One stock many investors will be watching this earnings season is Roku (ROKU 2.15%). The streaming TV specialist's stock is up 190% over the past year. The company has consistently beat expectations as its high-margin platform business grew at a torrid pace throughout 2019.
When the company reports its fourth-quarter results on Feb. 13, investors will be looking to see if Roku's strong momentum persisted during the important holiday quarter. Outperformance during the period could make a material difference in the company's full-year results since Q4 benefits from the seasonality of increased TV viewing and higher ad spend from advertisers.
Ahead of Roku's results, here's a preview of some key areas to watch.
Roku's recent top-line growth has been astounding. After reporting 39% year-over-year revenue growth in the third quarter of 2018, the company's revenue growth rate proceeded to accelerate for three quarters in a row -- peaking at a growth rate of 59% in the second quarter of 2019. In Q3, revenue growth decelerated slightly, but it was still strong at 50%.
With Roku going up against a tough comparison of 45% year-over-year revenue growth in the fourth quarter of 2018, management guided for further deceleration in the fourth quarter of 2019. The company said it expects revenue during the period to be between $380 million and $396 million. The midpoint of this guidance range implies 41% year-over-year growth. Analysts, on average, expect Roku's revenue to increase 42%.
Platform revenue growth
Key to Roku's strong top-line growth has been its platform business, which includes revenue from the monetization of its platform via advertising and third-party subscriptions and transactions on its platform. Platform revenue soared 79% year over year during Q3, with growth in advertising spend leading the charge for the segment.
While management's guidance for a deceleration in total revenue growth implies some deceleration in Roku's platform business, investors will still be looking for outsize growth in the segment. Investors should look for the segment's revenue to grow at a rate of around 60% year over year.
Finally, investors may want to check on Roku's adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) -- a key measure of profitability that helps provide insight into the scalability of the company's business model. This metric should improve substantially as Roku's revenue grows.
Since initiating its full-year outlook for adjusted EBITDA, management has lifted its view multiple times. Initially, Roku expected 2019 adjusted EBITDA to be between negative $5 million and positive $5 million. However, management said in its third-quarter update that it is now expecting full-year adjusted EBITDA between $28 million and $33 million.
Roku will report its fourth-quarter results after market close on Thursday, Feb. 13.