Roku shares rose over 6% in after-hours trading on Thursday as the streamer and hardware maker continued to narrow its net losses and beat Wall Street expectations with a smaller than expected earnings per share loss and better than expected revenue for its second quarter of 2024.
Here are the top-line results:
- Net loss: $33.95 million, narrowing 68% compared to $107.6 million in the year-ago period.
- Earnings per share: A loss of 24 cents per share compared to an estimated loss of 45 cents per share by analysts surveyed by Zacks Investment Research.
- Revenue: $968 million, up 14% year over year, compared to an estimated $935.29 million by analysts surveyed by Zacks Investment Research.
- Streaming Households: 83.6 million, an increase of 2 million from the previous quarter and 14% year over year.
Platform revenue for the quarter, which is largely based on advertising sales and subscription revenues split with partners, grew 11% year over year to $824 million, reflecting contributions from streaming services distribution
and advertising activities, despite continued softness within the media and entertainment (M&E) vertical. Meanwhile, devices revenue increased 39% year over year to $143.8 million, driven by the expansion of the retail distribution of Roku-branded TVs.
Average revenue per user was flat year over year at $40.68 on a trailing 12-month basis, reflecting an increasing share of international streaming households, where the company is in the early stages of its monetization efforts and focused on scale and engagement.
Total gross profit grew 12% year over year to $425 million and total operating expenses fell 2% to $495.9 million. Roku reported its fourth consecutive quarter of positive adjusted EBITDA and free cash flow, which came in at $43.6 million and $317.9 million, respectively, which it attributed to “top-line growth and ongoing operational efficiencies.”
During the quarter, streaming services distribution activities grew faster than platform revenue overall, primarily due to price increases for subscription-based apps on its platforms.
“We have increased our focus on growing the share of subscriptions billed through Roku Pay, our payments and billing service that makes it easy for both our viewers and content partners to transact subscriptions,” the company wrote in its quarterly shareholder letter. “The new Content Row on our Home Screen is helping to drive Roku-billed subscription sign-ups, by highlighting popular titles from SVOD services on our platform, and we see upside ahead in this growth area.”
The Roku Home Screen reaches more than 120 million people in America every day. Viewers streamed 30.1 billion hours during the quarter, an increase of 20% year over year or 5 billion hours, with an average of 4 streaming hours per streaming household per day, up from 3.8 hours in the year-ago period. More than 70% of The Roku Channel’s streaming hours originated from Home Screen features such as the Content Row, Live TV and What to Watch.
The company touted its sports offerings as one of its fastest growing features, with streaming hours from the Roku Sports Experience more than tripling year over year. The company recently launched an MLB Zone, in addition to its NFL and NBA Zones. It also secured exclusive multi-year rights to the MLB’s Sunday Leadoff live games, which are available for free on The Roku Channel.
Though the foundation of its content spend remains with third-party licenses and revenue shares, the company continues to leverage its Roku Originals to attract viewers and advertisers.
“We do have distinct advantages over the streaming services that compete on our platform, so our unique assets allow us to adapt and be less impacted than others seem to be by market supply dynamics,” Roku Media president Charles Collier told analysts on Thursday.
Looking ahead, Roku expects its monetization initiatives to help accelerate revenue from advertising in the second half of 2024 as it looks beyond its challenged M&E vertical for future growth. Those initiatives include expanding third party partnerships and offering its new marquee video ad unit, which sold out in the first month of its invite-only beta, to more brands.
“We are very good at M&E and we’re getting better at it, and it’s a good business for us,” Roku CEO Anthony Wood told analysts. “But the key factor that’s driving the reason it’s challenged is because it’s pretty simple that a lot of streaming services are pulling back on their marketing budgets, and that’s having some impact on the market and us as well.”
For the third quarter, the company is forecasting net revenue growth of 11% year over year to $1.01 billion, with 9% year over year growth in platform revenue and 24% year over year growth in devices revenue. It also anticipates gross profit of $440 million, a net loss of $50 million and adjusted EBITDA of $45 million, reflecting ongoing operational discipline. Additionally, it expects a sequential increase in platform revenue’s year over year growth rate in the fourth quarter.
“We remain confident in our ability to accelerate platform revenue in 2025 and beyond as we maximize ad demand, lean into our Home Screen as the lead-in for TV, and grow Roku-billed subscriptions,” the letter concluded.
