Roku Q220 recap

Well I lucked out.

I’ve had a busy summer and a busier fall, and managed to never post my quarterly takes (or write on my blog much either). So I’ll be posting some of this quarter’s reports as “doubles” - last Q’s + this Q’s numbers & thoughts.

It so happened that Roku was near the top of my watch list, and still own a smidge in my kid’s account to keep an eye on it. Last quarter to this quarter was NIGHT and DAY. The depressed margins were erased as ad spend rushed back and went right to CTV. But beyond that, player unit sales went up 57%! Wow! Their highest level in 7 years. People have been buying Rokus in their copious amounts of free time this summer, and that makes for a huge amount of fresh eyes watching the Roku Channel (ads) or premium sub channels (a cut). The story that I really liked last year is back, and I had to buy back in, and did. And then it went up 20% over the past week. Sweet.

Wish I bought more. (Not really, it was right where I wanted it sized, at 5%, as a consumer play instead of the typical enterprise SaaS play.)

ROKU - Q220

Shareholder letter:…

Revenue 356.1M 42%
- Platform Rev 244.8M +46%
Gross Profit 146.8M +29%
Gross Margin 41.2% -443bps
- Platform GM 56.6% -886bps
- Player GM 7.5% 206bps
Opex 189M +52%
Active accounts: 43M +41%
Streaming hours 14.6B +65%
ARPU 24.92 +18%

ROKU - Q320

Shareholder letter:…
CC transcript:…
Texmex take:…

Revenue 451.7M +73%
- Platform Rev 319.2M +78% !!!! +3200bps seq !!
- Player Rev 132.4M 62% !!!!
Gross Profit 214.8M +81%
- Platform Profit 194.7M +73% !!!, +4700bps seq !!
- Player Profit +20.2M +224%
Gross Margin 47.6% +216bps, +640bps seq !!
- Platform 61% -161bps, +440bps seq !!
- Player 15%
Opex 202.9M +40%
Adj EBITDA 56.2M (vs -0.4M) swung pos
... margin 12.4% (vs -0.2%) !!
Cash <$1B

Active Accts 46M +43% ^^, +200bps seq !!
Streaming Hours 14.8B +54%
ARPU 27.00 +20% ^^, +200bps seq !!
Player unit sales +57% !!!!

Video ad impressions +90% ^^, +4000bps seq !! 

  • Highest player sales in 7 years, due to inventory replenish after strong Q2, continued strong demand in Q3, and pre-holiday stocking

  • Player sales > doubled YoY in Canada and UK

  • Player margins rose due to no need for promotions

  • Huge reacceleration of CTV ads from Q2 (+50% YoY) to Q3 (+90% YoY).
    … How much is political spend?

  • New Roku Ultra 4K HDR w/ Dolby Vision and Dolby Atmos (top of the line device)

  • New Roku Streambar 4K HDR line, to upgrade video/audio in one, for any TV w/ HDMI

  • Roku Streaming Stick+ won CNET Editors Choice

  • Launched Roku Express in Brazil

  • OS adding Apple Airplay2 and Homekit support later this year

First-time advertisers doubled YoY
Roku Channel grew twice as fast as Roku overall on streaming hours and active account growth

  • Roku Pay number of tx and partner payouts +130% YoY
  • added Peacock Channel and NBC News from NBC

CFO: “As I mentioned earlier, Q3 revenue benefited from material deal value increases that we do not anticipate will be replicated in Q4.”

Active Accounts = 43M but they say Roku Channel has reach of 54M?

CEO: “… even though we have a nice robust ad business, the vast majority of advertising spend is still in linear television, it’s not – it’s still not in streaming. And one of the interesting things in the quarter was the fact that advertisers are increasingly seeing streaming is something they need to start allocating a bigger portion of their budgets toward.”

Huge bounce back in margins. Gross Margins dipped to 56% for 2Qs, back to low 60s now. That allowed Gross Profit to rise faster than revenue. Player margins stayed high due to lack of promotions (not needed, demand is high).

Will continue to increase platform gross margins as they shift OneView (dataxu) customers from managed service to DSP.

Back to positive Adj EBITDA.


On consumer shift:

SVP, Platform: “There are just – whole classes of consumers that are simply no longer reachable through linear television ad buys. About half of TV time for adults 18 to 34 has moved to streaming. Those users are just not reachable anymore. So that’s typically what brings a marketer into the Roku fold is the desire to keep reaching them on the big screen.”

I like this combination: Heavy sales of new players (+62%) over rising streaming hours (net +9% Streaming Hours / Active Accts) and rising ARPU +20%.


On marketers changing:

SVRP, Platform: “We’re not going back to the way it was to be clear. I mean I think COVID triggered a lasting, durable change in how CMOs and marketers are thinking about their TV ad spend. We – in Q3, we saw a 17% drop in linear viewing.

Roku was up 54%. 92% of Roku cord cutters are very satisfied with their decision to cut the cord and aren’t planning to go back. So I really think this is a one-way transfer function. We don’t go back to the older spending patterns because the audience isn’t there.

