Roblox Morningstar Report

Morningstar Equity Analyst Report | Report as of 16 Sep 2023 04:20, UTC | Reporting Currency: USD | Trading Currency: USD
| Exchange: NEW YORK STOCK EXCHANGE, INC. Page 1 of 20
Roblox Corp Ordinary Shares - Class A RBLX QQQQQ 15 Sep 2023 21:18, UTC
Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Equity Style Box Uncertainty Capital Allocation ESG Risk Rating Assessment1
27.91 USD 60.00 USD 0.47 17.12 USD Bil Narrow 5 Mid Blend Very High Exemplary ;;;;;
15 Sep 2023 9 Aug 2023 21:26, UTC 14 Sep 2023 6 Sep 2023 05:00, UTC
Price vs. Fair Value
Fair Value: 60.00

9 Aug 2023 21:26, UTC
200
Last Close: 27.91
150 Over Valued
Under Valued
100
50
0
2018 2019 2020 2021 2022 YTD
— — — 1.03 0.44 0.47 Price/Fair Value
— — — — -72.41 -1.93 Total Return %
Morningstar Rating
Total Return % as of 15 Sep 2023. Last Close as of 15 Sep 2023. Fair Value as of 9 Aug 2023 21:26, UTC.
Contents
Analyst Note (9 Aug 2023) Roblox Earnings: Operational Spending Remains Elevated
Business Description
Business Strategy & Outlook (9 Aug 2023) Despite Growth Reacceleration
Bulls Say / Bears Say (9 Aug 2023)
Analyst Note Neil Macker, CFA, Senior Equity Analyst, 9 Aug 2023
Economic Moat (9 Aug 2023)
Fair Value and Profit Drivers (9 Aug 2023)
Roblox again reported mixed results as the second quarter, like the first, featured strong revenue growth
Risk and Uncertainty (9 Aug 2023) along with expanding operating losses due to elevated spending. Despite strong underlying metrics, the
Capital Allocation (9 Aug 2023) stock fell over 20% in midday trading Aug. 9 as we suspect investors expected larger cost cuts.
Analyst Notes Archive Management continues to project operating leverage improvement over the next few years as growth
Financials
continues. We are lowering our fair value estimate to $60 from $65 due to slightly slower margin
ESG Risk
expansion from higher investment in infrastructure/safety and R&D, including spending on
Appendix
Research Methodology for Valuing Companies incorporating AI into development tools.
Important Disclosure
Bookings expanded by 22% versus last year to $781 million as the platform continues to grow its
The conduct of Morningstar’s analysts is governed by Code of Ethics/Code of
Conduct Policy, Personal Security Trading Policy (or an equivalent of), and customer base. Quarterly bookings were larger than in all of 2019 ($694 million) for the fourth quarter in
Investment Research Policy. For information regarding conflicts of interest, please
visit: http://global.morningstar.com/equitydisclosures. a row. Underlying metrics improved across the board—global daily active users, or DAUs, reached 65.5
The primary analyst covering this company does not own its stock. million, up from 52.2 million a year ago. Roblox’s reach with older gamers continues to grow, as 56.1%
The ESG Risk Rating Assessment is a representation of Sustainalytics’ ESG Risk
1 of users were over the age of 13 versus 53.0% a year ago and 55.8% last quarter. Engagement also
Rating.
expanded by 24% to just under 14 billion hours of use, with hours among those over 13 years old up
32%.
Adjusted EBITDA margin dropped to 4.9% in the quarter from 8.5% a year ago due to the ongoing
investment in headcount, safety spending, and increased R&D investment. Developer exchange fees fell
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Morningstar Equity Analyst Report | Report as of 16 Sep 2023 04:20, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 2 of 20
Sector Industry
Electronic Gaming & to 21.2% of bookings from 22.4% a year ago, and management projects this expense will continue to
i Communication Services
Multimedia
expand more slowly than revenue. Infrastructure and safety spending jumped to 28.8% of bookings
Business Description
versus 24.7% last year. Management continues to expect that bookings will start to outpace the growth
Roblox operates an online video game platform that lets
in infrastructure and safety spending in the third quarter and will surpass compensation expenses
young gamers create, develop, and monetize games (or
“experiences”) for other players. The firm effectively growth in the first quarter of 2024, signaling both the ending of the recent investment phase and the
offers its developers a hybrid of a game engine, return to operating leverage within the business model.
publishing platform, online hosting and services,
marketplace with payment processing, and social Business Strategy & Outlook Neil Macker, CFA, Senior Equity Analyst, 9 Aug 2023
network. The platform is a closed garden that Roblox Roblox operates an online video game platform that lets gamers create, develop, and monetize games
controls, earning revenue in multiple places while
for other players. The firm offers its developers a hybrid of a game engine, publishing platform, online
benefiting from outsourced game development. Unlike
hosting and services, marketplace with payment processing, and social network. Unlike a full-priced
traditional video game publishers, Roblox is more
focused on the creation of new tools and monetization AAA title, there is no entry cost to try out Roblox or the vast majority of user-developed games. Thus, to
techniques for its developers then creating new games drive booking growth and keep the Roblox model churning along, the new user must purchase and
or franchises. spend Robux, the platform’s tender.
Roblox heavily benefited from the stay-at-home restrictions at the start of pandemic with very
impressive top-line growth, even more so than its video game peers. It expanded its user base from 19.1
million daily active users, or DAUs, in fourth-quarter 2019 to 65 million in the second quarter of 2023.
We project that the combination of popular games and large userbase will attract more users.
Additionally, we expect that the firm will be able to further increase its penetration in non-U.S. markets.
As a result, we expect that the growth will be slower than during the pandemic but that DAUs will
exceed 108 million in 2027.
The platform was also successful in driving quarterly bookings per DAU up from $12.37 to $15.40 by the
second quarter of 2021. While Roblox’s DAUs grew faster outside of the U.S. during the pandemic, the
firm is still leveraged to its domestic market as it generated 68% of 2020 bookings--despite only
representing 33% of DAU in 2020. We expect this gap to shrink over the next decade as Roblox
improves its penetration in post-industrial countries in Europe and East Asia. However, growth in.
bookings per DAU has been and will continue to be slowed down by Roblox's further expansion into
emerging markets where many young users will likely have even less access to disposable income.
Longer-term, we assume the firm continues to invest in adding new features to help keep both
developers and teenage gamers engaged with the Roblox platform While an all-encompassing
metaverse may be very far from realization, we think that Roblox's steps toward a metaverse will help
the platform hold on to users and developers as they age.
Bulls Say Neil Macker, CFA, Senior Equity Analyst, 9 Aug 2023
u Roblox is uniquely positioned to take advantage of the trend toward increased screen time among
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Competitors
Roblox Corp Ordinary Shares - Class A ThredUp Inc Ordinary Shares - Class A
Huuuge Inc Ordinary Shares HUG Skillz Inc Ordinary Shares - Class A SKLZ
RBLX TDUP
Fair Value
60.00 Last Close Last Close
Uncertainty : Very High 6.33 3.20
Last Close
27.91
Economic Moat Narrow — — —

