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ROKU Q1 Earnings Top Estimates, Revenues Ride on Advertising

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Roku (ROKU - Free Report) reported first-quarter 2021 earnings of 45 cents per share against the Zacks Consensus Estimate of a loss of 12 cents per share. The company had reported loss of 45 cents per share in the year-ago quarter.

Revenues soared 79% from the year-ago quarter’s level to $574.2 million and beat the consensus mark by 16.3%.

Active accounts jumped 35% year over year to 53.6 million driven by the popularity of Roku streaming players and Roku TV models in both the United States and international markets.

In first-quarter 2021, the Roku OS was the No. 1 smart TV operating system (OS) in the United States. Similarly, in international markets, Roku OS was the No.1 smart TV OS in Canada where more than one in three smart TVs sold was a Roku TV model and the No. 2 OS overall (the No. 1 licensed OS) for smart TVs sold in Mexico.

Moreover, average revenue per user (ARPU) grew 32% to $32.14 (on a trailing 12-month basis) driven by increased per-user engagement, as well as continued investments in channel distribution, content promotions, billing and advertising capabilities.

Roku, Inc. Price, Consensus and EPS Surprise

Top-Line Details

Platform revenues (81.3% of revenues) surged 100.6% year over year to $466.5 million driven by significant increases in both content distribution activities and advertising. Content partners took advantage of Roku’s promotional tools to drive downloads, subscriptions and engagement, while advertisers increased their spending on connected TV platforms like in the first quarter of 2021.

Per management, The Roku Channel reached households with an estimated 70 million people in the first quarter. Moreover, over 85% of the adult audience (18- 49) reach delivered on The Roku Channel was unduplicated with traditional TV.

In March, Roku acquired This Old House business including This Old House and Ask This Old House TV programs, which are the two top-rated home improvement programs in the United States. Acquisitions like Quibi and This Old House complement the company’s existing content sourcing strategy of working with over 175 licensing and distribution partners.

Markedly, Roku users streamed 18.3 billion hours, an increase of 49% year over year in first quarter of 2021. Prior to lapping COVID-19 stay-at-home orders in mid-March, both active account and streaming hour year-over-year growth rates were trending ahead of those in the fourth quarter of 2020.

Total premium subscriptions more than doubled year over year, with viewership of SVOD services in The Roku Channel growing more than twice as fast as the corresponding DTC apps on the Roku platform.

Availability of third-party streaming channels on the Roku platform, including Discovery+, Disney’s (DIS - Free Report) Disney+, HBO Max, ViacomCBS (VIAC - Free Report) owned Paramount+, Comcast (CMCSA - Free Report) owned NBCUniversal’s Peacock, Amazon Prime Video, AppleTV+, Hulu, and Netflix besides continued investments in The Roku Channel contributed to engagement growth in the first quarter of 2021.

Moreover, this Zacks Rank #3 (Hold) company benefited from advertising spend reallocation toward TV streaming as marketers accelerated their shift out of traditional TV and into TV streaming. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the first quarter, total TV streaming ad impressions delivered through OneView nearly tripled year over year, while total impressions on the Roku platform (sold by Roku or its publishers) more than tripled.

Player revenues (18.7% of revenues) increased 22% from the year-ago quarter’s levels to $107.7 million.

Operating Details

As a percentage of total revenues, gross margin expanded to 56.9% from 44% in the year-ago quarter.

Operating expenses, as a percentage of revenues, decreased to 43.7% from the year-ago quarter’s 61.2%.

S&M, research & development (R&D) and general & administrative (G&A) expenses contracted 580 basis points (bps), 980 bps and 190 bps, respectively.

In the first quarter, adjusted EBITDA came in at $125.9 million compared with ($16.3) million in the year-ago quarter.

Operating income was $75.8 million in the reported quarter. The company had reported an operating loss of $55.2 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Mar 31, 2021, cash and cash equivalents including short-term investments were $2.07 billion compared with $1.09 billion, as of Dec 31, 2020.


For second-quarter 2021, the company expects total net revenues of $615 million at the midpoint (up 73% year over year) and total gross profit of $300 million at the midpoint (up 104% year over year).

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