Please ensure Javascript is enabled for purposes of website accessibility

Roku's Platform Revenue Soars 71%

By Daniel Sparks - Feb 14, 2020 at 8:36AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The streaming-TV company's fourth-quarter revenue blew past analyst estimates.

Investors have come to expect stellar results from Roku (ROKU -2.89%), which has made a habit of reporting better-than-expected top-line growth. Q4 proved to be no exception.

Following market close on Thursday, Roku said its revenue for the period surged 49% year over year to $411 million, handily beating analysts' average forecast for revenue of $392 million. Even more impressive, the company's guidance for both first-quarter and full-year revenue was higher than anticipated.

The quarter capped off an outstanding year for Roku in which its top line, gross profit, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) all exceeded management's forecasts.

Here's a closer look at the strong holiday quarter.

A Roku-powered TV in an apartment living room

A Roku-powered TV. Image source: Roku.

Roku Q4 earnings summary

Metric

Q4 2019

Q4 2018

Change

Revenue

$411.2 million

$275.7 million

49%

Adjusted EBITDA

$15.1 million

$24.5 million

(38%)

Data source: Roku quarterly shareholder letters for quarters shown.

Roku's revenue of $411 million not only beat analyst expectations but was far ahead of management's guidance for revenue between $380 million and $396 million. Profitability, however, suffered as the company's research and development, sales and marketing, and general and administrative expenses rose 54%, 81%, and 68%, respectively, year over year. Increased spending in these areas was aimed at the company's four investment areas: advertising, the Roku Channel, its TV operating system and reference designs, and international expansion.

Roku's earnings per share were $0.13 -- wider than a loss per share of $0.08 in the year-ago period but $0.01 better than analysts' consensus estimate.

Surging platform revenue

Fueling Roku's growth during the quarter was a 71% year-over-year increase in platform revenue. While the segment benefits from subscriptions, transactions, and ads on its platform, advertising continues to steal the show.

"For Q4 and full year 2019, Roku monetized video advertising impressions more than doubled year-over-year," said Roku management in the company's fourth-quarter shareholder letter. This rapid growth in advertising revenue played a key role in the tech company's strong average revenue per user (ARPU) in 2019, management said. ARPU in 2019 was $23.14 -- up 29% year over year.

Beyond platform revenue, which accounted for 63% of Roku's total fourth-quarter revenue, player revenue increased 22% year over year, driven by a 33% year-over-year increase in unit sales.

Impressive user metrics

User metrics on the platform continue to highlight rapid active account growth and improving engagement. Roku added 9.8 million active accounts in 2019, with 4.6 million of the accounts being added in the fourth quarter alone. Users streamed 11.7 billion hours in the fourth quarter of 2019 -- up 60% year over year.

Expect more strong growth in 2020

Looking to 2020, management said it expects revenue between $1.58 billion and $1.62 billion, up from $1.29 billion in 2019. Analysts, on average, were expecting revenue of $1.58 billion in 2020.

For its first quarter of 2020, Roku guided for revenue between $300 million and $310 million -- well ahead of a consensus analyst estimate of $297 million.

Advertising looks poised to be the key growth theme for Roku in 2020, as well. "The Platform segment is anticipated to contribute a greater mix of overall revenue and gross profit than prior years primarily driven by Roku monetized video ad impressions doubling again on a year-over-year basis," explained management in the company's fourth-quarter shareholder letter.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Roku Stock Quote
Roku
ROKU
$94.84 (-2.89%) $-2.82

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.