Currency USD — USD USD
Fair Value 60.00 9 Aug 2023 21:26, UTC —— —— ——
1-Star Price 105.00 — — —
5-Star Price 30.00 — — —
Significantly 15 Sep —— —— ——
Assessment
Undervalued 2023
Morningstar Rating QQQQQ15 Sep 2023 21:18, UTC —— —— ——
Analyst Neil Macker, Senior Equity Analyst — — —
Capital Allocation Exemplary — — —
Price/Fair Value 0.47 — — —
Price/Sales 6.94 1.59 0.69 1.09
Price/Book 102.16 1.31 0.54 2.80
Price/Earning — 8.05 — —
Dividend Yield — — — —
Market Cap 17.12 Bil 1.65 Bil 136.14 Mil 345.94 Mil
52-Week Range 25.32—47.67 20.56—29.90 6.32—25.40 0.73—4.39
Investment Style Mid Core Small Core Small Value Small Value
younger consumers.
u Roblox’s business model allows the firm to self-finance while it focuses on expanding its subscriber
base and monetization.
u Roblox will benefit as its user base grows older and has more disposable income.
Bears Say Neil Macker, CFA, Senior Equity Analyst, 9 Aug 2023
u Roblox’s tremendous subscriber growth was highly stimulated by the pandemic. A return to less
restrictive lockdown guidelines will cause a major decline in user growth and monetization.
u Roblox’s model will invite regulatory scrutiny and force the firm to spend more money on moderation,
limiting margin expansion.

