The following discussion and analysis of our financial condition, results of
operations and cash flows should be read in conjunction with the consolidated
financial statements and the related notes appearing under "Consolidated
Financial Statements and Supplementary Data" in Item 8 of this filing. This
discussion and analysis and other parts of this Annual Report on Form 10-K
contain forward-looking statements, such as those relating to our plans,
objectives, expectations, intentions, and beliefs, that involve risks,
uncertainties and assumptions. Our actual results could differ materially from
these forward-looking statements as a result of many factors, including those
discussed in the section titled "Risk Factors," "Special Note Regarding
Forward-Looking Statements", and "Special Note Regarding Operating Metrics"
included elsewhere in this Annual Report on Form 10-K. Our historical results
are not necessarily indicative of the results that may be expected for any
periods in the future. Unless the context otherwise requires, all references in
this report to "Roblox," the "Company", "we," "our," "us," or similar terms
refer to Roblox Corporation and its subsidiaries.
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This section of our Annual Report on Form 10-K discusses our financial condition
and results of operations for the fiscal years ended December 31, 2021 and 2020,
and year-to-year comparisons between fiscal 2021 and fiscal 2020. A discussion
of our financial condition and results of operations for the fiscal year ended
December 31, 2019 and year-to-year comparisons between fiscal 2020 and fiscal
2019 that is not included in this Annual Report on Form 10-K can be found in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of Company's final prospectus dated March 2, 2021, or the Effective
Date, and filed with the SEC pursuant to Rule 424(b)(4) on March 10, 2021, or
the Final Prospectus.

Overview

People from around the world come to Roblox every day to connect with friends.
Together they play, learn, communicate, explore, and expand their friendships,
all in 3D digital worlds that are entirely user-generated, built by our
community of developers. We call this emerging category "human co-experience,"
which we consider to be the new form of social interaction we envisioned back in
2004. Our Platform is powered by user-generated content and draws inspiration
from gaming, entertainment, social media, and even toys.

Our Roblox human co-experience Platform consists of the Roblox Client, the
Roblox Studio, and the Roblox Cloud. Roblox Client is the application that
allows users to explore 3D digital worlds. Roblox Studio is the free toolset
that allows developers and creators to build, publish, and operate 3D
experiences and other content accessed with the Roblox Client. Roblox Cloud
includes the services and infrastructure that power our human co-experience
Platform.


Our mission is to connect a billion people with optimism and civility. We are
constantly improving the ways in which the Roblox Platform supports shared
experiences, ranging from how these experiences are built by an engaged
community of developers, to how they are enjoyed and safely accessed by users
across the globe.

Our primary areas of investment are our developer and creator community, and the
people, technology, and infrastructure required to keep improving the Roblox
Platform. These areas of focus are how we drive the business and are reflected
in our operating cost structure, which primarily consists of four major areas:
payment processing and other fees, compensation and benefits, developer
earnings, and direct infrastructure.

Recent Developments


On October 29, 2021, we issued $1.0 billion aggregate principal amount of 2030
Notes in a private placement for net proceeds of approximately $987.5 million.
We intend to use the net proceeds from this offering for general corporate
purposes, which may include production and development, capital expenditures,
investments, working capital, and potential acquisitions and strategic
transactions.

On August 16, 2021, we acquired Guilded, a privately-held company, which
operates a communications platform for connecting gaming communities. The
acquisition has been accounted as a business combination. The acquisition date
fair value of the consideration transferred was $77.6 million, which consisted
of cash and 0.5 million shares of Class A common stock with a fair value of
$31.3 million and $46.3 million paid in cash.

Key Metrics


We believe our performance is dependent upon many factors, including the key
metrics described below that we track and review to measure our performance,
identify trends, formulate financial projections, and make strategic decisions.
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Operating Metrics


We manage our business by tracking several operating metrics, including DAUs,
hours engaged, and ABPDAU. As a management team, we believe each of these
operating metrics provides useful information to investors and others. For
definition of these metrics, refer to the section titled "Special Note Regarding
Operating Metrics."

Daily Active Users

We define a DAU as a user who has logged in and visited Roblox through our
website or application on a unique registered account on a given calendar day.
We track DAUs as an indicator of the size of the audience engaged on our
Platform. DAUs are also broken out by geographic region to help us understand
the global engagement on our Platform.

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Hours engaged


We define hours engaged as the time spent by our users on the Platform, which
includes time spent in experiences, which refer to the titles that have been
created by developers, and also within Platform features such as chat and avatar
personalization. We believe that the growth in hours engaged on our Platform
reflects the increasing value of our Platform.

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Average bookings per daily active user


We define average bookings per DAU, or ABPDAU, as bookings in a given period
divided by the DAUs for such period. We use ABPDAU as a way to understand how we
are monetizing across all of our users through the sale of virtual currency and
subscriptions.
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Non-GAAP Financial Measures


In addition to our results determined in accordance with GAAP, we believe the
following non-GAAP financial measures are useful in evaluating our performance.
We use this non-GAAP financial information to evaluate our ongoing operations
and for internal planning and forecasting purposes. We believe that this
non-GAAP financial information may be helpful to investors because it provides
consistency and comparability with past financial performance. However, non-GAAP
financial measures have limitations in their usefulness to investors because
they have no standardized meaning prescribed by GAAP and are not prepared under
any comprehensive set of accounting rules or principles. In addition, other
companies, including companies in our industry, may calculate similarly titled
non-GAAP financial measures differently or may use other measures to evaluate
their performance, all of which could reduce the usefulness of our non-GAAP
financial information as a tool for comparison. As a result, our non-GAAP
financial information is presented for supplemental informational purposes only
and should not be considered in isolation from, or as a substitute for financial
information presented in accordance with GAAP.

Bookings


Bookings represent the sales activity in a given period without giving effect to
certain non-cash adjustments. Substantially all of our bookings are generated
from sales of virtual items on the Roblox Platform. Proceeds from the sale of
virtual items are initially recorded in deferred revenue and recognized as
revenues over the estimated period of time the virtual items are available on
the Roblox Platform (estimated to be the average lifetime of a paying user) or
as the virtual items are consumed. Bookings also include a minimal dollar amount
from advertising and licensing arrangements.

