Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Roku Inc (ROKU, Financial) reported a 14% year-over-year increase in streaming households, reaching 83.6 million.
- Streaming hours grew by 20% year-over-year, indicating strong user engagement.
- Platform revenue increased by 11% year-over-year, driven by both streaming services distribution and advertising activities.
- Roku Inc (ROKU) achieved its fourth consecutive quarter of positive adjusted EBITDA and generated positive free cash flow.
- The company expanded its retail distribution for Roku-branded TVs, contributing to a 39% year-over-year increase in devices revenue.
Negative Points
- Platform gross margin remained relatively flat year-over-year, while devices gross margin was negative 11%, indicating challenges in the devices segment.
- The Media and Entertainment (M&E) vertical continues to face challenges, impacting overall platform revenue growth.
- Despite the growth in streaming households and hours, the Average Revenue Per User (ARPU) remained flat year-over-year at $4.68.
- The company anticipates a challenging year-over-year growth rate comparison within streaming services distribution for Q3.
- Roku Inc (ROKU) expects device margins to remain in the negative low double digits for the next several quarters due to the ramp-up of Roku-branded TVs.
Q & A Highlights
Q: There's been a lot of commentary recently about excess supply of PC inventory in the market and downward pressure on CPMs. What are you seeing?
A: Anthony Wood, CEO: Roku is not impacted by market-driven pricing changes in the same way as other streaming services because we are a streaming platform with diversified revenue streams. Our platform business includes streaming services distribution and advertising, both of which are diversified. We continue to grow streaming households and engagement, and our unique ad products and sponsorships integrated throughout the viewer experience help drive our growth.
Q: What kind of lift are you expecting in demand or pricing from the UID partnership with Trade Desk?
A: Charles Collier, President, Roku Media: The partnership with Trade Desk has been well received and is expected to drive demand. Unified ID 2.0 (UID2) will allow for more precise targeting and enhanced data collaboration. We are also growing relationships across the programmatic demand and measurement ecosystem, which will help differentiate Roku and benefit advertisers.
Q: What is the north star for Roku's subscription revenue streams over the next year?
A: Anthony Wood, CEO: A big goal is to reaccelerate platform monetization. We are focused on expanding third-party partnerships to increase ad demand, building unique ad products into our UI, and growing our subscription business by signing up new subscribers and reducing churn. The home screen is a key asset, and we plan to evolve it to drive more monetization.
Q: Can we look at big box office movies as a lead indicator for Roku's M&E revenue?
A: Anthony Wood, CEO: M&E is broad-based and not just about new releases. It includes services on the platform that want to sign up new subscribers, increase engagement, or sell transactions. While big movies can drive engagement, M&E is deeply integrated into the platform and involves various ways to drive subscriptions, transactions, and engagement.
Q: Was there a 606 adjustment in the quarter, and how does it impact revenue acceleration?
A: Dan Jedda, CFO: Yes, there was a 606 adjustment in Q2, similar to last quarter, primarily due to subscription price increases. We don't forecast 606 adjustments, but they are taken into account in our outlook. The acceleration in Q4 will be led more by the advertising business, with SSD moderating due to difficult comps from last year's price increases.
Q: Why now on using third-party DSPs to sell Roku Channel ad inventory?
A: Anthony Wood, CEO: Integrating with third-party partners is not new, but we are now focusing on it as a key initiative to drive more demand for our ads. The evolution of the industry towards programmatic demand platforms makes this the right time. Charlie Collier, President, Roku Media, added that being an interoperable platform in a world that is not often open or interoperable will differentiate Roku and benefit advertisers.
Q: Can you provide an update on the news front and the impact of political advertising in the second half of the year?
A: Charles Collier, President, Roku Media: We are seeing good momentum on the news front and growing our share. Political advertising holds us in a strong position, and we are improving every cycle. Our unique position to lead into all of television, as seen with our Olympics partnership, benefits viewers, content owners, and advertisers.
Q: How are fill rates evolving with increasing programmatic buying activity and ad tech partnerships?
A: Charles Collier, President, Roku Media: The entire platform is growing, and the Roku Channel is up over 75% year-over-year. This growth helps handle pricing and demand fluctuations. We expect a steady ramp of demand and ad revenues into the back half of the year, driven by our advanced data, scale, and ability to handle supply.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
