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Earnings Results

Nov. 5, 2020, 7:53 p.m. EST

Roku delivers big revenue beat as more ad dollars shift to streaming

By Emily Bary

Shares of Roku Inc. were up 3% in after-hours trading Thursday after the company showed that it continues to benefit from the shift of advertising dollars away from traditional television.

The streaming-media company delivered a big revenue beat for the period, buoyed by a “confluence of very positive trends,” Chief Financial Officer Steve Louden said on Roku’s (NAS:ROKU) earnings call. He called out “strong performance” on the advertising side as well as record growth for Roku’s streaming-player business and robust sales of TVs running the company’s operating system.

Roku’s revenue climbed to $452 million from $261 million, while analysts surveyed by FactSet were modeling $369 million. The company’s sales consisted of $132 million from its player business and $319 million from its platform business, which includes areas like licensing and advertising. Analysts had been projecting $99 million in player sales and $270 million in platform revenue.

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For the fourth quarter, Roku expects revenue growth in line with other recent holiday quarters, in the mid-40% range, “barring any significant external risk factors materializing,” Louden said on the call.

In response to an analyst question about the expectation for a slowdown relative to the 73% growth seen in the third quarter, Louden said that the third quarter was “outstanding” on many fronts but that the company remains “cautiously optimistic” about the holiday season. “There’s a lot of uncertainty and variability that remains out there in the macro environment, everything from COVID-related resurgences in the U.S. and around the world to the shape of the holiday season as well as consumer spending levels,” he noted.

Louden called out positive recent trends on the advertising front, including that Roku benefited as advertisers pulled back on prior commitments with linear networks given changing viewing trends during the pandemic.

“Advertisers are realizing they need to follow the viewers and lean in,” he told MarketWatch after the call, saying that Roku and the streaming ecosystem in general offering advantages in targeting and measurement.

He gave the example of DraftKings Inc. (NAS:DKNG) , which “follow[ed] sports viewers who increasingly left the traditional cable bundle with the absence of sports.” Louden said that DraftKings increased its ad spending with Roku as it sought to reach sports lovers on Roku’s platform.

Another upbeat development according to Louden is that the company already has 2021 upfront deals with all six major ad-agency holding companies. In past years, negotiations have sometimes stretched beyond this point, so the fact that Roku “got agreements with all six and significant increases speaks to the focus of the ecosystem on streaming,” he said.

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For the third quarter, Roku reported net income of $13 million, or 9 cents a share, versus a net loss of $25 million or 22 cents a share, a year earlier. Analysts surveyed by FactSet had been projecting that Roku lost 42 cents a share for the third quarter.

Roku’s average revenue per user climbed to $27 for the September quarter from $24.92 in the June quarter and $22.58 in the prior September period.

The streaming-media company reported that it added 2.9 million incremental active accounts in the third quarter, bringing its total up to 46 million. Streaming hours totaled 14.8 billion.

Shares of Roku have added 68% so far this year as the S&P 500 (S&P:SPX) has gained about 9%.

Link to MarketWatch's Slice.