We believe bookings provide a timelier indication of trends in our operating
results that are not necessarily reflected in our revenue as a result of the
fact that we recognize the majority of revenue over the estimated average
lifetime of a paying user. The change in deferred revenue constitutes the vast
majority of the reconciling difference from revenue to bookings. By removing
these non-cash adjustments, we are able to measure and monitor our business
performance based on the timing of actual transactions with our users and the
cash that is generated from these transactions. Over the long-term, the factors
impacting our revenue and bookings trends are the same. However, in the
short-term, there are factors that may cause revenue and bookings trends to
differ in any period.

                       Year Ended December 31,
                2021             2020            2019

                       (dollars in thousands)
Bookings    $ 2,725,706      $ 1,882,543      $ 694,262

The following table presents a reconciliation of revenue, the most directly
comparable financial measure calculated in accordance with GAAP, to bookings,
for each of the periods presented (in thousands):


                                                    Year Ended December 31,
                                             2021             2020          

2019

Reconciliation of revenue to bookings:
Revenue                                  $ 1,919,181      $   923,885      $ 508,393
Add (deduct):
Change in deferred revenue                   819,927          965,919        187,916
Other                                        (13,402)          (7,261)        (2,047)
Bookings                                 $ 2,725,706      $ 1,882,543      $ 694,262


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Free cash flow

We define free cash flow as net cash provided by operating activities less
purchases of property, equipment, and intangible assets. We believe that free
cash flow is a useful indicator of our unit economics and liquidity that
provides information to management and investors about the amount of cash
generated from our core operations that, after the purchases of property,
equipment, and intangible assets, can be used for strategic initiatives.

                          Year Ended December 31,
                     2021           2020           2019

                           (dollars in thousands)
Free cash flow    $ 557,980      $ 411,220      $ 14,456

The following table presents a reconciliation of net cash from operating
activities, the most directly comparable financial measure calculated in
accordance with GAAP, to free cash flow, for each of the periods presented (in
thousands):


                                                                         Year Ended December 31,
                                                              2021                2020                2019

Reconciliation of net cash from operating activities to
free cash flow:
Net cash provided by operating activities

                 $  659,109          $  524,340          $   99,185
Add (deduct):
Acquisition of property and equipment                        (93,273)           (104,153)            (83,264)
Purchases of intangible assets                                (7,856)             (8,967)             (1,465)
Free cash flow                                            $  557,980          $  411,220          $   14,456

Acquisition of property and equipment primarily includes servers, infrastructure
equipment and tenant improvements.

Adjusted EBITDA


Adjusted EBITDA for purposes of the table below is calculated in accordance with
the calculation of "Consolidated EBITDA" as that term is defined in the
Indenture. Adjusted EBITDA is a measure of operating performance as used in
certain covenant calculations specified in the Indenture that is not calculated
in accordance with GAAP and may not conform to the calculation of EBITDA in
other circumstances. Adjusted EBITDA should not be considered as a substitute
for net loss as determined in accordance with GAAP. Management believes that,
when considered together with reported amounts, this measure is useful to
investors and management in understanding our ongoing operations and operating
trends for purposes of analyzing the covenants specified in the Indenture. This
metric should be considered in addition to, and not as a replacement for, the
most comparable GAAP measure. Adjusted EBITDA should be read in connection with
our financial statements presented in accordance with GAAP.

                           Year Ended December 31,
                     2021           2020           2019

                           (dollars in thousands)
Adjusted EBITDA   $ 673,926      $ 600,177      $ 108,920


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The following table presents a reconciliation of consolidated net loss, the most
directly comparable financial measure calculated in accordance with GAAP, to
adjusted EBITDA, for each of the periods presented (in thousands):

                                                                            

Year Ended December 31,

                                                                 2021                2020                2019
Reconciliation of consolidated net loss to adjusted EBITDA:
Consolidated net loss                                        $ (503,480)         $ (257,691)         $  (71,114)
Add:
Interest income                                                     (92)             (1,822)             (6,546)
Interest expense                                                  6,998                   -                   -
Other income/(expense), net                                       1,796                  32               1,211
Provision for/(benefit from) income taxes                          (320)             (6,656)                  9
Depreciation and amortization                                    75,622              43,808              27,664
Stock-based compensation expense                                341,942              79,158              17,634
Change in fair value of warrants                                      -               1,890               1,190
Accretion and amortization on marketable securities                   -                   5                (735)
Change in deferred revenue                                      819,927             965,919             187,916
Change in deferred cost of revenue                             (172,828)           (230,404)            (48,309)
Fees related to equity offering                                  50,586               5,938                   -
Fees related to certain legal settlements                        53,775                   -                   -
Adjusted EBITDA                                              $  673,926          $  600,177          $  108,920


Impact of COVID-19

Although the COVID-19 pandemic has caused general business disruption worldwide
beginning in January 2020, it has resulted in an increase in our operational
performance, cash flows, and financial condition. We experienced an increase in
user and bookings growth following the implementation of shelter-in-place orders
to mitigate the COVID-19 pandemic. The COVID-19 pandemic accelerated adoption of
our Platform, which generated additional opportunities for us.

However, this increase in engagement and monetization may be temporary and we
have seen it moderate as vaccination rates increase, children return to
classrooms, and shelter-in-place orders are lifted. The long-term effects of the
COVID-19 pandemic on society, and developer, creator and user engagement remain
uncertain. There can be no assurance that, as a result of the COVID-19 pandemic
or other global economic conditions, users will not reduce their discretionary
spending on Robux, will renew their subscriptions or may otherwise increase or
maintain their usage of our Platform, which would adversely impact our revenue
and financial condition. In addition, in response to the spread of COVID-19, we
required and have continued to require substantially all of our employees to
work remotely to minimize the risk of the virus to our employees and the
communities in which we operate, which represents a significant disruption in
how we operate our business. We may take further actions as may be required by
government authorities or that we determine are in the best interests of our
employees, customers and business partners. We announced our "return to office"
plan, which includes shifting to a hybrid model where employees can work from
home up to two days a week, that we intend to commence during 2022. Although we
have announced a return to office plan, and we expect most of our employees to
return to physical offices in the future, the timing, nature and extent of that
return remains uncertain.

