Roku Revenue Jumps 73% on Higher Player Sales, Ad Revenue Growth
Roku revenue soared 73% in Q3 to $452 million on demand for TV streaming products, growth in advertising and expansion of content distribution partnerships, said the company in a Thursday shareholder letter. Advertisers “reassessed their TV upfront advertising commitments and moved significant portions of their investments to connected TV platforms like Roku,” said CEO Anthony Wood on a Thursday investor call.
Advertising with Roku gave marketers additional reach over linear TV and capability to target advertising and measure effectiveness, said Wood. Some 97% of TV advertisers that spent $1 million or more with Roku in Q3 last year returned in the 2020 quarter; the company closed 2021 upfront deals with the six major agency holding companies at increased levels of commitments.
Unit sales of Roku players jumped 57% year on year, the highest growth in seven years, while average selling price slipped 1%, “given less promotional activity due to strong demand resulting in tight inventory levels for certain products,” said Chief Financial Officer Steve Louden on the call. He referenced “significant retailer channel inventory replenishment” after Q2 player sales, continued “robust demand” for streaming players in Q3 and a portion of holiday inventory arriving at the end of Q3.
Pivotal Research Group analyst Jeffrey Wlodarczak said in a Friday investor note that the “significant revenue beat” was due to a “favorable backdrop” of cord cutting, COVID-19 stay-at-home orders, “relatively few competitors" in direct-to-consumer aggregation and an election-driven advertising rebound. Q3's 2.9 million net new active subscriber accounts topped PRG’s forecast of 2.7 million.
Wlodarczak maintained his view that Roku will be squeezed by Comcast, Cox and other traditional distributors “attacking the [over-the-top] aggregation opportunity,” including reports Comcast is in early talks with Walmart about creating branded TVs with built-in Flex service (see 2011040001). Google is expanding relationships with TV makers for Chromecast, he noted, while Netflix is signing distribution deals with traditional distributors to bundle service into pay-TV or internet offers, “which obviates the need for Roku.”
Wedbush analyst Michael Pachter raised estimates for Roku, citing “more substantial growth than we anticipated.” Roku’s growth is “sustainable” because most advertising remains on linear TV and “will continue to shift in Roku’s direction” as content moves to OTT platforms. “Roku is only in the early stages of its international expansion,” he said.
Roku users streamed 14.8 billion hours in the quarter, up 54% year over year; streaming hours per active account grew 9%, after easing of pandemic-related restrictions in summer, said the company. The number of active accounts rose 43% to 46 million on strong player and Roku TV sales in U.S. and international markets. Average revenue per user rose 20% to $27.
Roku again didn't provide quarterly guidance due to global COVID-19 resurgences, along with uncertainties about the holiday season and consumer spending levels. Louden said Q4 year-over-year revenue growth will be in line with the last few holiday seasons, in the mid-40% range. The company expects platform receipts to be about two-thirds of total Q4 revenue. Shares closed 12.6% higher Friday at $253.36.