ROKU's Q2 Loss Narrower Than Expected, Revenues Increase Y/Y
Roku ROKU reported second-quarter 2023 loss of 76 cents per share, narrower than the Zacks Consensus Estimate of a loss of $1.28. The company had reported loss of 82 cents per share in the year-ago quarter.
Revenues increased 10.8% from the year-ago quarter’s level to $847.2 million and beat the consensus mark by 10.05%. Growth of The Roku Channel’s active accounts and streaming hours drove second-quarter performance.
Active account net adds were 1.9 million in the second quarter, taking the total active accounts to 73.5 million globally, reflecting greater engagement and more monetization opportunities.
Roku has become the No. 1 TV streaming platform by hours streamed in the United States, Canada and Mexico. Globally, users streamed a record of 25.1 billion hours in the second quarter, up 4.4 billion hours from the prior-year quarter.
The average revenue per user declined 7% from the prior-year quarter’s levels to $40.67 (on a trailing 12-month basis).
For the sixth consecutive quarter, The Roku Channel was among the top five channels by both active account reach and streaming hour engagement on the Roku platform in the United States. The Roku Channel’s active accounts are approaching half of all broadband households in the United States.
Roku, Inc. Price, Consensus and EPS Surprise
Roku, Inc. price-consensus-eps-surprise-chart | Roku, Inc. Quote
Quarter Details
Platform revenues (87.8% of revenues) increased 11.1% year over year to $743.8 million through advertising sales, the distribution of streaming services and FAST channels, Roku Pay and Media & Entertainment promotional capabilities.
Macroeconomic challenges continued to pressure consumers and advertisers in the second quarter. The total U.S. ad market weakened throughout the quarter, remaining flat year over year. Ad spend decline was even more on tradition tv with 9.4% year over year and ad scatter was down 17.2% year over year (according to SMI).
Player revenues (12.2% of revenues) rose 8.6% from the year-ago quarter’s level to $103.4 million.
Roku operating system (OS) was the #1 selling smart TV OS in Mexico for the third consecutive quarter. Roku TV program expanded in Germany with its third OEM partner, Coocaa. The program keeps expanding with 20 licensed Roku TV partners globally.
Roku was recognized as the Most Innovative Company for 2023 by Fast Company for their work in both hardware and software. This includes content partnership for The Roku Channel and Roku Voice Remote Pro.
The company recently announced partnership with Shopify. It will provide viewers the ability to purchase products from Shopify merchants directly from their TV through Roku Action Ads.
Operating Details
Gross margin, as a percentage of total revenues, contracted 180 basis points from the year-ago quarter’s level to 44.7%.
Operating expenses increased 8.3% year over year to $504.2 million. As a percentage of total revenues, the metric contracted to 59.5% from 60.9% in the year-ago quarter.
Research & development declined by 2.2% to $192.4 million, whereas sales & marketing and general & administrative expenses grew 22.8% and 0.7% on a year-over-year basis to $227.2 million and $84.7 million, respectively.
In the second quarter, negative adjusted EBITDA was $17.8 million compared with negative adjusted EBITDA of $12.1 million in the year-ago quarter.
Operating loss was $126 million in the reported quarter compared with operating loss of $110.5 million in the year-ago quarter.
Balance Sheet
As of Jun 30, 2023, cash and cash equivalents were $1.75 billion compared with $1.63 billion as of Mar 31, 2023.
As of Jun 30, 2023, Roku had no long-term debt compared with the total debt of $63.3 million as of Mar 31, 2023.
Guidance
For third-quarter 2023, Roku expects total net revenues of $815 million, total gross profit of roughly $355 million and adjusted EBITDA of negative $50 million.
Zacks Rank & Stocks to Consider
Roku currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the Consumer Discretionary sector are PlayAGS AGS, DraftKings DKNG and Sirius XM SIRI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PlayAGS, DraftKings and Sirius XM are scheduled to report the quarterly results on Aug 3, Aug 3 and Aug 1, respectively.
The Zacks Consensus Estimate for AGS’ second-quarter 2023 loss per share is pegged at 1 cent, which has remained unchanged over the past 30 days.
The Zacks Consensus Estimate for DKNG’s second-quarter 2023 loss is pegged at 25 cents per share, up from a loss of 29 cents per share over the past 30 days.
The Zacks Consensus Estimate for SIRI’s second-quarter 2023 earnings is pegged at 8 cents per share, which has remained unchanged over the past 30 days.
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