Taking advantage of a huge wave of streaming use to stay home, Roku increased revenue in the fourth quarter by 58%, to a record $ 649.9 million – and posted a net profit of $ 65.2 million in the quarter, while Wall Street expected a loss.
The company already announced last month that it ended 2020 with 51.2 million active accounts, an increase of 39% year on year after adding 14.3 million net accounts. The ad-supported Roku channel grew even faster, more than doubling its audience to reach U.S. homes with an estimated 61.8 million people in the fourth quarter.
On average, analysts expected Roku to post revenue of $ 617.7 million and a loss of 5 cents per share in the fourth quarter, according to research firm Refinitiv. Roku’s shares, which have risen more than 42% in the year to date, rose up to 3.9% in Thursday’s trading session.
Roku’s main growth driver was its business platform, which increased revenue 81% during the quarter, to $ 471.2 million. The platform segment encompasses the company’s advertising and subscription / transaction business, and Roku said that monetized video ad impressions more than doubled in the fourth quarter year on year with the continued shift from pay TV audiences to streaming.
Helping to increase usage in the fourth quarter were the deals that Roku closed – after months of disputes – for NBCUniversal’s Peacock (which launched on September 21) and HBO Max (which launched on December 17).
“It was all aspects of the company hitting at the same time,” said Scott Rosenberg, senior vice president and general manager of Roku’s business platform, of the better-than-expected fourth-quarter results in an interview with reporters.
Roku’s low-margin player segment, which includes its streaming media devices, generated revenue of $ 178.7 million. This was an 18% increase, but it was a slower growth rate than in the previous year, which the company attributed to the COVID restrictions that depressed Christmas purchases. Roku maintains low margins (close to zero) for its player business, which it uses to increase active accounts and boost sales in the platform business.
For the entire year, streaming hours on Roku reached a record 58.7 billion, an increase of 55%. In the fourth quarter, Roku users’ streaming hours reached a record high of 17 billion hours (also a 55% increase).
Last month, as part of an increase in its free and Roku Channel-sponsored programming, the company struck a deal to acquire global rights to more than 75 of Quibi’s original programs. This happened after the startup led by Jeffrey Katzenberg and Meg Whitman ended six months after launch. Roku says it plans to add the Quibi programs, representing several hundred hours of content, to the Roku Channel in 2021. The company “significantly” paid less than $ 100 million for the Quibi deal, said a source familiar with the deal.
In discussing fourth quarter earnings, Roku executives did not provide an update on when Quibi’s content would be released. Under Quibi’s agreement, Roku has the option to order additional seasons from his producers’ programs.
“We think Quibi’s content will perform well,” said Rosenberg. But he also said the company had added “a significant amount of content” to other partners’ Roku Channel in the past few months, said Rosenberg, including Disney, NBCUniversal, A + E Networks and Discovery.
For the current quarter, Roku expects continued revenue growth, projecting $ 478 million to $ 493 million in revenue for the first quarter of 2021 (up 49% -54%). It expects a net loss of $ 16 million to $ 23 million in the first quarter.
Given the explosion in streaming activity that Roku saw in the second half of 2020, Roku warned that growth for the entire year 2021 will fall below the levels he expects to see in the first and second quarters of 2021. The company said it expects a gross margin overall 2021 be in the 40% range; Roku posted a gross margin of 45.4% for the entire year 2020.
Other metrics praised by Roku: average revenue per user in the fourth quarter increased 24% year over year to $ 28.76 (on a 12-month-ago basis), and 38% of all smart TVs sold in the U.S. in 2020 were Roku TV models. The company also said that in the fourth quarter, the six largest advertising agency holding companies more than doubled their spending year on year with Roku and committed to “significantly higher upfronts for 2021 with Roku”.