u Roblox’s competitors have more development resources and offer games with better graphics and
deeper gameplay. As Roblox users grow up, they will leave the Roblox metaverse for other gaming
experiences.
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Economic Moat Neil Macker, CFA, Senior Equity Analyst, 9 Aug 2023
We assign Roblox a narrow moat rating derived from the network effect. The Roblox platform consists of
three separate pieces that work together. The first is the Roblox Client, which players use on PCs,
Android, iOS, and Xbox One to play games, connect and chat with friends, and make purchases. Roblox
Studio, the second piece, is the development environment for users to create, publish, and operate their
games. The final piece is Roblox Cloud, the infrastructure for both online games and development.
Roblox doesn't generates revenue from the sale of the Roblox client, games, or server space but via in-
game transactions, avatar cosmetics, private servers, subscriptions, premium development plugins, and
advertising for developers. All of these transactions are done in Robux, the Roblox currency that can be
purchased at multiple price points with an effective exchange rate in the U.S. from $0.0125 per Robux
(400 Robux for $5) to $0.01 per Robux (10,000 Robux for $100). Users can subscribe to monthly premium
plans to lower the exchange rate to $0.0091. Roughly 90% of Robux are spent within three days of
being purchased but the revenue for durable virtual goods is recognized over the life of the player
(assumed to be 23 months under GAAP accounting). This difference accounts for the divergence
between GAAP revenue versus bookings (the actual amount of Robux purchased in a quarter or year),
which can be particularly glaring during high growth periods like 2020 when bookings were over 100%
above GAAP revenue.
Robux spent in games is split among three groups--app stores and payment processors (24%),
developers (27%--25% based on transactions and 2% based on time spent in game by Premium
subscribers), and Roblox (49%, further broken down to 14% for hosting and support, 9% for platform
investment, and 26% as Roblox's share). Developers receive payment in Robux, not local government
currency. The developer can either use the Robux to buy development plugins, bid for advertising for
their game within other games, or use the Robux to buy other games. If a developer in the U.S. wants to
convert her Robux into dollars, the exchange rate back into fiat currency is $0.0035 per Robux but a
developer must exchange at least 100,000 Robux ($350) to qualify. This relatively high minimum and
unfavorable exchange rate mean that the vast majority of developers do not cash out their Robux.
In 2020, Roblox paid out $329 million to 4,300 developers, up sharply from $112 million in payouts to
2,600 developers the year before. However, bookings for Roblox in 2020 hit $1.88 billion, up from $694
million in 2019, and there were roughly 1.27 million developers active in 2020. While most developers
created games that generated limited playtime, over 18,200 games were played for more than 10,000
hours in 2020 but only 1,287 developers made over $10,000 in developer exchange fees, with only 305
over $100,000.
Roblox's network effect moat source derives from its unique business model. By providing a game
engine, tools, and servers along with monetization opportunities, Roblox offers a tempting starting point
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for young gamers who are interested in creating games with a relatively simple to use game engine
along with a robust set of tools and tutorials. The library of user-developed games attracts more young
players who spend money in-game. The growing user base along with the ability to monetize games
entices more developers from not only the current player base but also experienced developers and
brands/celebrities looking to market to younger users. Examples of the brands and entertainers using
the Roblox metaverse include Netflix, which launched games around its Stranger Things franchise, and
Lil Nas X, who hosted three concerts in November 2020 on the platform. Additionally, the social aspect
of the Roblox Client helps to reinforce the networks as the relatively young players entice their friends to
join Roblox and play the games together. Players can use Robux to create a private server to ensure that
that their friends and themselves can play an instance of a specific game.
Like its peers in the video game industry, the pandemic accelerated both Roblox's growth and the
strength of its network effect. The company had 10.3 million daily average users in the first quarter of
2018 that grew to 19.1 million in the fourth quarter of 2019. Lockdown restrictions along with younger
users needing new outlets to connect with friends helped to drive DAUs to 43 million in the second
quarter of 2021. While the expansion of the user base is likely somewhat of a pull forward in demand,
we do think it demonstrates how the network effect could continue to drive long-term growth.
The firm also benefited on the booking side as average quarterly bookings per DAU jumped from $11.62
in the first quarter of 2018 to $15.40 in the second quarter of 2021, with a peak of $17.31 in the fourth
quarter of 2020. The ability to grow bookings per DAU while massively expanding the user base in a
highly competitive video game landscape reveals the strength of the network effect moat source.
Fair Value and Profit Drivers Neil Macker, CFA, Senior Equity Analyst, 9 Aug 2023
Our $60 fair value estimate is generated using non-GAAP revenue (bookings) as Roblox is largely self-
funded thanks to deferred revenue as customers provide cost-free capital to invest back into the
business. Despite not posting positive net income, the firm reported roughly slightly positive free cash
flow in 2018 and 2019 and generated very strong free cash conversion in 2020, 2021, and 2022. Thus,
we believe that bookings provide a better projection of the Roblox business model and its ability to
generate cash flows.
We project that bookings will grow 14% annually over our 10-year explicit forecast. The growth in
bookings will be driven by continued expansion of the user base, with 14% annual growth increasing
daily average users to 151 million in 2032. This growth will be propelled by the firm’s network effect, as
the current user base continues to attract more developers who create new games that attract more
users. The social aspects of playing with friends will also help to expand the base. We also expect
continued growth in monetization, albeit in lumpy manner. We project that average bookings per DAU
will drop over the next three years as the new user mix shifts towards emerging markets. Afterward, we
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expect growth to be driven by a slight increase in the age profile of users and by more diverse and
complex games. We expect growth in the latter half of our forecast to also come from advertising/
branding as the growing user base will attract sponsors targeting young adults.
As the company gains scale, we expect leverage to occur on some but not all of its costs. On gross
margins, we project a very slight improvement over the next 10 years to 77.9% gross margin in 2032
from 77.4% in 2021 as the user mix shifts toward mobile and console apps, which have higher payment
processing take rates. We think the shift will be offset by improved rates from the app store as Roblox
gains scale and increasing pressure on the app stores’ 30% take rate.
Roblox expects that developer exchange fees--the money paid out to developers after they exchange
their Robux for legal tender--will increase in both absolute dollars and as a percentage of bookings
toward a long-term company-defined target of 25%. However, we expect developer exchange fees as a
percentage of bookings fall just short, hitting 24% in 2032 as we think the firm will need to change its
