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ROKU Q1 Loss Narrower Than Expected, Active Accounts Jump Y/Y

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Roku (ROKU - Free Report) reported first-quarter 2019 loss of 9 cents per share that was narrower than the Zacks Consensus Estimate of a loss of 24 cents. However, the figure was wider than a loss of 7 cents reported in the year-ago quarter.

Revenues soared 51.3% from the year-ago quarter to $206.7 million that comfortably surpassed the consensus mark of $189 million.

Active  Accounts surged 40% year over year to 29.1 million. Streaming hours jumped 74% year over year to 8.9 billion. Moreover, Average Revenue per User (ARPU) increased 27% to $19.06 (on a trailing 12-months basis).

Quarter Details

Platform revenues (64.9% of revenues) surged 78.7% year over year to $134.2 million. This was driven by strong SVOD and TVOD distribution revenues, audience development revenues and video advertising sales. In the first quarter, monetized video ad impressions across the platform more than doubled. Roku expects this trend to continue throughout 2019.

Player revenues (35.1% of revenues) increased 17.9% from the year-ago quarter to $72.5 million. Player units were up 21% year over year. Average sales price (ASP) declined 4% due to the company’s strategy of offering players at attractive discounts.
 

Roku, Inc. Price, Consensus and EPS Surprise

Roku, Inc. Price, Consensus and EPS Surprise | Roku, Inc. Quote

 

Management estimates that one out of three smart TVs sold in the United States was a Roku TV, sold by its OEM partners, in the first quarter.

Notably, The Roku Channel now offers access to more than 10,000 free ad-supported movies and TV episodes, and more than two dozen live streaming channels. In the reported quarter, the company added Premium Subscriptions to The Roku Channel, which now offers more than 30 premium content services, including HBO, SHOWTIME, EPIX and STARZ.

Gross margin expanded 260 basis points (bps) on a year-over-year basis to 48.8%.

Operating expenses as percentage of revenues increased 280 bps from the year-ago quarter to 54%. Research & development (R&D) and sales & marketing (S&M) expenses increased 200 bps and 150 bps, respectively. However, general & administrative (G&A) expenses declined 70 bps on a year-over-year basis.

Adjusted EBITDA was $10 million against year-ago quarter loss of $0.8 million.

Operating loss was $10.7 million compared with a loss of $6.9 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Mar 31, 2019, cash and cash equivalents including short-term investments were $263.9 million compared with $197.7 million as of Dec 31, 2018.

Operating cash outflow was $10.7 million in the reported quarter compared with cash outflow of $14.6 million in the year-ago quarter.

Guidance

For 2019, Roku expects revenues between $1.03 billion and $1.05 billion. The Zacks Consensus Estimate for revenues is pegged at $1.02 billion, which indicates growth of 37.2% from the figure reported in 2018.

Gross profit is expected between $465 million and $475 million. Adjusted EBITDA is expected between $10 million and $20 million.

For second-quarter 2019, Roku expects revenues between $220 million and $225 million. The Zacks Consensus Estimate for revenues is pegged at $219.84 million, which indicates growth of 40.2% from the figure reported in the year-ago quarter.

Gross profit is expected between $98 million and $103 million. Adjusted EBITDA loss is expected between $10 million and $5 million.

Zacks Rank & Stocks to Consider

Roku currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader consumer discretionary sector include lululemon athletica (LULU - Free Report) , V.F. Corporation (VFC - Free Report) and SeaWorld Entertainment (SEAS - Free Report) .  While lululemon sports a Zacks Rank #1 (Strong Buy), V.F. Corporation and SeaWorld carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for lululemon, V.F. Corporation and SeaWorld is projected to be 18.4%, 11.4% and 7%, respectively.

 

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