The full extent to which the COVID-19 pandemic will directly or indirectly
impact the global economy, the lasting social effects, and impact on our
business, results of operations and financial condition will depend on future
developments that are highly uncertain and cannot be accurately predicted. For
additional details, refer to the section titled "Risk Factors-The global
COVID-19 pandemic has significantly affected our business and operations."
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Components of Results of Operations

Revenue


We generate substantially all of our revenue through the sale of virtual items
on the Roblox Platform. Users can purchase and spend Robux to obtain virtual
items to enhance their social experience on the Roblox Platform. We recognize
revenue over the estimated period of time the virtual items are available to the
user on the Roblox Platform (estimated average lifetime of a paying user) or at
the time the virtual item is consumed. The average lifetime of a paying user is
calculated based on the monthly retention data for each paying user cohort. We
then calculate the average retention period by determining the weighted-average
period paying users have spent on the Platform and are projected to participate
in the Roblox environment. The average lifetime for a paying user for the year
ended December 31, 2021 and December 31, 2020 was 23 months. Revenue is reported
net of taxes and estimated chargebacks.

Other revenue streams include a minimal amount of revenue from advertising,
licenses, and royalties. We recognize revenue based on the performance
obligations of the underlying agreements, in an amount that reflects the
consideration we expect to be entitled to.

Costs and Expenses


We allocate shared costs, such as facilities (including rent, depreciation on
equipment and leasehold improvements shared by all departments) and software
costs, to all departments based on headcount. As such, allocated shared costs
are reflected in each expense category, with the exception of cost of revenue
and developer exchange fees.

Personnel costs include salaries, benefits, travel-related expenses, and
stock-based compensation for each expense category, with the exception of cost
of revenue and developer exchange fees. In the years ended December 31, 2021,
and 2020, personnel costs were $748.9 million, and $292.9 million, respectively.

During the year ended December 31, 2021, we recorded a one-time catch-up of
stock-based compensation expense of $21.3 million related to the RSUs granted
prior to the direct listing of our Class A common stock on the NYSE, or the
Direct Listing, that vest upon the satisfaction of both the service condition
and a liquidity event-related performance vesting condition which was satisfied
on the effective date of our registration statement on Form S-1/A, and $42.0
million of stock-based compensation expense related to the CEO Long-Term
Performance Award granted in February 2021. In addition, stock-based
compensation expense attributed to RSUs granted to employees during the year
ended December 31, 2021, account for a large portion of personnel costs in the
period.

During the year ended December 31, 2020, we recorded compensation expense of
$35.2 million related to a tender offer conducted by the purchasers of Series F
and Series G convertible preferred stock to acquire shares from employees,
former employees, and other existing investors. This expense was recorded
because the purchasers were our affiliates, and the tender was completed at
above the then-fair market value. In connection with the tender offer, we waived
any rights of first refusal or transfer restrictions applicable to such shares.

Cost of revenue


Cost of revenue primarily consists of third-party payment processing fees
charged by the various distribution channels. We defer payment processing fees
and recognize them over the same period as the respective revenue. These costs
are incurred in connection with our sales of our virtual currency.

We intend to use nearly all of any efficiencies earned in this area over time to
increase earnings for our developers and creators. Additionally, cost of revenue
as a percentage of revenue is affected by shifts in user purchasing preferences
and trends. We have observed a shift of our sales toward mobile distribution
channels, such as the Apple App Store and Google Play Store. These distribution
channels are subject to higher processing fees compared to other distribution
channels, such as credit card payment processors. As a result, we expect our
cost of revenue expenses to increase both in absolute dollars and as a
percentage of revenue over time as our business grows due to the ongoing shift
toward these mobile channels, although the percentage may fluctuate from period
to period.
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Developer exchange fees


Developer exchange fees represent the amount earned by developers and creators
on the Platform. Developers and creators are able to exchange their accumulated
earned Robux, for real-world currency under certain conditions outlined in our
Developer Exchange Program. Developers and creators can earn Robux through sale
of access to their experiences and enhancements in their experiences, sale of
content and tools between developers through the Studio Marketplace, and the
sale of items to users through the Avatar Marketplace. Additionally, developers
can earn Robux through our engagement-based reward program, Premium Payouts,
that rewards developers based on the number of hours spent in their experiences
by Roblox Premium subscribers.

Over the next few years, a major goal is to drive as much money to our developer
and creator community as possible while maintaining reasonable margins and free
cash flow. We intend to use future cost efficiencies realized in other areas of
our business to increase earnings for our developers and creators. As such, we
expect that our developer exchange fees will increase in both absolute dollars
and as a percentage of bookings over time as our business grows and as we
continue to invest in supporting our Roblox developer and creator community.

Infrastructure and trust & safety


Infrastructure and trust & safety expenses consist primarily of expenses related
to the operation of our data centers and technical infrastructure. These costs
include costs to third-party service providers, such as cloud computing or other
hosting and data storage, rent and facilities-related expenses for
our co-located data centers and PoPs that we lease and operate, network and
bandwidth costs, and depreciation and associated support and maintenance of our
servers and infrastructure equipment. In the year ended December 31, 2021,
depreciation related to infrastructure and trust & safety was $60.8 million. The
same costs were $40.4 million and $26.5 million in the years ended December 31,
2020 and 2019, respectively. As of December 31, 2021, we have data centers and
PoPs around the world with over 40,000 servers.

Infrastructure and trust & safety expenses also include personnel costs and
allocated overhead for employees and team members whose primary responsibilities
relate to supporting our infrastructure and trust & safety initiatives. In the
year ended December 31, 2021, stock-based compensation related to infrastructure
and trust & safety was $35.3 million. The same costs were $7.4 million and $2.1
million in the years ended December 31, 2020 and 2019, respectively.

We plan to continue increasing the capacity and enhancing the capability and
reliability of our infrastructure to support more sophisticated content, more
users, and increased engagement. We expect to increase the dollar amount of our
investment in infrastructure for the foreseeable future as we continue to build
out our global infrastructure. We intend to achieve scalability and operating
leverage in the business by building and maintaining our own technical
infrastructure and expect our infrastructure and trust & safety expenses to
increase in the short term and then decrease over time as a percentage of
bookings as our business grows, primarily through leverage on infrastructure
expenses, although the percentage may fluctuate from period to period depending
on fluctuations in the timing and extent of our infrastructure and trust &
safety expenses and business seasonality.