payout ratio to hit goal.
We do project that the firm will gain considerable leverage on its other costs, including R&D and
marketing. As a result, operating margin will expand from 5% in 2021 to 24% in 2032.
Risk and Uncertainty Neil Macker, CFA, Senior Equity Analyst, 9 Aug 2023
Roblox operates in a highly competitive marketplace against firms with more financial and development
resources. While Roblox’s platform is a unique offering, the firm still competes with video game
publishers both to attract new users and to hold on to their current players as they grow older. A key
driver to the firm’s long-term growth will be keeping younger users as they age into and out of their
teen years, as over two-thirds of users are under the age of 17 and around 40% are under 13 years old.
The young user base could also bring increasing regulatory enquiries as parents and authorities have
historically been very concerned and vocal about games with very young users, particularly ones that
allow chat, user-created content, and randomized in-game purchases. This additional scrutiny could
force the firm to invest further in both algorithmic and human moderation, limiting the margin
expansion.
Further moderation costs may be required to police the user content that infringes on IP from
multinational companies like Disney, WarnerMedia, and others. Many popular games on Roblox use
copyrights from Marvel, DC Comics, Star Wars, and other major franchises without seeming to be
licensed. If the firm would like to work with these IP holders to create unique games or spaces, Roblox
will likely need to crack down on these games, which could cause players to leave the platform.
A potential environmental, social, and governance, or ESG, risk for the firm is the use of Robux and the
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business model of selling Robux for $0.01 and buying them back at $0.0035. As pointed out by the
YouTube channel People Make Video Games, the practice is akin to the company paying pseudo
employees in scrip, similar to the practice used by mining and lumber companies in the U.S. that was
eventually banned by Congress. The age of the developers and the amount of time spent on games
versus the actual payouts is also coming under scrutiny.
Capital Allocation Neil Macker, CFA, Senior Equity Analyst, 9 Aug 2023
We assign Roblox an Exemplary capital allocation rating. Our rating is driven primarily by the likelihood
that Roblox adds value through investments but also considers the shape of its balance sheet and
shareholder distributions.
We view the balance sheet as sound. The company has $0.5 billion of cash and equivalents and $1
billion in debt as of June 2023. The firm generated $411 million in free cash flow in 2020 and $558
million in 2021 with a loss of $58 million in 2022. Given the cash position and the cash flow generation
over the last three years, we believe that Roblox can issue a significant amount of debt in order to fund
any potential acquisitions, though we don’t believe management is currently looking to make any large-
scale purchases.
In terms of investments, we believe that Roblox will remain vigilant in the marketplace in the near
future. The acquisitions will likely be on the smaller end of the spectrum as the firm fills out its
development capabilities. In August 2021, Roblox purchased Guilded, a company that builds platforms
to connect online gaming communities for $90 million. The firm also bought Bash Video in August in an
acqui-hire transaction for Bash’s six employees. We expect similar-size deals to be the norm for Roblox
moving forward.
Roblox does not pay a dividend, and we don’t expect one to be instituted in the near future. The
company only completed its IPO in March 2021, so we think that management will allocate the free
cash flow toward investing in the business. As a result, we also don’t expect any repurchases in the
near future and believe that investing in the business is likely to offer the highest return for Roblox and
its shareholders.
Analyst Notes Archive
Roblox Earnings: Strong Metrics Drive Bookings Growth; Operating Leverage Improvement on the
Horizon Neil Macker, CFA, Senior Equity Analyst, 11 May 2023
Roblox posted a mixed first quarter with strong revenue growth but expanding operating losses.
Underlying metrics remained strong with improvement across the board—global daily active users, or
DAUs, reached 61.1 million, up from 58.8 million last quarter and 54.1 million a year ago. Roblox’s reach
with older gamers continues to expand, as 55.8% of users were over the age of 13 versus 52.3% a year
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ago. The firm also rebounded to positive free cash flow in the quarter after three straight quarters of
losses. We maintain our $65 fair value estimate.
Bookings jumped 23% versus last year to $774 million as the platform continues to retain and expand its
pandemic-swollen customer base. Quarterly bookings were larger than in all of 2019 ($694 million) for
the third quarter in a row. Engagement also expanded by 23% to over 23.8 billion hours of use. Average
booking per DAU for the period was flat year over year at $11.70, well ahead of our estimated 10%
decline. This marks the first quarter without a year-over-year decline since second-quarter 2021. We still
expect average booking per DAU to drop, albeit slowly, as the new user mix shifts away from the U.S.
and Western Europe toward more emerging markets.
Adjusted EBTIDA margin dropped to 6.0% in the quarter from 10.8% a year ago due to the ongoing
investment in headcount, safety spending, and increased infrastructure investment. Developer
exchange fees increased slightly to 23.6% of bookings from 23.3% a year ago. Management expects the
expense category will continue to expand slowly over the near to medium term. Infrastructure and
safety spending jumped to 27.6% of bookings versus 22.5% last year. Management now projects that
bookings will start to outpace the growth in infrastructure and safety spending in the third quarter and
will surpass compensation expenses growth in the first quarter of 2024, signaling both the ending of the
recent investment phase and the return to operating leverage within the business model.
Roblox: Shares Drop Sharply on Mixed March Key Metrics Neil Macker, CFA, Senior Equity Analyst,
17 Apr 2023
In its March 2023 key metric release, Roblox announced that daily active users, or DAUs, increased 26%
year over year to 66.2 million, bookings grew 25%-29% on a constant currency basis, and bookings per
daily active user changed by a range of negative 1% to 3% after adjusting for the strong dollar. Roblox
shares were down about 12% in early trading on April 17 as we believe that the market overreacted to
the user base slightly declining sequentially from 67.3 million DAUs in February. The long-term picture
for the firm remains impressive as Roblox had only 23.6 million DAUs in the first quarter of 2020. We are
maintaining our $65 fair value estimate.
The continued growth in engagement, up 21% to 4.7 billion hours in March, remains impressive as
engagement for all of the first quarter of 2020 was only 4.9 billion hours. This level of engagement
implies each user was on the Roblox platform for 71 hours in March, or over two hours and 20 minutes
per day. The level of engagement demonstrates that Roblox’s promotion of games with longer
engagement appears to be paying off and should improve retention of players as they age.
While the key metrics help provide an interim picture of how the firm is doing, the lack of monthly data
around the age of the user base, regional metrics, and other data points make the interim picture less
useful as Roblox expands. Management apparently agrees with our viewpoint, as this release will be
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the last one from Roblox.
Roblox Posts Strong Q4; Strong Underlying Metrics Drive Impressive Booking Growth Neil Macker,
