ROKU STREAMING HOURS INCREASE BY 80% IN APRIL, NEARING 40 MILLION ACCOUNTS IN Q1

Roku’s first-quarter revenue surpassed Wall Street’s estimates as the Covid-19 pandemic has resulted in a massive spike in numbers for the company. However, concerns that advertising revenue growth will decrease in 2020 due to a pullback in U.S. spending continue to arise. “Some of the trends are positive for us, some of them are short-term negative,”  CFO Steve Louden said. “But most of these trends accelerate the long-term trend toward streaming. The positive for us in OTT is that for the money that’s left in marketers’ budgets, they’ll be looking for measurable and targeted spend.”

Roku posted a USD 320.8 million revenue, reflecting a 55% year-over-year increase, and higher than analyst consensus estimates of USD 306.7 million, and a net loss of USD 54.6 million, which equals to 45 cents per share in line with expectations. Shares of Roku were down over 9% in after-hours trading, during which investors reacted to the company’s expectation that the pace of ad revenue growth would be impacted for the rest of the year. The stock closed up by 7.8% in the regular session. The company confirmed that it ended Q1 with 39.8 million active accounts, 2.9 million more than the prior quarter’s net increase, which classified as a record as well, with 4.6 million more accounts and a 37% year-over-year increase. Streaming hours in Q1 totaled 13.2 billion, a 49% year-over-year increase, a smaller year-to-year increase than the 68% jump Roku reported in Q4, and a sequential decline from 16.3 billion hours for the last three months of 2019.

According to Roku, the acceleration of growth in Roku viewership and new accounts continued in April. Active accounts grew by 38% last month versus April 2019, driven by a total of 70% year-over-year increase in new accounts. In April, streaming hours rose by 80% year-over-year, driven by an increase in streaming hours per account of about 30%. “The pandemic associated stay-at-home orders and increased unemployment appear to have accelerated the shift from linear TV viewing to streaming during the past few weeks,”  Louden and Founder/CEO Anthony Wood wrote in a letter to shareholders.

Subscription video-on-demand trials and subscriptions and transactional VOD purchases have massively increased since the pandemic touched the U.S. in mid-March, but Roku’s advertising business has also seen a rise in cancellations as overall ad budgets have declined, which has partially been offset by the spending that has transferred from traditional TV budgets to Roku’s over-the-top video. Roku executives say they expect the ad business to deliver “substantial revenue growth” on a year-over-year basis, “albeit at a slower pace and lower gross profit than we originally expected for the year.” 

During the first quarter, sales in Roku’s Platform segment (advertising and subscription/transactional revenue) “popped” by 73%, to USD 232.6 million. The Player segment (hardware) revenue increased by 22%, to USD 88.2 million. The company had already estimated that Q1 revenue would be slightly higher than expected, with alternative metrics generally in-line with prior outlook, as it pulled guidance for 2020 given economic uncertainty with the Covid-19 pandemic. Although Roku says it benefits from the boom of streaming amid the pandemic’s stay-at-home orders, it rolled out its “Are you still watching?” feature in Q1, which exits videos after long periods of inactivity. Therefore, it was expected to reduce overall streaming time across its user base. Earlier this week, Roku announced its OneView Ad Platform, which will integrate Roku’s advertising inventory with identity and attribution tools of demand-side platform Dataxu, which the company acquired in November 2019.