Roku plunges -22% on disappointing revenue and guidance

Roku shares fell as much as 20% in extended trading on Thursday after the video-streaming company issued fourth-quarter revenue and first-quarter revenue guidance that came in below consensus.

Here’s how the company did:

Earnings: 17 cents per share, adjusted, vs. 9 cents per share as expected by analysts, according to Refinitiv.
Revenue: $865.3 million, vs. $894.0 million as expected by analysts, according to Refinitiv.
Revenue grew by 33% year over year in the quarter, according to a letter to shareholders, compared with 51% growth in the third quarter and 81% in the second quarter.

With respect to guidance, Roku called for $720 million in first-quarter revenue, which implies 25% revenue growth. The Refinitiv revenue consensus was $748.5 million. Roku said it sees $55 million in adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, in the first quarter, below the $79.2 million consensus among analysts polled by FactSet.

Roku expects revenue growth in the mid-30s percentage range for all of 2022, Steve Louden, the company’s finance chief, said on a conference call with analysts. Analysts polled by Refinitiv had expected 36% growth. Louden said the company sees EBITDA would be consistent with 2020, when it was $150.0 million.

Not long after the announcement, Roku was trading at its lowest point since June 2020. During Thursday’s trading session, in which the S&P 500 index fell 2%, Roku’s stock had gone down 10%. Setting aside the after-hours move, Roku stock has fallen about 37% since the start of 2022, while the S&P was down about 8% over the same period.

Management attributed the slower growth to supply shortages that hurt the U.S. market for televisions.

“Similar to Q3, overall U.S. TV unit sales in Q4 fell below pre-COVID 2019 levels,” Anthony Wood, Roku’s founder and CEO, and Steve Louden, its finance chief, wrote in the letter. “Some of our Roku TV OEM partners were hit particularly hard with inventory challenges, which negatively impacted their unit sales figures and market share in Q4.”

The company chose not to pass on higher material and shipping costs in order to benefit user acquisition.

“While we expect market conditions to result in player-related costs remaining elevated for the near term, we do not believe these conditions will be permanent,” Wood and Louden wrote.

Roku reported 60.1 million active accounts in the fourth quarter. That figure was up 17% year over and year and more than the 59.5 million that analysts polled by StreetAccount had been looking for. The number of hours each active account watched declined year over year.

In the fourth quarter, the company’s Platform segment, which includes digital advertising subscription and revenue sharing and sales of branded buttons on remote controls, generated $703.6 million in revenue, up 49% and lower than the StreetAccount consensus of $732.2 million. Platform revenue had grown 82% in the third quarter. The segment’s gross margin came in at 60.5%, narrowing from 65.0% in the third quarter.

Automotive and consumer packaged goods companies endured their own supply challenges, which resulted in light advertising spend, Wood and Louden wrote.

Player revenue, from sales of streaming players and audio devices, totaled $161.7 million, declining 9% as analysts surveyed by StreetAccount had expected $162.5 million.

In the quarter Roku said it had completed an agreement with Google to keep YouTube and YouTube TV on its service.


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