ROKU 2Q19 Results

03 October 2019  |  TRADING IDEAS


ROKU, who sells streaming devices in the United States, posted its 2Q19 results. The 2Q and result highlights were:

  • It experienced a surge in platform sales, mostly related to advertising revenue;
  • It launched its new Premium Subscription service;
  • Its stock price increased 21% after the 2Q19 release.

ROKU Revenue

ROKU generated USD $250 million in revenue in 2Q19. Revenue increased by 60% compared to 2Q18, while operating losses reached USD $10.4 million.

Revenue Chart

ROKU has two major revenue streams: platform sales and player sales. Platform sales are generated primarily from video advertising and from content partners on a transactional basis. Player sales are generated from hardware sales. Platform sales reached $167 million in 2Q19, up 86% year-on-year.

An increase in active accounts and streaming hours contributed to the growth of platform sales.

Key metrics

Active accounts reached over 30 million (+39% YOY) and streaming hours increased to 9.4 billion hours in 2Q19, from 5.5 in 2Q18. Increased streaming hours contributed to accelerate advertising monetisation.

ROKU’s foundation “ROKU Channel” allows users to watch free content on the platform with advertisement. Recently, ROKU introduced “Premium Subscriptions on the ROKU Channel” in April 2019.

When users are subscribed to the paid premium subscription channel, they won’t see advertisements, and they get to access more than 1,000 free channels and additionally more than 30 paid channels of programs, such as ABC News and TMZ.

Average viewing hours per account increased to 3.42 from 2.78 compared to the previous 12 months. Average revenue per user (ARPU) also increased to $21.10, from $16.60.

Financial data

The cost of revenue increased to 54%, up 4% year-on-year. The Premium Subscription offering contributed to this increase.

Looking into total assets breakdown, cash and cash equivalents are valued at $375 million as the company issued Class A common stock via an at-market offering during the quarter. ROKU’s accumulated deficit was -$273 million at the end of 2Q19.

The company raised its full year outlook from $1 billion in revenue to $1.085 billion, based on the strong performance up to the second quarter, and their expectations for the second half of the year.

The company’s stock soared 20% after the quarterly release, as EPS on 2Q19 was -$0.08 which was higher than analysts’ estimate of -$0.22. Current market cap is $15.7 billion. Their price to sales ratio, (the market cap divided by the revenue estimate), is 14.4.

According to Strategy Analytics, ROKU is the #1 TV streaming platform in the U.S. by hours streamed. ROKU’s operating system powers 41 million OTT devices and smart TVs in the U.S. Current market share of ROKU is 15.2 % in the United States. Active platforms are expected to reach 50 million by 4Q19.

In May 2019, ROKU announced a new revolutionary feature called Activation Insight which enables advertisers to analyse the effectiveness of their advertisements.

The Activation Insights tool uses data from ROKU’s 29 million users to determine the audience that an advertiser is already reaching through linear TV, plus the additional audience that it could be reaching by advertising on OTT and therefore the optimal ad spend on the ROKU ad platform. ROKU is focused on creating an attractive and compelling platform for both users and advertisers, thereby adding value to both revenue segment participants

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The original article was published by Stockclip, Inc. on 12/09/2019.

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