Roku Tops 30 Million Subs, Stock Up Nearly 9%

Roku hit a fiscal home run Aug. 7, beating its estimates for second-quarter (ended June 30) revenue, gross profit and pre-tax earnings.

The streaming media device manufacturer and over-the-top operating system, said it ended the quarter with more than 30 million active user accounts — up 39% from 22 million accounts in the previous-year period.

Total revenue increased 59% to $250.1 million, while platform (ad-supported) revenue skyrocketed 89% to $167.7 million.

Streaming device revenue increased 24% to %82.4 million from $66.5 million last year.

“The industry-wide shift to streaming is accelerating,” founder/CEO Anthony Wood and CFO Steve Louden wrote in the shareholder letter.

At the same time, Roku is attempting migrate revenue away from hardware to advertising and evergreen software sales. As a result, hardware operating income dropped 69% to $4.5 million from $14.7 million, due in part to lower pricing for Roku players and streaming sticks.

“As anticipated, gross margin declined sequentially due to continued mix shift to video advertising, the introduction of premium subscriptions and our strategy of driving down player [average sales pricing] … grows our active accounts faster,” Wood and Louden wrote.

The net effect resulted in loss from operations increasing to $10.4 million from $100,000 last year.

Regardless, Roku’s status among TV manufacturers seeking connectivity with the Internet remains strong.

According to Kantar Milward Brown, Roku is the No. 1 TV streaming platform in the U.S. by hours streamed. Last month, Strategy Analytics reported that the Roku operating system powers about 41 million OTT devices and smart TVs in the U.S. This is 36% greater than the next closest competitor and expected to grow.

Separately, Parks Associates consumer survey data revealed Roku had 39% of the U.S. streaming media player installed base as of Q1 2019.

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Roku disclosed it has partnered with Walmart to roll out a series of OEM branded streaming devices under the retailer’s name.

“This is in addition to Roku TVs and Roku players already sold through Walmart,” they wrote. “Our purpose-built OS allows us to offer superior streaming experiences to consumers at attractive price points.”

Wood and Louden contend 3.5 million U.S. TV households cut the cord from March 2018 through February of 2019, moving from traditional pay-TV to streaming.

“‘Cord-cutters’ and ‘cord-nevers’ access video on their TV exclusively through streaming and Roku has the largest share in the U.S.,” read the letter. “This is a valuable strategic position for our advertising business as brands cannot reach these consumers via traditional linear TV.”


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