I know Roku is not discussed too frequently here but I am sure some are still interested.
Q2 2020 Highlights
• Total net revenue grew 42% YoY to $356.1 million;
• Platform revenue increased 46% YoY to $244.8 million;
• Gross profit was up 29% YoY to $146.8 million;
• Roku added 3.2 million incremental active accounts in Q2 2020 to reach 43 million;
• Streaming hours increased by 2.3 billion hours over last quarter to 14.6 billion;
• Average Revenue Per User (ARPU) of $24.92 (trailing 12-month basis), up 18% YoY;
• The Roku Channel reached U.S. households with an estimated 43 million people.
My thoughts –
So revenue growth decelerated sequentially, down from 55% last quarter to 42% YoY. What is most concerning for me is the slow down of platform revenue, down from 73% last quarter to 46% YoY. Part of this was to be expected due to the lower spending on advertisements, but still a rather large drop. Roku did not provide any forecast.
Gross margins also continued their downward trajectory coming in at 41.2% (yikes). Adjusted EBITDA margin is not showing much improvement either, sitting at -1%, and it does not appear this will change. This is from the shareholder letter -
"We plan to continue to monitor the trajectory of the business, and prudently manage expenses and capital expenditures. This approach of investing to enhance our competitive advantages and future growth while managing through external headwinds will likely mean that we run at an adjusted EBITDA loss for the year."
The only glimmer of hope I can see comes from the engagement numbers. Active accounts and streaming hours growth held pretty steady. If you are holding this stock, it is with the idea that eventually the dollars will go where the eyeballs are, and with 43 million accounts and 14.6 billion hours streamed this quarter, Roku has the eyeballs.
I am not very impressed, and it does not appear the market is either sending the stock down a few percent after hours. I suppose 42% growth for a business highly dependent on ads is not awful given the current state of the world, but the lack of a path towards profitability concerns me. Curious to hear what Stocknovice and others think. Still holding, barley…