CFA, Senior Equity Analyst, 16 Feb 2023
Roblox ended a challenging 2022 on a strong note as the firm once again posted strong underlying
metrics. Global daily active users came in at 58.8 million, flat versus last quarter and up from 49.5 million
a year ago. Roblox continued to improve its reach with older gamers, as 55.1% of users were over the
age of 13 versus 51.7% a year ago. On the negative side, the firm posted a slight free cash flow loss for
2022, its first full-year loss since the firm started to disclose financial. The loss was largely due to much
higher capital spending on infrastructure to support the platform’s user growth both in the U.S. and
aboard. While management projects a significant 25%-35% drop in infrastructure spending in 2023, we
still project that capital spending will remain elevated versus pre-2022 levels. We are maintaining our
$65 fair value estimate.
Bookings improved 17% versus last year to $899 million as the platform is expanding on its pandemic-
swollen customer base. Quarterly bookings were larger than in all of 2019 ($694 million) for the second
quarter in row. Engagement also jumped to over 12.8 billion hours of use, up 18% versus a year ago.
This level of engagement implies each user was on the Roblox platform for over 217 hours for the
quarter (2.4 hours per day) versus 202 hours (2.2 hours per day) a year ago.
Profitability continued to decline but at much lower pace than the third quarter, with the adjusted
EBITDA margin dropping to 20.3% in the quarter from 21.8% last year due to the investment in
headcount, spending on safety measures, and increased infrastructure spending. Developer exchange
fees fell slightly to 20.3% of bookings from 20.7% a year ago. Infrastructure and safety spending jumped
to 27.6% of bookings versus 22.5% last year. We now project that Roblox will spend a similar level of
bookings on infrastructure and safety in 2023 as in 2022 (24%) to cope with user growth and higher
voice chat adoption.
Strong December Key Metrics Lift Roblox Shares; Maintaining $65 FVE Neil Macker, CFA, Senior
Equity Analyst, 17 Jan 2023
In its December 2022 key metric release, Roblox announced that daily active users increased 18% year
over year to 61.5 million, bookings grew 20%-22% on a constant currency basis, and average bookings
per daily active user, or ABPDAU, improved 1%-3% after adjusting for the strong dollar. Roblox shares
were up over 20% in morning trading as we believe that the market reacted to the strong user and
bookings growth. Despite the gain in ABPDAU, investors should expect the metric to decrease, even in
constant currency, as the platform continues to add users outside the U.S. We are maintaining our $65
fair value estimate.
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Engagement continued to expand, up 21% to 4.7 billion hours. This level of engagement implies each
user was on the Roblox platform for over 76 hours in December or almost two and a half hours per day.
While not maybe quite at the hardest of hardcore gamer levels, this amount of engagement does show
that Roblox's attempts to promote games with longer engagement are paying off and could help with
retaining users as they age.
While the key metrics help to give an interim picture of how the firm is doing, the lack of monthly data
around the age of the user base, regional metrics, and other datapoints make the interim picture less
useful as Roblox expands. Management seems to agree with our viewpoint and will be ending the
monthly releases after March as we predicted in our note about the November key metrics release.
Weak November Average Revenue User Growth Hammers Roblox Shares; Maintaining $65 FVE Neil
Macker, CFA, Senior Equity Analyst, 15 Dec 2022
In its November 2022 key metric release, Roblox announced that daily active users, or DAU, increased
15% year over year to 56.7 million, bookings grew 10%-12% on a constant currency basis, and bookings
per daily active user, or ABPDAU, fell 3%-5% after adjusting for the strong dollar. Roblox shares were
down over 17% in morning trading as we believe that the market overreacted to the non-adjusted
ABPDAU decline of 7%-9%. As the platform continues to add users outside the U.S., investors should
expect ABPDAU to decrease even in constant currency, with the strong dollar exacerbating the decline.
We are maintaining our $65 fair value estimate.
We’ve projected that ABPDAU will fall in the fourth quarter, but the November DAU growth came in
slightly lower than our expectation for the quarter. DAU actually dropped sequentially from October and
came in below the third-quarter level. Despite the slight drop, the current level is well ahead of the first
half of the year and should get a boost from the holiday season and December school break in a number
of markets. Engagement continued to expand, up 10% to 3.9 billion hours, as Roblox is attempting to
promote games with longer engagement. While the key metrics help to give an interim picture of how
the firm is doing, the lack of monthly data around the age of the user base, regional metrics, and other
datapoints make the interim picture less useful as Roblox expands. Given the volatile response to recent
monthly key metrics releases, we would not be surprised if management decided to eschew the practice
and just release quarterly results.
Roblox Posts Mixed Q3; Widening Losses Outshine Strong Underlying Metric Growth Neil Macker,
CFA, Senior Equity Analyst, 10 Nov 2022
Roblox reported mixed third-quarter results as users grew sequentially and bookings improved year over
year, but the operating loss widened significantly versus a year ago. Underlying metrics were relatively
strong with global daily active users coming in at 58.8 million, up from 52.2 million last quarter and 47.3
million a year ago. The reach with older gamers continued to improve as 54.2% of users were over the
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age of 13 versus 50.3% a year ago. On the negative side management disclosed that the investments in
development and infrastructure and safety will continue into 2023 with adjusted EBITDA expected to
remain below 10% of bookings.
We are lowering our fair value estimate to $65 from $75 to account for slower margin expansion and
currency headwinds. Shares are trading at a significant discount to our updated fair value, providing
some margin of safety, but we expect the stock to remain highly volatile.
Profitability continued to fall short of our projections, with the adjusted EBTIDA margin dropping to 7.3%
in the quarter from 27.1% last year due to the investment in headcount, spending on safety measures,
and increased developer payouts. While we had projected the pace of hiring to slow, management
expects to continue hiring through 2023, bucking the overall tech trend toward large-scale layoffs.
Developer exchange fees increased slightly to 21.6% of bookings, up from 20.4% a year ago.
Infrastructure and safety spending jumped to 27.2% of bookings versus 18.4% last year. While we
previously thought this spending would drop sharply next year, the increased investment in both
headcount and tools are a natural outcome of not only user growth, but the addition of voice chat.
Bookings grew 10% versus last year to $702 million as Roblox continues to retain and expand on its
pandemic-influenced gains. Bookings during the quarter were larger than in all of 2019 ($694 million).
Engagement also improved to over 13.4 billion hours of use, up 20% versus a year ago. K
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Competitors Price vs. Fair Value
Huuuge Inc Ordinary Shares HUG
Last Close: —
40 Fair Value: —
—
30 Over Valued
Under Valued
20
10
0
2018 2019 2020 2021 2022 YTD
— — — — — — Price/Fair Value
— — — — -13.15 17.89 Total Return %
Morningstar Rating
No data available
Total Return % as of 15 Sep 2023. Last Close as of —. Fair Value as of —.
Skillz Inc Ordinary Shares - Class A SKLZ
Last Close: 6.33