Research and development


Research and development expenses consist primarily of personnel costs and
allocated overhead for our engineering, design, product management, data
science, and other personnel engaged in maintaining and enhancing the
functionality of the Platform. We plan to increase research and development
expenses, both in absolute dollars as well as a percentage of bookings, for the
foreseeable future primarily on increased headcount to develop new features,
functionality, and innovation of our product.

General and administrative


General and administrative expenses consist primarily of personnel costs and
allocated overhead for our finance and accounting, legal, human resources,
talent acquisition, and other administrative teams. General and administrative
expenses also include professional services fees such as outside legal,
accounting, audit, and outsourcing services, and other corporate expenses. We
plan to increase general and administrative expenses, both in absolute dollars
as well as a percentage of bookings, for the foreseeable future to support the
growth of the business and due to costs associated with being a public company,
such as increased headcount, enhanced systems, processes, and controls as well
as increased expenses in the areas of insurance, compliance, investor relations,
and professional services.
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Sales and marketing


Sales and marketing expenses consist primarily of user acquisition expenses and
personnel costs and allocated overhead for our marketing, business development,
and developer relations functions. Other expenses include those associated with
market research, branding, public relations, and developer relations programs,
including our annual Roblox Developer Conference. We plan to increase the sales
and marketing expenses, both in absolute dollars as well as a percentage of
bookings, for the foreseeable future primarily on increased headcount to support
our developer relations and brand partnership teams.

Interest Income

Interest income consists primarily of interest earned on our cash, cash
equivalents, and restricted cash balances.

Interest Expense

Interest expense consists primarily of contractual interest and amortization of
debt issuance costs on our 2030 Notes.

Other Income/(Expense), net


Other expense for historical periods consisted primarily of changes in the fair
value of our outstanding warrants to purchase convertible preferred stock that
were remeasured at the end of each reporting period. As of December 31, 2021,
there were no outstanding convertible preferred stock warrants. Other expense
also includes foreign currency exchange gains and losses.

Provision for/(Benefit from) Income Taxes


Provision for (benefit from) income taxes consists primarily of income taxes in
foreign jurisdictions and U.S. federal and state income taxes. We maintain a
full valuation allowance on federal, state, and foreign deferred tax assets as
we have concluded that it is not more likely than not that the deferred assets
will be utilized. As of December 31, 2021, we had federal net operating loss
carryforwards of $2,120.8 million, which begin to expire in 2024, state net
operating loss carryforwards of $840.1 million, which begin to expire in 2027,
and foreign net operating loss carryforwards of $49.6 million, which begin to
expire in 2024. Utilization of our net operating loss carryforwards and other
tax attributes, such as research and development tax credits, may be subject to
annual limitations, or could be subject to other limitations on utilization or
benefit due to the ownership change limitations provided by Sections 382 and 383
of the Internal Revenue Code of 1986, as amended, or the Code, and other similar
provisions. Further, the Tax Cuts and Jobs Act, or the Tax Act, as modified by
the Coronavirus Aid Relief, and Economic Security Act, or the CARES Act, changed
the federal rules governing net operating loss carryforwards. Of the $2,120.8
million of federal net operating losses, $2,035.2 million is carried forward
indefinitely but is limited to 80% of taxable income.
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Results of Operations


The following tables set forth our results of operations for the periods
presented in dollars and as a percentage of our revenue (in thousands, except
per share data):

                                                                          Year Ended December 31,
                                                                          2021                 2020
Revenue                                                             $   1,919,181          $  923,885
Cost and expenses:
Cost of revenue(1)                                                        496,870             239,898
Developer exchange fees                                                   538,321             328,740
Infrastructure and trust & safety(2)                                      456,498             264,226
Research and development(2)                                               533,207             201,433
General and administrative(2)                                             303,020              97,341
Sales and marketing(2)                                                     86,363              58,384
Total cost and expenses                                                 2,414,279           1,190,022
Loss from operations                                                     (495,098)           (266,137)
Interest income                                                                92               1,822
Interest expense                                                           (6,998)                  -
Other income/(expense), net                                                (1,796)                (32)
Loss before income taxes                                                 (503,800)           (264,347)
Provision for/(benefit from) income taxes                                    (320)             (6,656)
Consolidated net loss                                                    (503,480)           (257,691)
Net loss attributable to the noncontrolling interest(3)                   (11,829)             (4,437)
Net loss attributable to common stockholders                        $    

(491,651) $ (253,254)
Net loss per share attributable to common stockholders, basic and
diluted(4)

                                                          $       

(0.97) $ (1.39)
Weighted-average shares used in computing net loss per share
attributable to common stockholders-basic and diluted(4)

                  505,858             182,108


______________________________

(1)Depreciation of servers and infrastructure equipment included in
infrastructure and trust & safety.

(2)Includes stock-based compensation as follows:


                                          Year Ended December 31,
                                            2021                2020
Infrastructure and trust & safety   $      35,255            $  7,396
Research and development                  219,851              39,402
General and administrative                 72,929              25,939
Sales and marketing                        13,907               6,421
Total stock-based compensation      $     341,942            $ 79,158


During the year ended December 31, 2021, we recorded a one-time catch-up of
stock-based compensation expense of $21.3 million related to the RSUs granted
prior to our Direct Listing that vest upon the satisfaction of both the service
condition and a liquidity event-related performance vesting condition which was
satisfied on the Effective Date. During the year ended December 31, 2020, we
recorded compensation expense of $35.2 million related to a tender offer
conducted by the purchasers of Series F and Series G convertible preferred stock
to acquire shares from employees, former employees, and other existing
investors. This expense was recorded because the purchasers were our affiliates
and the tender was completed at above the then-fair market value. In connection
with the tender offer, we waived any rights of first refusal or transfer
restrictions applicable to such shares.

(3)Our consolidated financial statements include our majority-owned subsidiary
Roblox China Holding Corp. The ownership interest of a minority investor,
Songhua, is recorded as a noncontrolling interest.


