Roku Glides Past Wall Street Q4 Expectations As Streaming Continues Its March

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Dade Hayes
·4 min read
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Roku continues to ride the streaming wave. The company reported fourth-quarter results ahead of Wall Street expectations as revenue shot up 58% from a year ago to just shy of $650 million.

Income from operations swung from a loss of $17.4 million in the year-earlier quarter to a profit of $65.2 million, or 13 cents a share. Wall Street analysts had expected a net loss of 5 cents a share and revenue of $619 million, according to FactSet.

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Users streamed 17 billion hours in the quarter, Roku said, and more than 58 billion hours in 2020, with both numbers representing a 55% year-over-year increase. The company’s interface is in 38% of all smart-TVs made in the U.S.,

Roku has been one of the biggest beneficiaries of lockdowns due to Covid-19. The company added some 14 million active users in 2020, ending the year with 51 million active accounts. Its stock is up 37% in 2021 to date and has rocketed almost 300% over the past year.

The quarter, which ended December 31, was an active one. The company completed a long-awaited distribution deal with WarnerMedia for HBO Max. It also negotiated the acquisition of Quibi’s programming, announcing that deal in January.

In its quarterly letter to shareholders, the company said it is continuing to benefit from an overall shift of advertising dollars from linear TV to streaming. “Despite a pandemic-related advertising slowdown in the U.S., our advertising business proved resilient,” the letter said, “with Q4 Roku monetized video advertising impressions more than doubling year-over-year.”

The company does not break out a specific line item for ad revenue, but total platform revenue — which includes advertising — soared 81% in the quarter.

Scott Rosenberg, SVP and GM of Roku’s platform business, said the company’s 41% market share of the most-streamed sporting event yet, Super Bowl LV, is a further tailwind in terms of its advertising efforts.

“We have seen that linear programming, whether it’s sports, lifestyle, news, performs extremely well in streaming,” the executive said on a press call before the company’s earnings call with analysts. “Some of this might be counter-intuitive to how people grew up thinking about streaming.” The engagement of viewers “channel-flipping through a live experience,” as Rosenberg described it, has prompted Roku to invest in several initiatives. Those new products include including an on-screen programming guide and several live offerings on the Roku Channel, the free, ad-supported bundle that now reaches U.S. households with 63 million people, up 100% year-over-year.

On smart-TV sets, Rosenberg added, Roku in the fourth quarter integrated streamed live channels with over-the-air channels into a combined feature and the offering has “done exceedingly well.”

Sports leagues and rights holders will be sobered to hear what Roku saw when it studied 2020 data on sports viewing. While viewers tuned back in to some degree when games resumed in the summer after the prolonged shutdowns in spring, tune-in did not snap back to 100% of prior levels. “For many consumers,” Rosenberg observed, “the disruption of the sports viewing habit caused them to permanently shift some of their usage to streaming and ultimately to make up for that viewership in other ways, like watching movies and TV shows, not sports.”

As to plans for Quibi programming, Rosenberg said specific launch dates and plans for mobilizing it on the Roku Channel will be announced soon. He said some programming could potentially be extended beyond its current form. While initially Roku’s interest in the failed startup’s library centered on “finished or near-finished” shows, the potential exists to do “follow-on” seasons or spinoffs, he said.

Quibi launched amid great fanfare last spring, but the startup led by Jeffrey Katzenberg and Meg Whitman shuttered by the fall after failing to get traction. Covid-19 played a role in its demise, but the broader consensus was that its “quick-bite,” ad-supported programming was not compelling enough to stand out in a crowded streaming marketplace. Quibi also bet almost entirely on mobile viewing, whereas Quibi will take its programming, much of it featuring recognizable talent in front of and behind the camera, into the living room. Unlike the monthly subscription model where it began, the Quibi fare will also be available to users for free, with ad revenue and engagement the goal for Roku.

Asked about key 2020 trends, Rosenberg also highlighted the “powerful subscriber acquisition tactic” of debuting theatrical movies on streaming platforms. Time will tell how the marketplace performs and moviegoers respond as Covid recedes, he said. Nevertheless, he noted, “Consumers are learning that the best, most current theatrical programming may be available for viewing in the comfort of their own homes.”

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