Marketers need to follow the audience into OTT, and they stay because of the enhanced capabilities. So I think that’s really what all this transition is helping teach marketers is that there’s a better way. There’s a more robust toolset in OTT. And we see it in our own stats, nearly 100% retention among the advertisers who spend over $1 million.

These budgets are not flowing back to television, traditional TV.”


On sport viewing changing:

SVP, Platform: “January to September, so sort of bridging sports going away and coming back, heavy sports fans on the Roku platform dropped their linear viewing 26% and grew their streaming 17%.

So even as sports came back, the viewership didn’t come back. Among heavy NFL viewers, we saw a 29% drop in linear and a 16% increase in streaming. So the disappearance of sports during COVID kind of accelerated the pressure on that vertical in the streaming.”


On monetizing ad load:

SVP, Platform: “We’re quite happy with our recipe of half the load of linear television. We think it strikes the right balance between a great consumer experience while also providing strong monetization opportunities.

So we’re not planning to tinker with that. I think there’s lots of upside potential in terms of how valuable we make that inventory as well as opportunities beyond 15- and 30-second spots. We’ve done some work in the market with pause ads and other ad units. So I think it’s a great consumer experience as delivered today.”


On int’l expansion:

CEO: “But our – in terms of investment, international is one of our key strategic investment areas that we view. Obviously, it takes people to do it well.

The way we focus is we pick our focus countries, which we keep expanding. And then we make sure that we have local content. So we hire local people to do local content deals. We make sure we have local retailer relationships, getting into local channels, local distribution channels.

We bring Roku TV to market, which requires a lot of localization. But also in many cases, specific features that are regulated or required by the government, so we add those. We bring our players to market. We bring our audio for TV products to market, so we bring the whole portfolio of products and offer just a very complete and compelling solution.

And that’s – and then our market share starts to grow. So that’s what we’re doing. It’s working well.”

One con that remains is how much investment and process (getting TV partner to manufacture local branded Roku TVs, getting local content) it takes to spread internationally. Right now, I don’t care about this, seeing Canada and UK player sales more than double this Q. Roku has a lot of platform growth coming just from this cohort of new customers. New countries can wait. (Or rather, we can wait for Roku to get them profitable over the longer term, as the countries it has entered before now flourish.)

long ROKU


Don’t forget about Muji’s blog site:

where, if you can imagine, he goes into even more detail on his thoughts.

Excellent post, thanks. I recently moved to the Siesta Key in Florida and the only provider was Frontier, who had previously bought the FIOS business in the area. I was happy because I loved my FIOS in my previous home. Unfortunately I found out that they no longer support “Cable” for new customers, they only sell internet and force you to stream. Only alternative is Dishnet work. Well, I purchased 3 Roku boxes and will get a 4th soon. Overall I really like them, though there are some idiosyncrasies to get used to (pauses and buffering if your Wifi coverage or bandwidth does down). On a side note, I started with ATT-Tv and was a bit annoyed by it and they treated me like a cable customer, this a teaser discount that would go up after a year. I managed to ditch them and go to YouTubeTV - I really like it and recommend it. Enough with the OT details.

I was listening to a recent RBI podcast and David or the guest was reviewing Roku and they pointed out that they have become such a powerful player, that streaming services have to pay the fees to get on their box. For instance, Peacock tried to do it without Roku and they had to come crawling back. Only HBO Max is able to hold out so far.

A nifty feature is that if you run the Roku app on you smartphone, you can have the phone receive audio (and it mutes TV) and thus you can listen on your phone headsets while you spouse has a quiet sleep. This is a killer app for me.

In addition to a carry fee, they also make money on ads, though I can’t tell if the ad I am seeing is from Roku or YouTubeTV, but I could tell they were not from the broadcast company because they would break in before the show was going to add and make me miss the last few words.

So Roku is a monster and has not seemed to be hurt by Amazon or Chromecast. So worth considering if there is a dip.



Muji thank you for this informative write up on ROKU.

It would be great if Muji and others could share your opinion on FUBOTV INC (Ticker’FUBO’) please.

I like the combination of streaming and sports. FUBO has greatly benefited from the COVID-19 situation, reaching an all-time high number of paid-subscribers of 455k+ in Q3 2020, increasing 58% to the same period of last year. The revenues were $61.2mln, an increase of 47% year-over-year (note in Q1 and Q2 revenue growth was 78% and 53% respectively - so there seems to be a deceleration in revenue growth). Subscription revenue increased 64% YoY to $53.4 mln, and advertising revenue increased an impressive 153% YoY to $7.5 mln

Negatives I see include: the sector is crowded by a plethora of competitors (DAZN, Hulu, YouTube TV)

Positives I see include: streaming is the future; good management; interesting valuation; advertising growth potential; scaling up on its traditional subscription business but also by expanding into gaming, betting and ecommerce.

Here is a good tread for anybody that is interested:…

Thank you.