Popular TV streaming platform Roku (ROKU 3.77%) is set to report first-quarter earnings results tomorrow after the close. This year promises to be a banner one for over-the-top (OTT) streaming services, as cord-cutting is accelerating and hitting record levels. Traditional cable providers collectively lost over 1.1 million subscribers in the first quarter, according to recent estimates from BTIG Research analyst Rich Greenfield, which he called the worst "sub loss quarter in history" for the industry.
That's all good news for Roku.
A steadily growing audience
Roku had a fantastic fourth quarter, adding more active accounts than ever before to hit 27.1 million. Streaming hours and average revenue per user (ARPU) continued to march steadily higher as well. While there is some seasonality around unit volumes and active account growth, as Roku players are popular gifts over the holidays, the active account base continues to grow at a healthy rate.
Analysts expect the company to finish the first quarter with approximately 28.4 million active accounts and ARPU of $19.02, up from $17.95 in the fourth quarter, according to Zack's. Roku measures ARPU as trailing-12-month platform revenue divided by the average number of active accounts over that time frame.
Hitting $1 billion
In terms of financials, the consensus estimates call for $192 million in revenue, which would represent 40% year-over-year growth, and an adjusted net loss of $0.24 per share, compared to losing $0.07 per share a year ago. Roku's own guidance for the first quarter is for $185 million to $190 million in revenue.
In February, Roku also forecast that full-year 2019 revenue should top $1 billion for the first time in the company's history, which should lead to $445 million to $460 million in gross profit for the year. Investors will want to see if management reaffirms that outlook -- or tweaks it higher or lower.
2019 will be a banner year for video streaming
On a strategic level, Roku has been pursuing numerous growth initiatives. The company started selling premium subscriptions during the quarter, after launching The Roku Channel, its first-party ad-supported channel, on the broader web and mobile platforms late last year. Roku has also been building out its advertising platform.
Of course, two heavyweights are preparing to push deeper into OTT services this year: Disney (DIS 3.70%) and Apple (AAPL -1.26%). Disney+ will launch in November at an aggressive price of $7 per month (or $70 per year) and will be available on Roku's platform. Needham analyst Laura Martin believes the distribution deal, combined with a related increase in advertising, could represent $200 million in annual revenue for Roku. Apple hasn't given a lot of detail around TV+, but has been increasingly pursuing cross-platform strategies -- including bringing the Apple TV app to Roku devices in the near future.
Some qualitative commentary on how all of these moving parts are playing out will also be helpful for investors.