Roku reported better-than-expected third quarter results, driven by strong growth in active accounts and a rebound in video advertising revenue.
| Metric | Q3’22 | Q4’22 | Q1’23 | Q2’23 | Q3’23 | YoY% |
|---|---|---|---|---|---|---|
| Active Accounts (millions) | 65.4 | 70.0 | 71.6 | 73.5 | 75.8 | 16% |
| Streaming Hours (billions) | 21.9 | 23.9 | 25.1 | 25.1 | 26.7 | 22% |
| ARPU ($) | $44.01 | $41.68 | $40.67 | $40.67 | $41.03 | (7)% |
The streaming platform company said it added 2.3 million active accounts sequentially in Q3, bringing its total to 75.8 million globally. Total streaming hours also hit a record 26.7 billion, up 22% from a year ago. Roku said this milestone marks the first time streaming hours have surpassed 100 billion hours over a trailing 12-month period.
Total revenue for the quarter rose 20% to $912 million, ahead of analysts’ estimates of $891 million. Platform revenue, which includes ad sales and content distribution fees, grew 18% to $787 million. Roku said growth was fueled by contributions from both video advertising and content distribution revenue.
After a challenging first half, Roku saw signs of recovery in the ad market. The company said YoY growth in video advertising on its platform outpaced both the overall ad market and TV advertising. This was driven in part by Roku’s efforts to diversify ad sources and expand partnerships. Roku is seeing strong growth in content distribution revenue from recent SVOD price increases and subscription signups. The company’s Roku TVs are also the number one selling smart TVs in Mexico, apparently.
On the downside, Roku is now facing pressures from Amazon as it enters the advertising fray with Fire TV, in the face of continuing uncertainty in the ad market. Growth rates are going to be hard to maintain into the fourth quarter, and Roku seems to be spending quite a bit of money on content for its channel, which is driving down margins and profits.
“We remain committed to achieving positive adjusted EBITDA for full year 2024 with continued improvements after that,” said Roku CEO Anthony Wood. “We will balance this commitment with investments to further expand our scale, engagement and monetization.”
For the fourth quarter, Roku expects revenue of approximately $955 million and gross profit of $405 million. It forecasts adjusted EBITDA will be around $10 million which would equate to a net loss of $85 million in the table below, but the company is focused on positive adjusted EBITDA which basically means that they have an argument for why the GAAP reported financials are not a true reflection of the business’ health. It’s subjective but there you have it.
| Financials ($ millions) | Q3 22 | Q4 22 | Q1 23 | Q2 23 | Q3 23 | YoY% |
|---|---|---|---|---|---|---|
| Platform revenue | $667.2 | $731.3 | $634.6 | $743.8 | $786.8 | 18% |
| Devices revenue | $94.2 | $135.8 | $106.4 | $103.4 | $125.2 | 33% |
| Total net revenue | $761.4 | $867.1 | $741.0 | $847.2 | $912.0 | 20% |
| Platform gross profit | $371.7 | $408.0 | $334.0 | $395.8 | $378.2 | 2% |
| Devices gross profit (loss) | ($14.9) | ($43.6) | $3.6 | ($17.6) | ($9.4) | (37)% |
| Total gross profit | $356.8 | $364.4 | $337.6 | $378.3 | $368.8 | 3% |
| Platform gross margin % | 55.7% | 55.8% | 52.6% | 53.2% | 48.1% | (7.6) pts |
| Devices gross margin % | (15.8)% | (32.1)% | 3.4% | (17.0)% | (7.5)% | 8.3 pts |
| Total gross margin % | 46.9% | 42.0% | 45.6% | 44.7% | 40.4% | (6.4) pts |
| Research and development | $207.6 | $220.7 | $220.1 | $192.4 | $282.2 | 36% |
| Sales and marketing | $209.4 | $297.6 | $233.9 | $227.2 | $307.7 | 47% |
| General and administrative | $86.8 | $96.0 | $96.1 | $84.7 | $128.7 | 48% |
| Total operating expenses | $503.8 | $614.3 | $550.1 | $504.2 | $718.6 | 43% |
| Income (loss) from operations | ($147.0) | ($249.9) | ($212.5) | ($126.0) | ($349.8) | 138% |
