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No. of Recommendations: 5
What are RBLX's Gross Margins?

They list revenues and then cost and expenses together to come up with operating margin. I came up with a GM of 6.6% for the 3 qtrs ending 9/30/2020.

One of their biggest expenses is developer exchange fees. As I understand it, developers are third party developers who develop and create worlds, experiences or items on the RBLX platform. When a customer, using "Robuxs", buys something that a developer creates, the developer is credited with 70% of that purchase. The Company keeps the other 30%. Some developers use Robux to buy other stuff but most probably convert Robux to cash. The conversion is something like .0034 USD to Roblux. I'm not sure the economics of buying Robux and the conversion (i.e., how much a Robux cost to buy by a customer and if they are taking a conversion fee etc). In any case, the developer cost is pretty big - $209.228 million for the 3 Qtrs ending 9/30/20. Developer costs were 35.54% of total revenues.

3 months ending 9/30/2020 (millions):

Revenues: $588,675
Cost of Revenues: $549,636
(I used Costs of Revenues; Developer Charges; Infrastructure, Trust & Safety)
R&D, GSMA Costs: $107,199
Loss from Ops: -$206,234

Gross Margin is around 6.6% which is down from 24% for the 3 qtrs ending 2019. This sticks out as a bit troubling. Anther issues I noted on the S-1 that could cause issues evaluating performance was the amount of deferred revenues. Might be hard to compare YOY or sequential growth - albeit I didn't look too much at this issue.

Finally, I note that Buszucki, founder/CEO, is 57 and will hold 12% of class A and 70% of class B shares. He will effectively control the company. I usually like that, but don't know anything about him.

Agree/disagree with GM issues?

Mike
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