Roblox upgraded to ’BBB-’ by S&P on strong user growth

Investing.com -- S&P Global Ratings upgraded Roblox Corp. to ’BBB-’ from ’BB+’ on Wednesday, citing the gaming platform’s robust expansion and strong financial performance.

The rating agency noted that Roblox has significantly improved its user base, engagement, bookings, and free operating cash flow (FOCF). As of June 30, the company increased its gross bookings to $5.1 billion on a trailing-12-month basis, up 34% from the previous year.

This growth stems from Roblox’s expanding daily active users (DAUs), which reached 111.8 million, representing a 41% year-over-year increase. Hours engaged rose 58% to 27.4 billion, while monthly unique payers hit a record high of approximately 23.4 million in the second quarter, up 42% from the prior year.

The company’s accelerating bookings growth has supported strong operating leverage, contributing to an almost doubling of its FOCF to $942 million for the 12 months ended June 30, compared to $440 million the previous year.

S&P expects Roblox to continue improving its EBITDA margins and FOCF generation over the next several years as it further expands its user base and increases monetization. The rating agency forecasts gross bookings to reach $5.9 billion in 2025 and $7.3 billion in 2026, with FOCF generation projected at $1.2 billion in 2025 and $1.4 billion in 2026.

Roblox has successfully diversified its user base both geographically and by age cohort. The proportion of users over 13 years old increased to 64% of its total user base as of June 30, up from 50% in 2021. The company has also expanded globally, with Europe and North America now representing 41% of DAUs, down from 61% in 2021.

The gaming platform has maintained a strong balance sheet with a net cash position of $3.7 billion as of June 30, comprising $995 million in cash and cash equivalents, $1.6 billion in short-term investments, $2.1 billion in long-term investments, and $1 billion in debt.

S&P assigned a positive outlook to Roblox, reflecting expectations of continued strong user growth, engagement, and increasing monetization. The outlook also assumes the company will maintain its conservative financial policy and strong balance sheet with a net cash position.

The rating agency indicated it could raise Roblox’s rating further if the company continues to grow market share, users, and engagement while maintaining a conservative financial policy that keeps S&P-adjusted leverage below 1.5x on a sustained basis.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.