Riding a big wave of stay-at-home streaming usage, Roku boosted revenue in the fourth quarter 58%, to a record $649.9 million — and posted a $65.2 million net profit for the quarter, whereas Wall Street had expected a loss.
The company already announced last month that it ended 2020 with 51.2 million active accounts, up 39% year over year after adding a net 14.3 million accounts. The ad-supported Roku Channel grew even faster, more than doubling its audience to reach U.S. households with an estimated 61.8 million people in Q4.
Analysts on average expected Roku to post revenue of $617.7 million and a loss of 5 cents per share for Q4, according to research firm Refinitiv. Roku’s stock, which has increased more than 42% year to date, rose as much as 3.9% in after-hours trading Thursday.
Driving Roku’s topline growth was its platform business, which increased revenue 81% during the quarter to $471.2 million. The platform segment encompasses the company’s advertising and subscription/transactional businesses, and Roku said monetized video ad impressions more than doubled in Q4 year-over-year with the ongoing shift of audiences from pay TV to streaming.
“It was all aspects of the company hitting at once,” Scott Rosenberg, SVP and GM of Roku’s platform business, said about the better-than-expected Q4 results in an interview with reporters.
Roku’s low-margin player segment, which includes its streaming-media devices, turned in revenue of $178.7 million. That was up 18% but was a lower growth rate than the year-earlier period, which the company attributed to COVID restrictions that depressed holiday shopping. Roku maintains low margins (near zero) for its player business, which it uses to grow active accounts and fuel sales in the platform business.
For the full year, streaming hours on Roku hit a record 58.7 billion, increased by 55%. In Q4, streaming hours by Roku users hit an all-time high of 17 billion hours (also up 55%).
Last month, as part of bulking up its free, ad-supported Roku Channel lineup, the company inked a deal to acquire global rights to more than 75 of Quibi’s original shows. That came after the startup led by Jeffrey Katzenberg and Meg Whitman folded six months after launch. Roku says it plans to add the Quibi shows, representing several hundred hours of content, on the Roku Channel in 2021. The company paid “significantly” less than $100 million under the deal with Quibi, a source familiar with the deal said.
In discussing Q4 earnings, Roku execs didn’t provide an update on when the Quibi content would be released. Under the Quibi deal, Roku has the option to order additional seasons of the shows from their producers.
“We think the Quibi content will perform well,” Rosenberg said. But he also said the company has added “a significant amount of content” to the Roku Channel from other partners over the past several months, Rosenberg said, including from Disney, NBCUniversal, A+E Networks and Discovery.
For the current quarter, Roku expects continued revenue growth, projecting $478 million to $493 million in revenue for Q1 2021 (up 49%-54%). It expects a net loss of $16 million to $23 million for Q1.
Given the burst in streaming activity Roku saw in the second half of 2020, Roku cautioned that growth for the full year 2021 will fall below levels it expects to see in the first and second quarters of 2021. The company said it expects overall 2021 gross margin to be in the mid-40% range; Roku posted gross margin of 45.4% for full-year 2020.
Other metrics touted by Roku: average revenue per user in Q4 increased 24% year over year to $28.76 (on a trailing 12-month basis), and 38% of all smart TVs sold in the U.S. in 2020 were Roku TV models. The company also said that in Q4, the six largest ad agency holding companies more than doubled their spending year-over-year with Roku and committed to “significantly larger 2021 upfronts with Roku.”
To date, Roku’s business has mostly been in the U.S. On the Q4 call, execs called out growing traction internationally — in Canada, Brazil, the U.K., Ireland and Mexico — and said Roku plans to expand into more countries.
“Streaming is a huge global opportunity. We’re still in pretty early days,” Roku CEO Anthony Wood told analysts. “I mean, obviously, it’s mainstream, and we’re seeing big changes. But given the fact that there’s 1 billion broadband households in the world, and they’re all going to watch their TV through streaming someday… it’s an area we’re going to keep investing in.”