(4)See Note 16, "Basic and Diluted Net Loss Per Common Share" to the Notes to
Consolidated Financial Statements included elsewhere in this Annual Report on
Form 10-K for an explanation of the method used to calculate our basic and
diluted net loss per share, and the weighted-average number of shares used in
the computation of the per share amounts.
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The following table sets forth the components of our consolidated statements of
operations data, for each of the periods presented, as a percentage of revenue.

Year Ended December 31,

                                                                                   2021                           2020
Revenue                                                                                       100  %                  100  %
Cost and expenses:
Cost of revenue                                                                                26                      26
Developer exchange fees                                                                        28                      36
Infrastructure and trust & safety                                                              24                      29
Research and development                                                                       28                      22
General and administrative                                                                     16                      10
Sales and marketing                                                                             4                       6
Total cost and expenses                                                                       126                     129
Loss from operations                                                                          (26)                    (29)
Interest income                                                                                 -                       -
Interest expense                                                                                -                       -
Other income/(expense), net                                                                     -                       -
Loss before income taxes                                                                      (26)                    (29)
Provision for/(benefit from) income taxes                                                       -                      (1)
Consolidated net loss                                                                         (26)                    (28)
Net loss attributable to the noncontrolling interest                                            -                      (1)
Net loss attributable to common stockholders                                                  (26  %)                 (27  %)


Comparison of the Years Ended December 31, 2021, and 2020

Revenue

                                                2020 to
                Year Ended December 31,           2021
                  2021             2020         % Change

                (dollars in thousands)
Revenue     $    1,919,181      $ 923,885          108  %


Revenue in the year ended December 31, 2021 increased $995.3 million, or 108%,
compared to the year ended December 31, 2020. The increase is primarily due to
expansion within our daily paying users, which is measured as the average number
of unique paying users for each day during the period. Our number of daily
paying users increased from roughly 490,000 in 2020 to roughly 678,000 in 2021.
Bookings per daily paying user for both periods remained relatively consistent
but may not be reflected in the revenue recognized per daily paying user as a
substantial portion of revenue recognized each period is from bookings from
prior periods. The daily paying user expansion followed existing growth trends,
but also included the impact of COVID-19.

Cost of revenue

                                                          2020 to
                        Year Ended December 31,             2021
                          2021               2020         % Change

                        (dollars in thousands)
Cost of revenue   $     496,870           $ 239,898          107  %

Cost of revenue increased $257.0 million, or 107%, for the year ended
December 31, 2021 compared to the year ended December 31, 2020. The increase is
primarily due to an increase of $171.7 million in payment processing fees
primarily driven by the growth in our bookings.

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Developer exchange fees

                                                                   2020 to
                                 Year Ended December 31,             2021
                                   2021               2020         % Change

                                 (dollars in thousands)
Developer exchange fees    $     538,321           $ 328,740           64  %


Developer exchange fees increased $209.6 million, or 64%, for the year ended
December 31, 2021 compared to the year ended December 31, 2020. The increase is
primarily driven by the growth in our bookings over the same period and the
associated growth in amounts earned by developers and creators due to the growth
in bookings. Additionally, we launched premium payouts in the first half of
2020, and have increased those payouts over time, which contributed to an
increase in the developer exchange fees as a percentage of bookings. Developer
exchange fees track with our overall bookings performance as more users on the
Platform and Robux purchased by our users drives more Robux earned by developers
and creators.

Infrastructure and trust & safety

                                                                            2020 to
                                          Year Ended December 31,             2021
                                            2021               2020         % Change

                                          (dollars in thousands)
Infrastructure and trust & safety   $     456,498           $ 264,226       

73 %



Infrastructure and trust & safety expenses increased $192.3 million, or 73%, for
the year ended December 31, 2021 compared to the year ended December 31, 2020.
The increase is primarily due to an increase of $90.2 million related to our
data center and technical infrastructure expenses associated with providing the
platform to our users as well as depreciation of our servers and infrastructure
equipment.

In addition, trust & safety expenses increased by $53.4 million to support the
growth in users and increased traffic to our platform. Other increases include
$44.1 million in personnel costs primarily due to an increase in headcount to
support our infrastructure growth and stock-based compensation expense of $27.9
million.

Research and development

                                                                   2020 to
                                 Year Ended December 31,             2021
                                   2021               2020         % Change

                                 (dollars in thousands)
Research and development   $     533,207           $ 201,433          165  %


Research and development expenses increased $331.8 million, or 165%, for the
year ended December 31, 2021 compared to the year ended December 31, 2020. The
increase is primarily due to an increase of $314.0 million of personnel costs,
which includes $180.4 million in stock-based compensation expense. The increase
is also due to an increase in headcount and consultants supporting our
engineering, design, and product teams. Other increases include amortized costs
of $11.4 million primarily due to intangible assets related our Guilded and
Loom.ai acquisitions.
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General and administrative

                                                                      2020 to
                                    Year Ended December 31,             2021
                                      2021                2020        % Change

                                    (dollars in thousands)
General and administrative    $     303,020            $ 97,341          211  %


General and administrative expenses increased $205.7 million, or 211%, for the
year ended December 31, 2021 compared to the year ended December 31, 2020. The
increase is primarily due to an increase of $124.9 million in professional
services expenses, including one-time fees related to the Direct Listing of
$50.7 million. The majority of the remaining costs is related to NMPA lawsuit
and other litigations settled and paid during the period as well as accruals for
other litigation and related changes recorded during the period. The increase is
also due to an increase in headcount in our finance, accounting, people, IT and
legal functions as part of our transition to a publicly traded company.
Personnel costs increased $75.9 million to support increased headcount, and
includes $47.0 million increase for stock-based compensation expense.

Sales and marketing

                                                                 2020 to
                              Year Ended December 31,              2021
                                 2021                2020        % Change

                               (dollars in thousands)
Sales and marketing     $      86,363             $ 58,384           48  %


Sales and marketing expenses increased $28.0 million, or 48%, for the year ended
December 31, 2021 compared to the year ended December 31, 2020. This increase is
due to an additional $22.0 million in personnel costs, including stock-based
compensation expense of $7.5 million. The increase also includes $3.6 million
related to marketing and promotional expenses.