800 Fair Value: —
—
600 Over Valued

Under Valued
400
200
0
2018 2019 2020 2021 2022 YTD
— — — -62.80 -93.19 -37.51 Total Return %
Morningstar Rating
No data available
Total Return % as of 15 Sep 2023. Last Close as of 15 Sep 2023. Fair Value as of —.
ß
ThredUp Inc Ordinary Shares - Class A TDUP
Last Close: 3.20

40 Fair Value: —
—
30 Over Valued
Under Valued
20
10
0
2018 2019 2020 2021 2022 YTD
— — — — -89.73 144.27 Total Return %
Morningstar Rating
No data available
Total Return % as of 15 Sep 2023. Last Close as of 15 Sep 2023. Fair Value as of —.
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Morningstar Historical Summary

Financials as of 30 Jun 2023
Fiscal Year, ends 31 Dec 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD TTM
Revenue (USD K) — — — — — 324,956 508,393 923,885 1,919,181 2,225,052 1,336,110 2,432,821
Revenue Growth % — — — — — — 56.5 81.7 107 15.9 18.4 10.3
EBITDA (USD K) — — — — — -75,611 -43,441 -220,539 -421,397 -761,864 -435,907 -929,776
EBITDA Margin % — — — — — -23.3 -8.5 -23.9 -22.0 -34.2 -32.6 -38.2
Operating Income (USD K) — — — — — -87,552 -76,440 -266,137 -495,098 -923,784 -603,836 -1,205,742
Operating Margin % — — — — — -26.9 -15.0 -28.8 -25.8 -41.5 -45.2 -49.6
Net Income (USD K) — — — — — -88,075 -70,968 -253,254 -491,651 -924,366 -551,090 -1,138,814
Net Margin % — — — — — -27.1 -14.0 -27.4 -25.6 -41.5 -41.3 -46.8
Diluted Shares Outstanding (K) — — — — — 526,227 526,227 534,820 505,858 595,559 609,680 604,773
Diluted Earnings Per Share (USD) — — — — — -0.17 -0.13 -0.47 -0.97 -1.55 -0.90 -1.88
Dividends Per Share (USD) — — — — — — — — — — — —
Valuation as of 31 Aug 2023

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Recent Qtr TTM
Price/Sales — — — — — — — — 36.0 7.6 10.3 7.0
Price/Earnings — — — — — — — — -147.1 -21.7 -23.4 -15.0
Price/Cash Flow — — — — — — — — 83.3 45.2 62.5 44.1
Dividend Yield % — — — — — — — — — — — —
Price/Book — — — — — — — — 102.0 40.7 100.0 103.1
EV/EBITDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.1 0.0 0.0 0.0
Operating Performance / Profitability as of 30 Jun 2023
Fiscal Year, ends 31 Dec 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD TTM
ROA % — — — — — -16.2 -10.9 -19.4 -15.3 -18.6 -10.0 -21.7
ROE % — — — — — — — — -295 -207 -232.3 -318.3
ROIC % — — — — — — — — -60.0 -50.2 -31.7 -60.3
Asset Turnover — — — — — 0.6 0.8 0.7 0.6 0.4 0.2 0.5
Financial Leverage
Fiscal Year, ends 31 Dec 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Recent Qtr TTM
Debt/Capital % — — — — — — — — 66.9 82.9 90.7 —
Equity/Assets % — — — — — — — — 12.8 5.7 3.0 —
Total Debt/EBITDA — — — — — — — — -2.9 -2.0 -4.0 —
EBITDA/Interest Expense Infinite Infinite Infinite Infinite Infinite — — — -62.1 -19.7 -22.5 -24.0
Morningstar Analyst Historical/Forecast Summary as of 09 Aug 2023

Financials Estimates Forward Valuation Estimates
2021 2022 2023 2024 2025
Fiscal Year, ends 12-31-2022 2021 2022 2023 2024 2025
Price/Sales 22.2 6.0 5.3 4.9 4.5
Revenue (USD Mil) 2,726 2,872 3,255 3,525 3,830 Price/Earnings 322.4 -39.5 -19.4 -31.0 -48.1
Revenue Growth % 44.8 5.4 13.3 8.3 8.6 Price/Cash Flow 106.8 -300.7 -65.7 -133.6 400.9
EBITDA (USD Mil) 674 356 -7 119 307 Dividend Yield % — — — — —
EBITDA Margin % 24.7 12.4 -0.2 3.4 8.0 Price/Book 88.9 47.4 -32.5 -15.9 -11.9
EV/EBITDA 87.2 43.6 -2,318.6 141.1 54.8
Operating Income (USD Mil) 139 -378 -836 -508 -316
Operating Margin % 5.1 -13.2 -25.7 -14.4 -8.3
Net Income (USD Mil) 159 -365 -873 -545 -354
Net Margin % 5.9 -12.7 -26.8 -15.5 -9.2
Diluted Shares Outstanding (Mil) 506 506 605 606 606
Diluted Earnings Per Share(USD) 0.32 -0.72 -1.44 -0.90 -0.58
Dividends Per Share(USD) 0.00 0.00 0.00 0.00 0.00
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ESG Risk Rating Breakdown
Exposure Subject Subindustry (26.0) u Exposure represents a company’s vulnerability to ESG

Company Exposure1 27.3 risks driven by their business model
27.3
u Exposure is assessed at the Subindustry level and then
– Manageable Risk 25.6 Low
2 0 55+ specified at the company level
Unmanageable Risk 1.7
Low Medium High u Scoring ranges from 0-55+ with categories of low, me-
dium, and high-risk exposure
Management
u Management measures a company’s ability to manage
Manageable Risk 25.6 ESG risks through its commitments and actions
36.4%
– Managed Risk3 9.3 Average
u Management assesses a company's efficiency on ESG
Management Gap4 16.3 100 0 programs, practices, and policies

Strong Average Weak u Management score ranges from 0-100% showing how
Overall Unmanaged Risk 18.0 much manageable risk a company is managing
ESG Risk Rating ESG Risk Rating Assessment5

