Roku Q3 2021 Earnings Report Recap

ROKU beat on earnings but missed on revenue

Key Takeaways

  • The number of active accounts came in at 56.4 million, narrowly missing analysts' estimates.
  • Roku's user base, as gauged by the number of active accounts, is a key measure of the company's ability to generate advertising revenue.
  • Roku expects robust revenue growth in the fourth quarter amid the continuation of the secular shift from traditional TV to streaming TV.
Roku Earnings Results
Metric  Beat/Miss/Match Reported Value Analysts' Prediction
Earnings Per Share Beat $0.48 $0.08
Revenue Miss $680.0M $683.8M
Active Accounts Miss 56.4M 56.7M

Source: Predictions based on analysts' consensus from Visible Alpha

Roku (ROKU) Financial Results: Analysis

Roku, Inc. (ROKU) reported mixed Q3 FY 2021 earnings results on Nov. 3. Earnings per share (EPS) crushed consensus estimates, rising more than fivefold compared to the year-ago quarter. Revenue, however, came in below analyst forecasts, up 50.5% year over year (YOY).

The total number of Roku's active accounts came in at 56.4 million for the quarter, just missing analysts' expectations. The company's shares fell as much as 9% in after-market trading. Over the past year, Roku's shares have provided a total return of 54.1%, above the S&P 500's total return of 38.3%.

ROKU Active Accounts

Roku's active accounts rose 22.6% YOY, the slowest pace of growth out of any quarter in at least the past four years. Growth in the company's user base, as measured by active accounts, has been slowing the larger it becomes. Growth in active accounts for each quarter in FY 2018 ranged between 40% and 46% YOY. By FY 2020, that range had fallen to 37% to 42% YOY. Growth has continued to decelerate in FY 2021.

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, family members streaming content on the same account only count as one active account. Nevertheless, 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.

Roku noted in its earnings press release that the slowdown in active account growth this quarter was largely due to global supply chain disruptions that have affected the U.S. market. On the positive side, Roku's average revenue per user (ARPU) rose 48.5% YOY to reach $40.10, passing the $40 milestone.

ROKU Outlook

Roku gave a midpoint estimate for its fourth quarter revenue of $893 million, an increase of approximately 37% YOY. Gross profit is expected to be $385 million at the midpoint, up 26% YOY. The company said that the secular shift from traditional TV to streaming TV supports its outlook despite the impacts of the pandemic and global supply chain disruptions that it believes will carry into 2022.

Roku Earnings Call Recap

On a call after the company released earnings, chief financial officer Steve Louden said that the major disruptions in the global supply chain were likely to create a number of problems during the coming holiday season. He said that included shipping delays, product-availability problems and product-price increases. “We expect the U.S. TV market to continue to be significantly impacted by these issues,” he said.

Roku's next earnings report (for Q4 FY 2021) is estimated to be released on Feb. 24, 2022.

Article Sources

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