compared $RBLX COGP/FCFGP figures with three companies:
- Take-Two Interactive $TTWO
- Electronic Arts $EA
- Unity Software $U
Here were our results:
14/ What We Learned From $RBLX Peer Comparison
Notice how much RBLX spends in CAPEX as a % of revenue compared to its peers.
Granted, $TTWO and $EA are more mature businesses. So we’re not expecting massive CAPEX expense.
But even $U is a younger, faster-growing company.
Notice how much RBLX spends in CAPEX as a % of revenue compared to its peers.
Granted, $TTWO and $EA are more mature businesses. So we’re not expecting massive CAPEX expense.
But even $U is a younger, faster-growing company.
15/ Concluding Thoughts
I hope you enjoyed this in-the-weeds analysis of $RBLX cash flows.
For more great $RBLX content, please read @mariodgabriele's post: readthegeneralist.com/briefing/roblo…
You can also read my Cash Flow Analysis pieces pt. 1/2 here: macro-ops.com/cash-flow-its-…
I hope you enjoyed this in-the-weeds analysis of $RBLX cash flows.
For more great $RBLX content, please read @mariodgabriele's post: readthegeneralist.com/briefing/roblo…
You can also read my Cash Flow Analysis pieces pt. 1/2 here: macro-ops.com/cash-flow-its-…
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