17.97
Low
Negligible Low Medium High Severe ESG Risk Rating is of Sep 06, 2023. Highest Controversy Level is as of Sep 08,
2023. Sustainalytics Subindustry: Entertainment Software. Sustainalytics
ESG Risk Ratings measure the degree to which a company’s value is impacted by environmental, social, and governance provides Morningstar with company ESG ratings and metrics on a monthly
risks, by evaluating the company’s ability to manage the ESG risks it faces. basis and as such, the ratings in Morningstar may not necessarily reflect
current Sustainalytics’ scores for the company. For the most up to date rating
1. A company's Exposure to material ESG issues 2. Unmanageable Risk refers to risks that are inherent to a particular business model that cannot be managed by and more information, please visit: sustainalytics.com/esg-ratings/.
programs or initiatives 3. Managed Risk = Manageable Risk multiplied by a Management score of 36.4% 4. Management Gap assesses risks that are not
managed, but are considered manageable 5. ESG Risk Rating Assessment = Overall Unmanaged Risk = Management Gap plus Unmanageable Risk
Peer Analysis 06 Sep 2023 Peers are selected from the company's Sustainalytics-defined Subindustry and are displayed based on the closest market cap values
Company Name Exposure Management ESG Risk Rating
Roblox Corp 27.3 | Low 0 55+ 36.4 | Average 100 0 18.0 | Low 0 40+
Skillz Inc 26.9 | Low 0 55+ 31.5 | Average 100 0 18.9 | Low 0 40+
Huuuge Inc 20.0 | Low 0 55+ 26.2 | Average 100 0 15.1 | Low 0 40+
ThredUp Inc 35.4 | Medium 0 55+ 31.0 | Average 100 0 25.1 | Medium 0 40+
— —|— 0 55+ —|— 100 0 —|— 0 40+
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Appendix
Historical Morningstar Rating
Roblox Corp Ordinary Shares - Class A RBLX 15 Sep 2023 21:18, UTC
Dec 2023 Nov 2023 Oct 2023 Sep 2023 Aug 2023 Jul 2023 Jun 2023 May 2023 Apr 2023 Mar 2023 Feb 2023 Jan 2023
- - - QQQQQ QQQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ
QQQQQ QQQQQ QQQQ QQQQ QQQQ QQQQ QQQQQ QQQQQ QQQQQ QQQQQ QQQQQ QQQQ
QQQ QQ - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - - - -
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Research Methodology for Valuing Companies
Overview turns on invested capital (or ROIC) over and above our es- rive our annual free cash flow forecast.
At the heart of our valuation system is a detailed projec- timate of a firm’s cost of capital, or weighted average
Stage II: Fade
tion of a company’s future cash flows, resulting from our cost of capital (or WACC). Without a moat, profits are
The second stage of our model is the period it will take
analysts’ research. Analysts create custom industry and more susceptible to competition. We have identified five
the company’s return on new invested capital—the re-
company assumptions to feed income statement, balance sources of economic moats: intangible assets, switching
turn on capital of the next dollar invested (“RONIC”)—to
sheet, and capital investment assumptions into our glob- costs, network effect, cost advantage, and efficient scale.
decline (or rise) to its cost of capital. During the Stage II
ally standardized, proprietary discounted cash flow, or
Companies with a narrow moat are those we believe are period, we use a formula to approximate cash flows in
DCF, modeling templates. We use scenario analysis, inde-
more likely than not to achieve normalized excess returns lieu of explicitly modeling the income statement, balance
pth competitive advantage analysis, and a variety of other
for at least the next 10 years. Wide-moat companies are sheet, and cash flow statement as we do in Stage I. The
analytical tools to augment this process. Moreover, we
those in which we have very high confidence that excess length of the second stage depends on the strength of
think analyzing valuation through discounted cash flows
returns will remain for 10 years, with excess returns more the company’s economic moat. We forecast this period to
presents a better lens for viewing cyclical companies,
likely than not to remain for at least 20 years. The longer last anywhere from one year (for companies with no eco-
high-growth firms, businesses with finite lives (e.g.,
a firm generates economic profits, the higher its intrinsic nomic moat) to 10–15 years or more (for wide-moat com-
mines), or companies expected to generate negative
value. We believe low-quality, no-moat companies will panies). During this period, cash flows are forecast using
earnings over the next few years. That said, we don’t dis-
see their normalized returns gravitate toward the firm’s four assumptions: an average growth rate for EBI over the
miss multiples altogether but rather use them as support-
cost of capital more quickly than companies with moats. period, a normalized investment rate, average return on
ing cross-checks for our DCF-based fair value estimates.
new invested capital (RONIC), and the number of years
We also acknowledge that DCF models offer their own
When considering a company's moat, we also assess until perpetuity, when excess returns cease. The invest-
challenges (including a potential proliferation of estim-
whether there is a substantial threat of value destruction, ment rate and return on new invested capital decline un-
ated inputs and the possibility that the method may miss
stemming from risks related to ESG, industry disruption, til a perpetuity value is calculated. In the case of firms
shortterm market-price movements), but we believe these
financial health, or other idiosyncratic issues. In this con- that do not earn their cost of capital, we assume marginal
negatives are mitigated by deep analysis and our
text, a risk is considered potentially value destructive if its ROICs rise to the firm’s cost of capital (usually attribut-
longterm approach.
occurrence would eliminate a firm’s economic profit on a able to less reinvestment), and we may truncate the
cumulative or midcycle basis. If we deem the probability second stage.
Morningstar’s equity research group (”we,” “our”) be-
lieves that a company’s intrinsic worth results from the of occurrence sufficiently high, we would not characterize
the company as possessing an economic moat. Stage III: Perpetuity
future cash flows it can generate. The Morningstar Rating
Once a company’s marginal ROIC hits its cost of capital,
for stocks identifies stocks trading at a discount or premi-
2. Estimated Fair Value we calculate a continuing value, using a standard per-
um to their intrinsic worth—or fair value estimate, in
Combining our analysts’ financial forecasts with the petuity formula. At perpetuity, we assume that any
Morningstar terminology. Five-star stocks sell for the
firm’s economic moat helps us assess how long returns growth or decline or investment in the business neither
biggest risk adjusted discount to their fair values, where-
on invested capital are likely to exceed the firm’s cost of creates nor destroys value and that any new investment
as 1-star stocks trade at premiums to their intrinsic worth.
capital. Returns of firms with a wide economic moat rat- provides a return in line with estimated WACC.
Four key components drive the Morningstar rating: (1) our ing are assumed to fade to the perpetuity period over a
longer period of time than the returns of narrow-moat Because a dollar earned today is worth more than a dollar
assessment of the firm’s economic moat, (2) our estimate
firms, and both will fade slower than no-moat firms, in- earned tomorrow, we discount our projections of cash
of the stock’s fair value, (3) our uncertainty around that
creasing our estimate of their intrinsic value. flows in stages I, II, and III to arrive at a total present
fair value estimate and (4) the current market price. This
value of expected future cash flows. Because we are
process ultimately culminates in our singlepoint star rat-
Our model is divided into three distinct stages: modeling free cash flow to the firm—representing cash
ing.
available to provide a return to all capital providers—we
discount future cash flows using the WACC, which is a
1. Economic Moat Stage I: Explicit Forecast
weighted average of the costs of equity, debt, and pre-
The concept of an economic moat plays a vital role not In this stage, which can last five to 10 years, analysts
ferred stock (and any other funding sources), using ex-
only in our qualitative assessment of a firm’s long-term make full financial statement forecasts, including items
pected future proportionate long-term, market-value
investment potential, but also in the actual calculation of such as revenue, profit margins, tax rates, changes in
weights.
our fair value estimates. An economic moat is a structural workingcapital accounts, and capital spending. Based on
feature that allows a firm to sustain excess profits over a these projections, we calculate earnings before interest,
3. Uncertainty Around That Fair Value Estimate
long period of time. We define economic profits as re- after taxes (EBI) and the net new investment (NNI) to de-
Morningstar’s Uncertainty Rating is designed to capture
the range of potential outcomes for a company’s intrinsic
Morningstar Equity Research Star Rating Methodology
value. This rating is used to assign the margin of safety
required before investing, which in turn explicitly drives
our stock star rating system. The Uncertainty Rating is
aimed at identifying the confidence we should have in as-
signing a fair value estimate for a given stock.
Our Uncertainty Rating is meant to take into account any-