Interest income, interest expense, other income/(expense), and provision
for/(benefit from) income taxes

                                                                                                                2020 to
                                                                    Year Ended December 31,                      2021
                                                                     2021                   2020               % Change

                                                                     (dollars in thousands)
Interest income                                             $          92                $  1,822                     (95) %
Interest expense                                            $      (6,998)               $      -                    (100)
Other income/(expense), net                                 $      (1,796)               $    (32)                  5,513
Provision for/(benefit from) income taxes                   $        (320)               $ (6,656)                    (95)


Interest income decreased $1.7 million for the year ended December 31, 2021 as
compared to the year ended December 31, 2020. The decrease is primarily due to
liquidation of our investments in fiscal year 2020 and decrease in interest
rates in fiscal year 2021 compared to 2020.

Interest expense increased by $7.0 million for the year ended December 31, 2021
as compared to the year ended December 31, 2020. The increase is primarily due
to amortization of debt issuance costs of $0.2 million and contractual interest
of $6.7 million on the 2030 Notes issued in October 2021.

Other income/(expense), net changed by $1.8 million for the year ended
December 31, 2021 as compared to 2020. The change was primarily due to a loss of
$1.9 million on remeasurement of warrant liability recorded in 2020 and increase
in foreign exchange loss by $4.1 million in the year ended December 31, 2021 as
compared to 2020. The change was offset was other miscellaneous charges of $0.4
million recorded in the year ended December 31, 2020.
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Provision (benefit) for income taxes decreased by $6.3 million for the year
ended December 31, 2021 as compared to prior year ended December 31, 2020. The
change was primarily due to the difference in the acquired deferred taxes in the
Guilded acquisition in the year ended December 31, 2021 compared to the acquired
deferred taxes in the Loom.ai acquisition in the year ended December 31, 2020.

Liquidity and Capital Resources

As of December 31, 2021, our principal sources of liquidity were cash and cash
equivalents of $3.0 billion, which were held for working capital purposes,
capital expenditures and acquisitions.

Since our inception, we have financed our operations primarily through cash
generated from operations and, to a lesser extent, sales of convertible
preferred stock, borrowings under our credit facilities and, more recently, the
sale of our 2030 Notes. We bill and collect payment upfront for our bookings.


On October 29, 2021, we issued the 2030 Notes, which will mature on May 1, 2030,
unless earlier repurchased or redeemed. Interest is payable semi-annually in
arrears on May 1 and November 1 of each year, commencing on May 1, 2022. The net
proceeds from the 2030 Notes issuance were approximately $987.5 million and we
intend to use the net proceeds for general corporate purposes, which may include
production and development, capital expenditures, investments, working capital,
and potential acquisitions and strategic transactions.

As of December 31, 2021, contractual obligations related to the 2030 Notes are
payments of $39.1 million in 2022 and $38.8 million each year from 2023 through
2029 and $1,019.4 million due in 2030. These amounts represent principal and
interest cash payments over the term of the 2030 Notes. Any future redemption of
the 2030 Notes could impact the amount or timing of our cash payments.

For more information regarding the 2030 Notes, see Note 8, “Debt” to the Notes
to Consolidated Financial Statements.


In January 2021, we completed a private placement and sold an aggregate of 11.9
million shares of our Series H convertible preferred stock at a purchase price
of $45.00 per share for net proceeds of approximately $534.3 million.

In February 2019, we entered into an agreement for a revolving line of credit,
with maximum borrowings of up to $50.0 million available under the line, due
February 2020. Outstanding borrowings under the line of credit bear interest at
1.5% per annum. In February 2020, this credit facility was renewed for a
one-year period. In February 2021, we terminated the credit facility agreement.
No amounts had been borrowed under the revolving line of credit.

We have non-cancelable lease arrangements for office facilities and space for
data center operations expiring in various years through 2031. As of December
31, 2021, the Company had fixed lease payment obligations of $278.4 million,
with $59.9 million payable within 12 months.

For more information regarding the operating lease commitments, refer to Note 3,
“Leases” to the Notes to Consolidated Financial Statements.


Our other purchase obligations primarily consist of non-cancelable obligations
with our data center hosting providers and software vendors. As of December 31,
2021, we had other purchase obligations of $40.1 million, with $16.0 million
payable within 12 months.

In addition, as of December 31, 2021, we had $9.9 million in letters of credit
outstanding related to our office facilities in San Mateo, California and data
center facilities in Ashburn, Virginia.

For more information regarding our contractual obligations, refer to Note 9,
“Commitments and Contingencies” to the Notes to Consolidated Financial
Statements.

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As of December 31, 2021, we have generated losses from our operations as
reflected in our accumulated deficit of $983.9 million as of December 31, 2021,
and positive cash flows from operating activities for each of the periods
presented. A substantial source of our cash provided by operating activities is
our deferred revenue, which is included on our consolidated balance sheets as a
liability. Deferred revenue consists of the unearned portion of bookings for
which we have already received cash and, which is recorded as revenue over the
estimated average lifetime of a paying user or as the virtual items are
consumed.

We expect to continue to incur operating losses for the foreseeable future due
to the investments that we intend to make in our business.


We believe our existing cash and cash equivalents, together with cash provided
by operations, will be sufficient to meet our needs for the next 12 months. Our
future capital requirements, however, will depend on many factors, including our
growth rate, investment in our headcount, capital expenditures to build out new
facilities and purchase hardware for infrastructure, timing and extent of
spending to support our efforts to develop our Platform, and the effects of
inflation on these various expenses. We may in the future enter into
arrangements to acquire or invest in complementary businesses, services, and
technologies, including intellectual property rights. In the event that
additional financing is required from outside sources, we may seek to raise
additional funds at any time through equity, equity-linked arrangements, and
debt. If we are unable to raise additional capital when desired and at
reasonable rates, our business, results of operations, and financial condition
would be adversely affected. See Part 1, Item 1A. "Risk Factors" for more
information.

Our principal uses of cash in recent periods have been funding our operations,
making capital expenditures and acquisitions.

