Going into Roku's (ROKU -0.62%) third-quarter earnings report Wednesday afternoon, battered and bruised shareholders were likely hoping for some good news. While there were certainly a few positives in the report, the company's guidance for a year-over-year revenue decline in Q4 likely spooked some investors.
Further, Roku said its chief financial officer Steve Louden is leaving the company sometime next year. Given that the transition for Roku's CFO comes after the stock lost more than three-fourths of its value this year, the news may not sit well with investors.
Shares of the streaming-TV platform provider saw a double-digit decline in after-hours trading as investors weighed the implications of management's worse-than-expected outlook for the important holiday quarter and a CFO transition.
As investors review Roku's third-quarter results and management's commentary, here are some highlights from the update to get started.
Top-line performance was solid
Judging only by Roku's third-quarter revenue, the company seems to be doing well. Total revenue increased 12% year over year during the period to $761 million, crushing management's guidance for third-quarter revenue of $694 million. Platform revenue, which accounts for the bulk of revenue and is where the company's gross profit comes from, grew 15% year over year.
While this is well below the company's historical growth rates and lower than Roku's second-quarter revenue growth rate of 18%, it's solid in light of the uncertain macroeconomic environment that's pressuring advertiser spend.
Active accounts grew nicely
Another positive from the report was a reacceleration in active accounts. Total active accounts on Roku's platform increased 16% year over year to more than 65 million. This compares to 14% growth in active accounts in Q2.
"This growth was driven primarily by TV sales in both U.S. and international markets, along with improved Active Account retention," management said in Roku's third-quarter shareholder letter.
Losses persisted
While it's good to see the company's top line moving in the right direction, Roku's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) swung from a profit of $130 million in the year-ago period to a loss of more than $34 million, making it the company's second quarter in a row of negative adjusted EBITDA. Roku's operating loss also swung from positive to negative, coming in at a loss of $147 million for the quarter.
Guidance was a big letdown
For Roku's fourth quarter, management said it expected just $800 million in revenue. Analysts, on average, were expecting fourth-quarter revenue of about $895 million. Revenue at this level would represent a significant year-over-year decline of 8%. Management said in its quarterly letter that it expects headwinds from the macro environment "to further pressure consumer discretionary spend and degrade advertising budgets, especially in the TV scatter market."
Adding more context to just how disappointing Roku's 2022 performance has been, the company initially believed revenue would grow more than 35% for the full year. But if fourth-quarter revenue comes in at $800 million, full-year revenue will have increased just 11%.
Of course, Roku believes its challenged top line is only a temporary issue. But management also said that it's difficult to forecast when Roku's top-line trends "will stabilize or rebound."