- Analysts estimate EPS of -$0.21 vs. $0.54 in Q1 FY 2021.
- The number of active accounts is expected to rise YOY, but at the slowest pace in 16 quarters.
- Revenue is expected to grow at the slowest rate in at least the last three years.
Roku Inc. (ROKU) has posted dramatic growth during much of the COVID-19 pandemic as many people working at home sharply boosted their consumption of streaming TV and movie entertainment. Last year, the company's net income was nearly nine times higher and its revenue more than three times higher than five years ago, in fiscal year 2016. But Roku's growth is now slowing, and the outlook for Roku - and the entire streaming industry - has grown cloudier as many people return to their offices as the economy reopens.
Investors will watch Roku's earnings and revenue for any signs that it can regain its momentum when the company reports earnings on April 28, 2021 for Q1 FY 2022. The results may not be what investors are hoping for. Analysts predict that Roku will post a loss per share for the first time since Q2 FY 2020. Revenue is expected to increase at a healthy pace, but at the slowest rate in at least three years.
Investors will also closely watch another key metric: Roku's total number of active accounts, which gauges the size of the company's user base. More subscribers means more people that will see ads, making the platform more attractive to advertisers, a major source of revenue. Analysts estimate hold that Roku's active accounts will grow during Q1 FY 2022, but at less than half the rate of the prior-year quarter.
Roku shares have massively underperformed the broader market over the last year. Initially, the shares outpaced the S&P 500 last summer and peaked in July 2021. But they have steadily fallen since then and their underperformance gap has broadened compared to the broader market. Roku stock has dropped following each of the last two quarterly earnings reports, and has drifted downward and sideways in the last three months. As of April 27, Roku shares have provided a 1-year trailing total return of -75.1%, far behind the total return of -0.3% for the S&P 500.
Roku Earnings History
Roku posted dramatic increases in earnings per share (EPS) for six consecutive quarters through Q3 FY 2021 after a period of six quarters of losses going back to Q1 FY 2019. During the six-quarter growth streak, the EPS increases ranged from a low of 144% to a high of 466% on a quarterly basis. But EPS reversed sharply in Q4 2021, falling 65.6%, as the economy began to slowly emerge from the pandemic. Analysts predict that Q1 FY 2022 will be worse, with Roku posting its first quarterly loss since Q2 FY 2020.
Roku's revenue performance has been strong for much of the past several years. In FY 2019, the year prior to the pandemic, Roku posted a 52.0% increase in revenue, and then accelerated to 57.5% in FY 2020 as the virus began to spread rapidly. On a quarterly basis, revenue growth reached a high of 81.2% YOY in Q2 FY 2021, then began to slow. It decelerated to 50.5% in Q3 and 33.2% YOY growth for last quarter. Analysts now expect revenue growth of 25.5% in Q1 FY 2022. While still healthy, this pace of growth is dramatically slower than the last 14 or more quarters.
|Roku Key Stats|
|Estimate for Q1 FY 2022||Q1 FY 2021||Q1 FY 2020|
|Earnings Per Share ($)||-0.21||0.54||-0.45|
|Active Accounts (M)||61.5||53.6||39.8|
Source: Visible Alpha
The Key Metric
As mentioned above, investors will also be watching for growth in the size of Roku's user base as measured by the number of active accounts. Roku defines active accounts as the number of distinct user accounts that have streamed content on its platform sometime within the past 30 days of the period. Streamed content from the Roku Channel only on non-Roku platforms does not count as streamed content for the purpose of measuring active accounts. Also, the metric does not distinguish between unique individuals streaming content on the same account. For example, an account with family members all streaming content on that same account only counts as one active account. But the number of active accounts will be closely correlated with the number of viewers, or targets for advertisers. The greater the number of active accounts using Roku's platform, the more attractive the platform will be to advertisers, which will attract more ad spending from them.
Roku's active accounts growth has decelerated significantly in recent quarters. Active accounts rose 45.7% in Q2 FY 2018, the fastest growth rate in roughly the past four years. They then slowed somewhat to growth in the upper 30s in each quarter of FY 2019. Growth in active accounts picked up slightly in FY 2020 amid the pandemic, rising 42.4% YOY in Q3 FY 2020. However, growth in active accounts has decelerated sharply throughout FY 2021, reaching 17.4% in Q4 FY 2021, the slowest pace in about four years. Analysts expect growth to slow even more to 14.7% for Q1 FY 2022.
Visible Alpha. "Financial Data."
Roku Inc. "Form 10-K for the fiscal year ended December 31, 2021," Page 50.