When Roblox (NYSE: RBLX) went public in March of last year, I was excited about it -- but I'm not excited anymore.
Prior to its IPO, the company's S-1 prospectus highlighted the powerful economics of operating a videogame platform on which a company's users were often also its game designers. Simply put, for every $1 in revenue Roblox was taking in, the company was able to produce $0.50 in real cash profit -- free cash flow. Those were incredible numbers. Microsoft doesn't even have a free cash flow margin that high -- nor, for that matter, does Apple.
Roblox maintained this impressive rate of cash production through at least its first quarter as a publicly traded company -- but then things began going downhill. In Q2 2021, only 37% of Roblox's revenues were converted into free cash flow. (Still great, but less so.) In Q3, the percentage dropped to 35%. And in Q4 -- disaster! -- it free cash margin fell toward 16%.
Source Fool.com