- Analysts estimate EPS of $0.06 vs. $0.49 in Q4 FY 2020.
- The number of active accounts is expected to rise YOY, but at less than half the pace of the same quarter a year earlier.
- Revenue is expected to grow at a slower rate as the initial boom from the pandemic wears off.
Roku Inc. (ROKU) has seen its profits and revenue spike during the COVID-19 pandemic as consumers have sharply increased their home viewing of streaming TV and movie entertainment. That caused Roku's streaming hours and advertising sales to soar. However, signs are emerging the pandemic's positive effects are starting to wear off. Roku saw a sharp deceleration in revenue growth and active accounts in its most recent reported financial quarter, the third quarter of FY 2021.
Investors will be watching to see if Roku can reverse those trends—and keep profits rising—when it reports earnings on Feb. 17, 2021 for Q4 FY 2021. Analysts expect earnings per share (EPS) to plummet as revenue growth decelerates to its slowest pace in at least 15 quarters.
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 expect active accounts to rise, but at the slowest quarterly pace in at least four years.
Shares of Roku have drastically underperformed the broader market over the past year. The stock's performance gap widened compared to the broader market between late February and early May 2021. Then the gap narrowed as Roku shares gained positive momentum starting in mid-June. But Roku's advance was short-lived. In late July, the stock began a sustained decline and its performance gap with the broader market dramatically widened. Roku's shares have provided a total return of -64.2% over the past year, well below the S&P 500's total return of 13.7%.
Roku Earnings History
Roku reported mixed Q3 FY 2021 earnings results. EPS beat analysts' expectations, rising 411.4% compared to the year-ago quarter. It was the fifth straight quarter of positive EPS after six consecutive quarters of losses per share. Revenue missed expectations, but was still up 50.5% year over year (YOY). It was the slowest pace of revenue growth since the second quarter of FY 2020. The company noted that its business was facing ongoing challenges due to global supply chain disruptions.
In Q2 FY 2021, Roku's earnings and revenue beat consensus estimates. EPS was positive for the fourth straight quarter as revenue soared 81.2% compared to the year-ago quarter. It was the fastest pace of revenue growth the company has ever achieved. Roku highlighted in its earnings press release the acceleration of the ongoing shift by advertisers from traditional TV to streaming TV. It also said that it more than doubled its monetized video ad impressions on a YOY basis.
Analysts expect Roku's financial performance to weaken in Q4 FY 2021. They estimate that EPS will decline 86.6% YOY as revenue growth decelerates to 37.3%. It would be the slowest pace of revenue growth in at least 15 quarters. Despite the weak Q4 estimates, analysts expect Roku to report its first year of positive EPS in at least five years for FY 2021. Annual revenue is expected to expand 57.0%, slightly slower than the previous year's pace of growth but faster than the annual increases in each of the three years prior to FY 2020.
|Roku Key Stats|
|Estimate for Q4 FY 2021||Q4 FY 2020||Q4 FY 2019|
|Earnings Per Share ($)||0.06||0.49||-0.13|
|Active Accounts (M)||59.5||51.2||36.9|
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.
The number of active accounts has grown rapidly over the past several years. At the end of FY 2017, Roku had 19.3 million active accounts. That number grew to 51.2 million by the end of FY 2020. Growth has slowed modestly over those years, however. The growth in active accounts for each quarter in FY 2018 ranged between 40%-46% YOY. By FY 2020, that range had fallen to 37%-42% YOY. Growth in active accounts continued to decelerate in FY 2021, slowing to a pace of 34.7% YOY in Q1, then to 28.1% YOY in Q2, and to 22.6% YOY in Q3. Analysts expect that trend to continue in Q4 FY 2021, estimating only a 16.3% increase YOY. That would be the slowest pace of quarterly growth in at least the past four years.
The Wall Street Journal. "Roku Plans to Develop More Than 50 Original Shows in Next Two Years."
Visible Alpha. "Financial Data."
Roku Inc. "3Q21 Shareholder Letter," Page 1.
Roku Inc. "2Q21 Roku Shareholder Letter," Page 1.
Roku Inc. "Form 10-K for the year ended December 31, 2020," Page 57.