Roku Pares Down Operating Losses, But Warns of More Ad Uncertainty

Caitlin Huston
·4 min read

Roku pared down its operating losses in the first quarter of 2023 to $212.5 million, after several quarters of growing losses.

This is an improvement from its Q4 operating losses of $249.9 million, and comes after Roku had set out a plan to tighten expenses moving forward, with a plan to reach positive adjusted earnings before interest, taxes, depreciation and amortization in 2024.

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Total active accounts inched up to 71.6 million from 70 million in the previous quarter. Streaming hours reached 25.1 billion, up 4.2 billion hours or 20 percent year-over-year, and above the 23.9 billion in the previous quarter.

Roku reported total net revenue of $741 million, above their guidance of $700 million and net income loss of $193.6 million, compared to their guidance of a loss of $205 million.

As part of its plan to tighten expenses, and amid a difficult ad environment, at the end of March, Roku announced it would cut another 200 jobs, or about 6 percent of its workforce, after having previously cut about 200 jobs last November.

With the most recent round of layoffs, Roku expected to take a $30 million to $35 million charge. The company also planned to leave or sublease “certain office facilities.”

All of this comes after Roku had provided a dire forecast for its fourth quarter earnings, which covered the holidays and is typically its strongest advertising quarter. At the time, Roku CEO Anthony Wood said companies were canceling their Q4 campaigns in anticipation of a possible recession. Fourth-quarter revenue came in better than expected, but there was still concern that Roku could continue to be weighed down by the advertising downturn.

For the first quarter, Roku reported platform revenue of $635 million, down 1 percent YoY, and ARPU was $40.67 (on a trailing 12-month basis), down 5 percent year-over-year. The company noted that ad spend was improving for travel, health and wellness, financial services and media and entertainment remained pressured.

The company expects concerns about the uncertain macroenvironment to remain through 2023 and continuing impact the consumer. In turn, Roku said it expects Q2 total net revenue of about $770 million, total gross profit of roughly $335 million, and Adjusted EBITDA of negative $75 million.

“Consumers remain pressured by inflation and recessionary fears, and thus discretionary spend is likely to remain muted. Accordingly, we expect the advertising market in Q2 to look much the same as it did in Q1, with ad spend from certain verticals improving (travel and health and wellness), while others remain pressured (M&E and financial services),” Roku said.

On Wednesday, Roku announced a new partnership with Instacart that will allow consumer-packaged goods advertisers to better understand whether viewers are purchasing products on Instacart after seeing an ad on the Roku platform.

At the end of January, Roku Media President Charlie Collier promoted David Eilenberg, who was head of originals, to oversee content across the media division. He succeeded Rob Holmes, who was vp of programming and spent six years at Roku.

Dan Jedda, who previously was the CFO at Stitch Fix, will join Roku as CFO starting May 1.

The company has been investing in new content, including a recently announced docuseries for the Roku Channel entitled WWE: Recruits, with WWE wrestler John Cena set to produce and appear in the eight-episode series.

Asked about Roku’s overall content strategy and content spending, executives said on the earnings call that content spend is based on the scale and growth of the Roku Channel and has been adjusted recently due to macroeconomic conditions. The majority of content spending is on licensed content.

However, the company has been producing more originals and Collier highlighted that model for creating content exclusivity, which has brought in both viewers and major advertisers, mentioning the recent releases of Die Harder, starring  Kevin Hart and Slip, starring Zoe Lister-Jones.

He added that while his team does not have the biggest content spend, compared to others, he believes that his history of programming, as well as that of his teams, and Roku’s platform can help deliver “targeted and successful programming.”

“I believe again, fueled by this great team, that Roku can continue to deliver differentiated products at a price that doesn’t put us anywhere near the streaming wars,” Collier said.

“I’d say with pride Roku is not in the streaming wars, the streaming wars are being played out on our platform,” he added.

In March, Roku launched its Roku-branded TVs at Best Buy. The company did not provide an update on sales for the new offering, but noted positive reviews from media about the quality of the devices.

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