Roku beats Q1 sales targets, stock soars

|Streaming TV platform Roku beat analysts’ expectations in Q1 CY2024, with revenue up 19% year on year to $881.5 million. The company expects next quarter’s revenue to be around $935 million, in line with analysts’ estimates. It made a GAAP loss of $0.35 per share, improving from its loss of $1.38 per share in the same quarter last year.

Roku Q1 CY2024 Highlights:

• Revenue: $881.5 million vs analyst estimates of $850.3 million (3.7% beat)
• Adjusted EBITDA: $40.9 million vs analyst estimates of $2.8 million (big beat)
• EPS: -$0.35 vs analyst estimates of -$0.62 (43.4% beat)
• Revenue Guidance for Q2 CY2024 is $935 million at the midpoint, roughly in line with what analysts were expecting (adjusted EBITDA guidance for the same period solidly ahead)
• Gross Margin (GAAP): 44.1%, down from 45.6% in the same quarter last year
• Free Cash Flow of $46.01 million, up from $12.81 million in the previous quarter
• Active Accounts: 81.6 million, up 10 million year on year
• Market Capitalization: $8.87 billion

Consumer SubscriptionConsumers today expect goods and services to be hyper-personalized and on demand. Whether it be what music they listen to, what movie they watch, or even finding a date, online consumer businesses are expected to delight their customers with simple user interfaces that magically fulfill demand. Subscription models have further increased usage and stickiness of many online consumer services.

Sales GrowthRoku’s revenue growth over the last three years has been strong, averaging 24% annually. This quarter, Roku beat analysts’ estimates and reported 19% year-on-year revenue growth.

Guidance for the next quarter indicates Roku is expecting revenue to grow 10.4% year on year to $935 million, in line with the 10.8% year-on-year increase it recorded in the comparable quarter last year. Ahead of the earnings results, analysts were projecting sales to grow 10.2% over the next 12 months.

Usage Growth As a subscription-based app, Roku generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.

Over the last two years, Roku’s monthly active users, a key performance metric for the company, grew 15.5% annually to 81.6 million. This is solid growth for a consumer internet company.

In Q1, Roku added 10 million monthly active users, translating into 14% year-on-year growth.

Revenue Per UserAverage revenue per user (ARPU) is a critical metric to track for consumer internet businesses like Roku because it measures how much the average user spends. ARPU is also a key indicator of how valuable its users are (and can be over time).

Roku’s ARPU has declined over the last two years, averaging 3.2%. Although the company’s users have continued to grow, it’s lost its pricing power and will have to make improvements soon. This quarter, ARPU grew 4.4% year on year to $10.80 per user.

Key Takeaways from Roku’s Q1 Results It was great to see Roku beat analysts’ revenue expectations and crush adjusted EBITDA expectations this quarter. We were also glad it expanded its number of users. Guidance was similar to the results themselves, with Q2 revenue guidance roughly in line while adjusted EBITDA guidance was well ahead. This signals that growth is roughly as expected but the profitability of that growth is outperforming. Overall, this quarter’s results seemed fairly positive and shareholders should feel optimistic. The stock is up 7.1% after reporting and currently trades at $67.26 per share. Investing