Cash Flows

The following table summarizes our cash flows for the periods presented (in
thousands):


                                                    Year Ended December 31,
                                                      2021             2020
Consolidated Statements of Cash Flows Data:
Net cash provided by operating activities       $      659,109      $ 524,340
Net cash (used in) investing activities         $     (146,821)     $ (97,030)
Net cash provided by financing activities       $    1,598,124      $ 164,972


Operating activities

Our largest source of operating cash is cash collection from sales of Robux to
our paying users. Our primary uses of cash from operating activities are for
payment processing fees, personnel-related expenses, data center and
infrastructure-related operations, and developer exchange fees.

During the year ended December 31, 2021, cash provided by operating activities
was $659.1 million, which consisted of a net loss of $503.5 million, adjusted
by non-cash charges of $462.3 million and net cash inflows from the change in
net operating assets and liabilities of $700.3 million. The non-cash charges
were primarily comprised of stock-based compensation of $341.9 million and
depreciation and amortization of $75.6 million. The net cash inflows from the
change in our net operating assets and liabilities was primarily due to a
$819.9 million increase in deferred revenue and a $83.0 million increase in
developer exchange liability offset by a $172.8 million increase in deferred
cost of revenue and a $61.0 million increase in accounts receivable, all due to
increases in bookings. A majority of our bookings and costs of revenue is
deferred over a 23 month period as they pertain to the sale and associated costs
pertaining to durable goods. In addition, the increase in net cash inflows was
also driven by $58.8 million increase in accrued expenses primarily due to ESPP
liability and other tax related liabilities.

During the year ended December 31, 2020, cash provided by operating activities
was $524.3 million, which consisted of a net loss of $257.7 million, adjusted
by non-cash charges of $126.0 million and net cash inflows from the change in
net operating assets and liabilities of $656.0 million. The non-cash charges
were primarily comprised of stock-based compensation of $79.2 million and
depreciation and amortization of $43.8 million. The net cash inflows from the
change in our net operating assets and liabilities was primarily due to a
$965.9 million increase in deferred revenue and a $49.9 million increase in
developer exchange liability offset by a $230.4 million increase in deferred
cost of revenue and a $156.9 million increase in accounts receivable, all due to
increases in bookings.
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Investing activities


During the year ended December 31, 2021, cash used in investing activities was
$146.8 million, primarily consisting of cash used in capital expenditures of
$93.2 million, payments related to business combination of $45.7 million, and
cash paid for purchase of intangible assets of $7.9 million.

During the year ended December 31, 2020, cash used in investing activities was
$97.0 million, primarily consisting of cash used in capital expenditures of
$104.2 million, and payments related to business combination of $40.9 million,
offset by cash provided by net maturities of marketable securities of
$57.0 million.

Financing activities


During the year ended December 31, 2021, cash provided by financing activities
was $1,598.1 million primarily consisting of proceeds of $987.7 million from the
issuance of 2030 Notes, net of debt issuance costs, $534.3 million from the
issuance of convertible preferred stock, and proceeds of $76.2 million from the
exercise of stock options.

During the year ended December 31, 2020, cash provided by financing activities
was $165.0 million primarily consisting of net proceeds of $149.7 million from
the issuance of convertible preferred stock and proceeds of $15.2 million from
the exercise of stock options.

Critical Accounting Policies and Estimates


Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with GAAP. The preparation of these financial statements requires us
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, as well as the reported revenue generated, and
expenses incurred during the reporting periods. Our estimates are based on our
historical experience and on various other factors that we believe are
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. To the extent that there
are differences between our estimates and actual results, our future financial
statement presentation, financial condition, results of operations, and cash
flows will be affected.

An accounting policy is considered to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain
at the time the estimate is made, and if different estimates that reasonably
could have been used, or changes in the accounting estimates that are reasonably
likely to occur periodically, could materially impact the consolidated financial
statements.

We believe that the accounting policies discussed below are critical to
understanding our historical and future performance, as these policies relate to
the more significant areas involving management’s judgments and estimates.


Refer to Note 1, "Overview and Summary of Significant Accounting Policies" to
the Notes to Consolidated Financial Statements for a full description of our
revenue and stock-based compensation policy.
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Revenue Recognition


In accordance with ASC 606, Revenue from Contracts with Customers, revenue is
recognized when control of the service is transferred to the customer. The
amount of revenue recognized reflects the consideration that we expect to be
entitled to in exchange for these services. To achieve the core principle of
this standard, we determine revenue recognition by:

•identifying the contract, or contracts, with the customer;

•identifying the performance obligations in the contract;

•determining the transaction price;

•allocating the transaction price to performance obligations in the contract;
and

•recognizing revenue when, or as, we satisfy performance obligations by
transferring the promised services.

We derive substantially all of our revenue from the sale of virtual items on the
Roblox Platform.


Roblox Platform

We operate the Roblox Platform as live services that allow users to play and
socialize with others for free. Within the experience, however, users can
purchase virtual currency (Robux) to obtain virtual items to enhance their
social experience. Proceeds from the sale of Robux are initially recorded in
deferred revenue and recognized as revenues as a user purchases and uses virtual
items. Our identified performance obligation is to provide users with the
ability to acquire, use, and hold virtual items on the Roblox Platform over the
estimated period of time the virtual items are available to the user or until
the virtual items are consumed.

Users can purchase Robux, as one-time purchases or through monthly subscriptions
via mobile payments, credit cards, or prepaid cards. Payments from users are
non-refundable and relate to noncancellable contracts for a fixed price that
specify our obligations. Revenue is recorded net of taxes assessed by a
government authority that are both imposed on and concurrent with specific
revenue transactions between us and our users, and estimated chargebacks. Such
payments are initially recorded to deferred revenue.

The satisfaction of our performance obligation is dependent on the nature of the
virtual item purchased and as a result, we categorize our virtual items as
either consumable or durable.


•Consumable virtual items represent items that can be consumed by a specific
user action. Common characteristics of consumable virtual items may include
items that are no longer displayed on the user's inventory after a short period
of time or do not provide the user any continuing benefit following consumption.
For the sale of consumable virtual items we recognize revenue as the items are
consumed.

•Durable virtual items represent items which result in a persistent change to a
users' character or item set (e.g., virtual hat, pet, or house). These items are
generally available to the customer to hold, use, or display for as long as they
are on our Roblox Platform. We recognize revenue from the sale of durable
virtual items ratably over the estimated period of time the items are available
to the user on the Roblox Platform.

