Amid the ongoing pandemic, Roku’s third-quarter financial results topped Wall Street’s estimates Thursday afternoon as streaming hours spiked for another consecutive quarter, sending the stock up over 4% in after-hours trading, on top of a 4.4% gain during the regular trading session.
Active accounts popped by 43% to 46 million, according to the company, while streaming hours rose 54% to 14.8 billion.
Roku reported $451.7 million in Q3 revenue, marking an 73% year-over-year increase during the quarter, better than the $367.8 million in revenue that analysts had expected for the September-ended quarter. Diluted earnings of 9 cents a share beat forecasts for a loss of 40 cents a share.
As the coronavirus crisis continues into its eighth month, viewers continue to turn to streaming programming for entertainment in lieu of going to movie theaters or opting for other group entertainment options. That has translated to increased ad revenue and player unit sales for Roku, the latter of which grew 57% from the prior-year quarter, the “strongest year-over-year player revenue growth in over seven years,” per the streaming-device company.
“We’re not going back to the way it was — COVID triggered a lasting, durable change in how marketers… are thinking about their TV ad spend,” said Roku CFO Steve Louden on the call. Roku is seeing 100% retention in advertisers who spend more than $1 million, he said, and does not anticipate them moving back to linear platforms.
During the quarter, Roku introduced several new products, incluing the 4K HDR streaming player Roku Ultra and he Roku Streambar, a streamer-soundbar hybrid device.
“Monetized video ad impressions were up almost 90% year-over-year in Q3, up sharply vs roughly 50% year-over-year in Q2,” said Scott Rosenberg, senior vice president of Roku’s platform business in a statement. “Not only are existing brands growing spend but many new advertisers are shifting into streaming as more and more cord-cutting consumers become unreachable to brands on traditional linear television. First-time advertisers more than doubled year-over-year in Q3 and once brands become accustomed to the superior performance of streaming they tend to stay with Roku. Ninety-seven percent of brands that spent $1 million or more with Roku in Q3 2019 continued to invest in Q3 2020.”
Roku estimates that Q4 revenue growth will be in line with previous holiday seasons, in the mid-40% range.
During the earnings call, Roku CEO Anthony Wood said the quarter reflected a confluence of positive trends for the company, but noted that the uncertainty in the macro environment — from global coronavirus resurgences to consumer spending levels — contributed to the lack of formal guidance for Q4 numbers. The company’s pre-pandemic full-year outlook, issued in February, guided for 42% year-over-year revenue growth for the year, approximately breakeven EBITDA and a loss of $160 million to $180 million.
The Roku Channel grew its reach to 54 million people, which execs on the call said they were every pleased with. Louden said it “opens more possibilities” for Roku as a channel.
“As we continue to offer users more content and features in The Roku Channel, we believe our viewers will stream more
content from within it and it will become an even more important source of economics to our content partners,” Wood and CFO Steve Louden noted in the company’s shareholder letter.
Addressing concerns about reports that Walmart and Comcast are in talks to sell smart TVs, Wood said that its platform is “purpose-built for television,” and allows manufacturers to build TVs that cost less. He also reiterated faith in the Roku brand and its competitive advantage in the market.
“Walmart is a very strong partner of Roku’s — we have a great relationship with them, they sell millions of Rokus a year,” he said, adding that the company puts a lot of work into making sure its relationship with Walmart remains strong.
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