It's fair to say that this has been a good week to be a Roku (ROKU 2.70%) shareholder. The stock soared 12% on Wednesday ahead of its fourth-quarter report. Those financial results are out now, and the shares were initially moving even more assertively higher on Thursday in light of the better-than-expected results.
There was a lot to take in from the quarterly release and the subsequent earnings call. Let's take a look at some of the more interesting metrics and morsels that Roku delivered this week.
Image source: Getty Images.
1. A beat is a beat
The numbers may seem disappointing at first glance. The $867.1 million in net revenue it brought in during the seasonally potent fourth quarter was essentially flat -- up 0.2% -- from where it was a year earlier with a smaller user base. Its gross profit of $364.4 million amounted to a 4% decline. Its net loss from operations of $249.9 million and its negative adjusted EBITDA of $95.2 million reversed positive results from the same period a year earlier.
The decoder key casts those same figures in a far more favorable light. The guidance that Roku put out for Q4 back in early November called for just $800 million on the top line, an 8% decline from the prior-year period. It was also targeting a gross profit of $325 million, a net loss of $245 million, and an adjusted EBITDA deficit of $135 million. In short, Roku smoked all four of its guidance metrics, and that was with sentiment for ad-based industries weakening as 2022 came to a close.
2. Help is on the way for the bottom line
Last year was rough for Roku. The market grew impatient with deficit-saddled growth stocks, and Roku didn't help its case by posting larger and larger deficits in each successive quarter. Go back to when Roku's profitability peaked -- the first quarter of 2021 -- and we've seen seven consecutive quarters of sequential weakening on the earnings front.
The unfortunate streak should end with the current quarter. Roku's guidance is for a $205 million net loss for the first quarter. That's a lot of red ink, sure, but it would be the first sequential improvement on the bottom line in two years. Looking further into the future, Roku repeated several times that it expects to deliver positive annual adjusted EBITDA for 2024. That's next year.
NASDAQ: ROKU
Key Data Points
3. Attraction and engagement are strong
Investors already knew that Roku had hit 70 million active accounts by the end of 2022. An early January press release confirmed that it added more net viewers during Q4 than it did during the prior-year period. As poorly as the stock performed last year -- down a blistering 82% -- the business gained more active accounts in 2022 than any year outside of 2020, when pandemic shutdowns boosted demand for in-home entertainment options.
Roku now says it reaches 100 million viewers, roughly half of the country's broadband audience. Its users are also spending more time on Roku. Investors knew that since Roku revealed that streaming hours were outpacing user growth in early January. The company offered the market more precise numbers this week, reporting that active accounts are streaming an average of 3.8 hours a day, up from 3.6 hours daily a year earlier.
4. It's not just the U.S. where Roku is dominating
Roku's smart TV operating system competes against some of the most valuable companies in tech and e-commerce. Somehow, this David is keeping the Goliaths at bay. Roku noted that its hub is the factory-installed platform for 38% of the smart TVs sold in this country. That's a greater market share than its two nearest competitors combined.
Roku also is the top dog in Canada and Mexico, where its platform is installed on 30% of the smart TVs sold. And it's not just a North American thing. Roku's shareholder letter on Wednesday made note of its ongoing efforts to expand its footprint in Brazil, the U.K., Germany, and Australia.
5. There's room for improvement
It's not all accolades. The reason Roku's net revenue was essentially flat was that a 5% increase in platform revenue was offset by an 18% decline in devices segment revenue. Average revenue per user may have been slightly higher year over year, but it declined sequentially for the first time.
Margins also took a hit. The weak ad market gnawed away at its profits on the platform end. Matters were even uglier on the devices front, as Roku had to subsidize rising costs related to supply chain constraints and inflationary pressures.
It wasn't a perfect report for this bellwether streaming video company. It didn't have to be. Roku shares have been rallying this week -- and this year -- but they're still trading for less than a third of the price they commanded at the beginning of last year. Roku has come a long way in 2023, but it has a long way to go to make its longer-term investors whole. Stay tuned. Roku appreciates the engagement.
