Roku Adds Accounts During Lockdown; Stock Down Amid Slowing Impact

Lockdowns helped Roku add 3.2 million incremental active accounts, a record for a non-holiday quarter, said Chief Financial Officer Steve Louden on a Wednesday evening call (see materials here under Q2). The company ended Q2 up 41% year on year in active accounts, at 43 million, fueled by shelter-at-home mandates. Revenue jumped 42% to $356 million, reflecting growth in platform and player segments. Player sales rose 28%, while average selling price decreased “only 2% ... given less promotional activity due to strong demand” and some inventory constraints, said Louden. The stock closed 6.9% lower Thursday at $153.87. The outlook for that industry remains “highly uncertain” for this year and it will be “well into 2021 before TV ad investment recovers to pre-pandemic levels,” said CEO Anthony Wood. The ad streaming market is in “very early days,” said Wood, envisioning that “all television is going to stream. Streaming hours per active account peaked in early Q2 and “has since moderated, but remains above pre-COVID levels,” said Louden. Responding to a question on HBO Max and Peacock, which launched over the past few months outside the Roku platform, Wood said, “We're not always first when it comes to adding new services to our platform because it's important to us that we establish a win-win-win relationship.” The company wants to “add all the content that we can.” Roku’s economic model with content distribution partners and advertisers “is what funds our business” and allows the company to sell low-cost players." MoffettNathanson tempered its view in a Thursday investor note, saying “looming competition from Android and TV OEMs,” and lack of key performance data makes it difficult to extrapolate COVID-19 lockdown gains into the future. The slowdown in ad impression growth in Q2 to 50% from nearly doubling in Q1 “is a bit worrying” given linear ad market trends, said Michael Nathanson. Ad-based VOD “appears a bit weaker than anticipated” given the rise in active accounts, he said. Though Roku appears well-positioned for the trend, the analyst said “it remains unclear if they will get a cut of Mulan purchases on Disney+ or share the economics of similar transactions on other major [Subscription] VOD platforms” (see 2008050037).