To separately account for consumable and durable virtual items, we specifically
identify each purchase for the majority of virtual items purchased on the Roblox
Platform. For the remaining population, we estimate the amount of consumable and
durable virtual items purchased based on data from specifically identified
purchases and the expected behavior of the users within similar experiences. The
estimation of amount of consumable and durable virtual items purchased for the
population of purchases not specifically identified, requires management's
judgement as it requires us to evaluate and estimate the expected behavior of
users in the population using information from known purchases in similar
experiences.

The average lifetime of a paying user estimate is calculated based on historical
monthly retention data for each user cohort to project future participation on
the Roblox Platform and is currently estimated to be 23 months. Determining the
estimated average lifetime of a paying user requires management's judgment as it
requires us to analyze the most recent trends in player cohort activity and
other qualitative factors to estimate the average lifetime of a paying user. We
also consider results from prior analyses in determining the estimated average
lifetime of a paying user. We believe this estimate is the best representation
of the average life of the durable virtual items.
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Stock-Based Compensation


We measure and recognize stock-based compensation expense based on the estimated
grant date fair value of the awards. We have granted certain awards, consisting
primarily of stock option awards, RSUs, PSUs, and stock purchase rights granted
under the 2020 ESPP. We account for forfeitures as they occur.

We estimate the fair value of stock options and stock purchase rights granted
under the 2020 ESPP using the Black-Scholes option-pricing model and recognize
expense on a straight-line basis over the requisite service period of the
awards. The Black-Scholes option pricing model requires certain subjective
inputs and assumptions, including the fair value of our Class A common stock,
the expected term, risk-free interest rates, expected stock price volatility,
and expected dividend yield of our Class A common stock. The assumptions used to
determine the fair value of the option awards and the stock purchase rights
granted under the 2020 ESPP represent management's best estimates. These
estimates involve inherent uncertainties and the application of management's
judgment. These assumptions and estimates are as follows:

•Fair value of Class A common stock-Prior to the Direct Listing, we estimated
the fair value of Class A common stock, as discussed below in the section titled
"Common Stock Valuations." After the completion of the Direct listing, the fair
value of our Class A common stock is determined based on the NYSE closing price
on the date of grant.

•Expected term-The expected term represents the period that our stock-based
awards are expected to be outstanding. The expected term assumptions were
determined based on the vesting terms, estimated exercise behavior, post-vesting
cancellations and contractual lives of the awards.

•Risk-free interest rates-The risk-free interest rate is based on the implied
yields in effect at the time of the grant of U.S. Treasury notes with terms
approximately equal to the expected term of the award.


•Expected stock price volatility-Prior to the Direct Listing, we used the
historical volatility of the Class A common stock price of similar
publicly-traded peer companies. After the completion of the Direct Listing we
continue to use the historical volatility of the stock price of similar publicly
traded peer companies since we have not established sufficient public trading
history.

•Expected dividend yield-Our expected dividend yield is zero, as we have not yet
paid and do not anticipate paying dividends on our common stock.


The fair value of RSUs is estimated based on the fair value of our common stock
on the date of grant. Prior to the Direct Listing, we estimated the fair value
of Class A common stock, as discussed below in the section titled "Common Stock
Valuations." After the completion of the Direct listing, the fair value of our
Class A common stock is determined based on the NYSE closing price on the date
of grant.

CEO Long-Term Performance Award


In February 2021, the leadership development and compensation committee of our
board of directors granted our Chief Executive Officer a Long-Term Performance
Award, or CEO Long-Term Performance Award, an RSU award that includes a service
and a market condition. The fair value of the CEO Long-Term Performance Award is
determined using a Monte Carlo simulation model. One of the most judgmental
assumptions in the Monte Carlo simulation is the estimated fair value of the
common stock underlying the award as discussed below in the section titled
"Common Stock Valuations.". We estimated the expected term based on the time
period from the valuation date to the end of the performance period. The
risk-free interest rate is based on the United States treasury yield curve in
effect at the time of grant for zero-coupon U.S. Treasury notes. The expected
volatility is derived from the historical stock volatility of selected peers
over a period equivalent to the expected term of the CEO Long-Term Performance
Award. The associated stock-based compensation is recorded over the derived
service period, using the accelerated attribution method. If the stock price
goals are met sooner than the derived service period, we will adjust the
stock-based compensation expense to reflect the cumulative expense associated
with the vested portion of the CEO Long-Term Performance Award. Provided that
David Baszucki continues to be our Chief Executive Officer, stock-based
compensation expense is recognized over the derived service period, regardless
of whether the stock price goals are achieved.
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Common Stock Valuations


Prior to the Direct Listing, due to the absence of a public trading market for
our common stock, and in accordance with the American Institute of Certified
Public Accountants Accounting and Valuation Guide: Valuation of Privately-Held
Company Equity Securities Issued as Compensation, our board of directors along
with management exercised its reasonable judgment and considered numerous
objective and subjective factors to determine the best estimate of fair value of
our common stock, including:

•the prices at which we or other holders sold our common and convertible
preferred stock to outside investors in arms-length transactions;

•contemporaneous valuations performed by an unrelated third-party valuation
firm;

•our operating and financial performance;

•the lack of marketability of our common stock;

•the valuation of comparable companies;

•the industry outlook;

•the likelihood of achieving a liquidity event, such as an initial public
offering or a sale of our company given prevailing market conditions; and

•the U.S. and global economic and capital market conditions and outlook.


We determine the fair value of our common stock using the most observable inputs
available to us, including income approaches as well as recent sales of our
stock. The income approach estimates the value of our business based on the
future cash flows we expect to generate discounted to their present value using
an appropriate discount rate to reflect the risk of achieving the expected cash
flows.

We also considered any secondary transactions involving our capital stock. In
our evaluation of those transactions, we considered the facts and circumstances
of each transaction to determine the extent to which they represented a fair
value exchange. Factors considered include transaction volume, timing, whether
the transactions occurred among willing and unrelated parties, and whether the
transactions involved investors with access to our financial information.

Recent Accounting Pronouncements

See section “Recent Accounting Pronouncements” within Item 8. Financial
Statements and Supplementary Information, Note 1, “Overview and Summary of
Significant Accounting Policies”, for discussion of recent accounting
pronouncements.

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