thing that can increase the potential dispersion of future
outcomes for the intrinsic value of a company, and any-
ß
thing that can affect our ability to accurately predict Morningstar Equity Research Star Rating Methodology
these outcomes. The rating begins with a suggested rat-
ing produced by a quantitative process based on the trail-
ing 12-month standard deviation of daily stock returns.
An analyst overlay is then applied, with analysts using
the suggested rating, historical rating data, and their own
knowledge of the company to inform them as they make
the final Uncertainty Rating decision. Ultimately, the rat-
ing decision rests with the analyst. Analysts take into ac-
count many characteristics when making their final de-
cision, including cyclical factors, operational and financial
factors such as leverage, company-specific events, ESG
risks, and anything else that might increase the potential
dispersion of future outcomes and our ability to estimate
those outcomes.
Our recommended margin of safety—the discount to fair

value demanded before we’d recommend buying or
selling the stock—widens as our uncertainty of the es-
timated value of the equity increases. The more uncertain
we are about the potential dispersion of outcomes, the
greater the discount we require relative to our estimate of
the value of the firm before we would recommend the
purchase of the shares. In addition, the Uncertainty Rat-
ing provides guidance in portfolio construction based on
risk tolerance. Once we determine the fair value estimate of a stock, we justed return is highly likely over a multiyear time frame.
compare it with the stock’s current market price on a Scenario analysis developed by our analysts indicates
Our Uncertainty Ratings are: Low, Medium, High, Very daily basis, and the star rating is automatically re-calcu- that the current market price represents an excessively
High, and Extreme. lated at the market close on every day the market on pessimistic outlook, limiting downside risk and maximiz-
which the stock is listed is open. Our analysts keep close ing upside potential.
Margin of Safety
tabs on the companies they follow, and, based on thor-
Qualitative Analysis
QRating ough and ongoing analysis, raise or lower their fair value QQQQ We believe appreciation beyond a fair risk-ad-
Uncertainty Ratings QQQQQRating
estimates as warranted. justed return is likely.
Low 20% Discount 25% Premium
Medium 30% Discount 35% Premium QQQ Indicates our belief that investors are likely to re-
Please note, there is no predefined distribution of stars.
High 40% Discount 55% Premium ceive a fair risk-adjusted return (approximately cost of
That is, the percentage of stocks that earn 5 stars can
Very High 50% Discount 75% Premium equity).
fluctuate daily, so the star ratings, in the aggregate, can
Extreme 75% Discount 300% Premium
serve as a gauge of the broader market’s valuation. When
there are many 5-star stocks, the stock market as a whole QQ We believe investors are likely to receive a less than
Our uncertainty rating is based on the interquartile range, fair risk-adjusted return.
is more undervalued, in our opinion, than when very few
or the middle 50% of potential outcomes, covering the
companies garner our highest rating.
25th percentile–75th percentile. This means that when a Q Indicates a high probability of undesirable risk-adjus-
stock hits 5 stars, we expect there is a 75% chance that ted returns from the current market price over a multiyear
We expect that if our base-case assumptions are true the
the intrinsic value of that stock lies above the current time frame, based on our analysis. Scenario analysis by
market price will converge on our fair value estimate over
market price. Similarly, when a stock hits 1 star, we ex- our analysts indicates that the market is pricing in an ex-
time generally within three years (although it is im-
pect there is a 75% chance that the intrinsic value of that cessively optimistic outlook, limiting upside potential and
possible to predict the exact time frame in which market
stock lies below the current market price. leaving the investor exposed to Capital loss.
prices may adjust).
4. Market Price Our star ratings are guideposts to a broad audience and Other Definitions
The market prices used in this analysis and noted in the individuals must consider their own specific investment Last Price: Price of the stock as of the close of the mar-
report come from exchange on which the stock is listed goals, risk tolerance, tax situation, time horizon, income ket of the last trading day before date of the report.
which we believe is a reliable source. needs, and complete investment portfolio, among other
factors. Capital Allocation Rating: Our Capital Allocation (or
For more details about our methodology, please go to Stewardship) Rating represents our assessment of the
https://shareholders.morningstar.com The Morningstar Star Ratings for stocks are defined be- quality of management’s capital allocation, with particu-
low: lar emphasis on the firm’s balance sheet, investments,
Morningstar Star Rating for Stocks QQQQQ We believe appreciation beyond a fair risk ad- and shareholder distributions. Analysts consider compan-
ß
ies’ investment strategy and valuation, balance sheet starting at zero (no risk) with lower scores representing mendations made herein may not be suitable for all in-
management, and dividend and share buyback policies. less unmanaged risk and, for 95% of cases, the unman- vestors: recipients must exercise their own independent
Corporate governance factors are only considered if they aged ESG Risk score is below 50. judgment as to the suitability of such investments and re-
are likely to materially impact shareholder value, though commendations in the light of their own investment ob-
either the balance sheet, investment, or shareholder dis- Based on their quantitative scores, companies are jectives, experience, taxation status and financial posi-
tributions. Analysts assign one of three ratings: "Exem- grouped into one of five Risk Categories (negligible, low, tion.
plary", "Standard", or "Poor". Analysts judge Capital Alloc- medium, high, severe). These risk categories are absolute,
ation from an equity holder’s perspective. Ratings are de- meaning that a ‘high risk’ assessment reflects a compar- The information, data, analyses and opinions presented
termined on a forward looking and absolute basis. The able degree of unmanaged ESG risk across all subindus- herein are not warranted to be accurate, correct, com-
Standard rating is most common as most managers will tries covered. plete or timely. Unless otherwise provided in a separate
exhibit neither exceptionally strong nor poor capital alloc- agreement, neither Morningstar, Inc. or the Equity Re-
ation. The ESG Risk Rating Assessment is a visual representa- search Group represents that the report contents meet all
tion of Sustainalytics ESG Risk Categories on a 1 to 5 of the presentation and/or disclosure standards applic-
Capital Allocation (or Stewardship) analysis published pri- scale. Companies with Negligible Risk = 5 Globes, Low able in the jurisdiction the recipient is located.
or to Dec. 9, 2020, was determined using a different pro- Risk = 4, Medium Risk = 3 Globes, High Risk = 2 Globes,
cess. Beyond investment strategy, financial leverage, and Severe Risk = 1 Globe. For more information, please visit Except as otherwise required by law or provided for in a
dividend and share buyback policies, analysts also con- sustainalytics.com/esg-ratings/ separate agreement, the analyst, Morningstar, Inc. and
sidered execution, compensation, related party transac- the Equity Research Group and their officers, directors
tions, and accounting practices in the rating. Ratings should not be used as the sole basis in evaluating and employees shall not be responsible or liable for any
a company or security. Ratings involve unknown risks and trading decisions, damages or other losses resulting from,
Capital Allocation Rating: Our Capital Allocation (or uncertainties which may cause our expectations not to or related to, the information, data, analyses or opinions
Stewardship) Rating represents our assessment of the occur or to differ significantly from what was expected within the report. The Equity Research Group encourages
quality of management’s capital allocation, with particu- and should not be considered an offer or solicitation to recipients recipients of this report to read all relevant is-
lar emphasis on the firm’s balance sheet, investments, buy or sell a security. sue documents (e.g., prospectus) pertaining to the secur-
and shareholder distributions. Analysts consider compan- ity concerned, including without limitation, information
ies’ investment strategy and valuation, balance sheet Risk Warning relevant to its investment objectives, risks, and costs be-
management, and dividend and share buyback policies. Please note that investments in securities are subject to fore making an in vestment decision and when deemed
Corporate governance factors are only considered if they market and other risks and there is no assurance or guar- necessary, to seek the advice of a legal, tax, and/or ac-
are likely to materially impact shareholder value, though antee that the intended investment objectives will be counting professional.
either the balance sheet, investment, or shareholder dis- achieved. Past performance of a security may or may not
tributions. Analysts assign one of three ratings: "Exem- be sustained in future and is no indication of future per- The Report and its contents are not directed to, or inten-
plary", "Standard", or "Poor". Analysts judge Capital Alloc- formance. A security investment return and an investor’s ded for distribution to or use by, any person or entity who
ation from an equity holder’s perspective. Ratings are de- principal value will fluctuate so that, when redeemed, an is a citizen or resident of or located in any locality, state,
termined on a forward looking and absolute basis. The investor’s shares may be worth more or less than their country or other jurisdiction where such distribution, pub-
Standard rating is most common as most managers will original cost. A security’s current investment performance lication, availability or use would be contrary to law or
exhibit neither exceptionally strong nor poor capital alloc- may be lower or higher than the investment performance regulation or which would subject Morningstar, Inc. or its
ation. noted within the report. Morningstar’s Uncertainty Rating affiliates to any registration or licensing requirements in
serves as a useful data point with respect to sensitivity such jurisdiction.
Capital Allocation (or Stewardship) analysis published pri- analysis of the assumptions used in our determining a fair
or to Dec. 9, 2020, was determined using a different pro- value price. Where this report is made available in a language other
cess. Beyond investment strategy, financial leverage, and than English and in the case of inconsistencies between
dividend and share buyback policies, analysts also con- the English and translated versions of the report, the Eng-
sidered execution, compensation, related party transac- General Disclosure lish version will control and supersede any ambiguities
tions, and accounting practices in the rating. associated with any part or section of a report that has
Unless otherwise provided in a separate agreement, re-
cipients accessing this report may only use it in the coun- been issued in a foreign language. Neither the analyst,
Sustainalytics ESG Risk Rating Assessment:The ESG Morningstar, Inc., or the Equity Research Group guaran-
try in which the Morningstar distributor is based. Unless
Risk Rating Assessment is provided by Sustainalytics; a tees the accuracy of the translations.
stated otherwise, the original distributor of the report is
Morningstar company.
Morningstar Research Services LLC, a U.S.A. domiciled
financial institution. This report may be distributed in certain localities, coun-
Sustainalytics’ ESG Risk Ratings measure the degree to tries and/or jurisdictions (“Territories”) by independent
which company’s economic value at risk is driven by en- third parties or independent intermediaries and/or distrib-
This report is for informational purposes only and has no
vironment, social and governance (ESG) factors. utors (“Distributors”). Such Distributors are not acting as
regard to the specific investment objectives, financial
situation or particular needs of any specific recipient. This agents or representatives of the analyst, Morningstar,
Sustainalytics analyzes over 1,300 data points to assess a Inc. or the Equity Research Group. In Territories where a
publication is intended to provide information to assist in-
company’s exposure to and management of ESG risks. In Distributor distributes our report, the Distributor is solely
stitutional investors in making their own investment de-
other words, ESG Risk Ratings measures a company’s un- responsible for complying with all applicable regulations,
cisions, not to provide investment advice to any specific
managed ESG Risks represented as a quantitative score. laws, rules, circulars, codes and guidelines established by
investor. Therefore, investments discussed and recom-
Unmanaged Risk is measured on an open-ended scale
ß
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Morningstar Equity Analyst Report | Report as of 16 Sep 2023 04:20, UTC | Reporting Currency: USD | Trading Currency: USD

| Exchange: NEW YORK STOCK EXCHANGE, INC. Page 1 of 20

Price vs. Fair Value

Fair Value: 60.00

Economic Moat Narrow — — —

limiting margin expansion.

Analyst Notes Archive

the last one from Roblox.

Competitors Price vs. Fair Value

Huuuge Inc Ordinary Shares HUG

Total Return % as of 15 Sep 2023. Last Close as of —. Fair Value as of —.

Skillz Inc Ordinary Shares - Class A SKLZ

Last Close: 6.33

600 Over Valued

ThredUp Inc Ordinary Shares - Class A TDUP

Last Close: 3.20

Morningstar Historical Summary

Valuation as of 31 Aug 2023

Morningstar Analyst Historical/Forecast Summary as of 09 Aug 2023

ESG Risk Rating Breakdown

Exposure Subject Subindustry (26.0) u Exposure represents a company’s vulnerability to ESG

dium, and high-risk exposure

Management Gap4 16.3 100 0 programs, practices, and policies

Overall Unmanaged Risk 18.0 much manageable risk a company is managing

ESG Risk Rating ESG Risk Rating Assessment5

— —|— 0 55+ —|— 100 0 —|— 0 40+

Research Methodology for Valuing Companies

Our Uncertainty Rating is meant to take into account any-

Research Methodology for Valuing Companies

Our recommended margin of safety—the discount to fair

Research Methodology for Valuing Companies

Research Methodology for Valuing Companies

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