Roku Earnings: What Happened with ROKU

^{Source: Predictions based on analysts’ consensus from Visible Alpha}

Roku (ROKU) Financial Results: Analysis

Roku, Inc. (ROKU) reported Q2 FY 2022 earnings results on July 28 that missed analysts’ expectations on earnings and revenue. The company reported a net loss per share that was wider than analysts had estimated. Revenue also fell short, climbing by 18.5% year-over-year (YOY) but missing analyst predictions by a sizable margin. One bright spot was Roku’s active accounts. Total active accounts grew by 14.5% YOY to 63.1 million, solidly beating consensus estimates.

Roku said that results were heavily impacted by a significant slowdown in TV advertising due to macroeconomic conditions. Consumer discretionary spending and advertising spending both dropped significantly. However, Roku said it has continued to boost advertising share while growing active accounts.

ROKU Active Accounts

Roku’s active accounts rose 14.5% YOY, narrowly outpacing the growth in this area for Q1 FY 2022, which had marked the slowest pace of growth in active accounts in several years. Growth in the company’s user base, as measured by active accounts, has generally been decelerating as the user base gets larger. Growth in active accounts for each quarter in FY 2018 ranged between 40% and 46% YOY. By FY 2020, that range had fallen to 37% to 42% YOY. Growth continued to slow throughout FY 2021.

Roku defines active accounts as the number of distinct user accounts that have streamed content on its platform sometime within the past 30 days of the period. Streamed content from the Roku Channel only on non-Roku platforms does not count as streamed content for the purpose of measuring active accounts. Also, the metric does not distinguish between unique individuals streaming content on the same account. For example, an account with family members all streaming content on that same account only counts as one active account.

Nevertheless, the number of active accounts is closely correlated with the number of viewers, or targets, for advertisers. The greater the number of active accounts using Roku’s platform, the more attractive the platform will be to advertisers, which will attract more ad spending.

ROKU Outlook and Stock Performance

Roku said it expects continuing challenges related to decreased TV advertising spending due to continued slowing economic growth worldwide. The company expects total net revenue to grow by 3% YOY to $700 million for Q3 FY 2022. Total gross profit is expected to be about $325 million.

Roku shares dropped precipitously in after-hours trading following the company’s earnings release, falling by about 27.5% as of this writing. The company’s stock has vastly underperformed the broader market in the last year, providing a 1-year trailing total return of -81.8% compared to -7.5% for the S&P 500 as of July 28.

Roku’s next earnings report (for Q3 FY 2022) is expected to be released on Nov. 2, 2022.