Roku Reports 68% Reduction in Q2 Net Loss, Reaching $33.95 Million

Roku's stock experienced a notable increase of over 6% in after-hours trading on Thursday following the release of its second-quarter 2024 earnings report. The streaming and hardware company not only managed to narrow its net losses but also exceeded Wall Street expectations with a smaller-than-anticipated loss per share and better-than-expected revenue figures.

The company's platform revenue, primarily generated from advertising sales and subscription revenue shared with partners, rose by 11% year over year, totaling $824 million. This growth was supported by increased distribution of streaming services and advertising activities, even amid ongoing challenges within the media and entertainment (M&E) sector. Additionally, devices revenue surged by 39% year over year, reaching $143.8 million, largely driven by the expanded retail distribution of Roku-branded TVs.

Roku's average revenue per user remained stable year over year at $40.68 on a trailing 12-month basis, indicating a growing share of international streaming households. These households are still in the early stages of monetization, focusing on scaling and enhancing user engagement.

The company reported a total gross profit of $425 million, reflecting a 12% increase year over year, while total operating expenses decreased by 2% to $495.9 million. Notably, Roku achieved its fourth consecutive quarter of positive adjusted EBITDA and free cash flow, with figures of $43.6 million and $317.9 million, respectively. This success was attributed to strong top-line growth and ongoing operational efficiencies.

Roku's activities related to streaming service distribution grew faster than overall platform revenue, driven by price increases for subscription-based applications on its platform. In its quarterly shareholder letter, Roku highlighted its commitment to expanding the share of subscriptions billed through Roku Pay, its payment and billing service that simplifies transactions for both viewers and content partners. The introduction of the new Content Row on the Home Screen has also been beneficial, promoting popular titles from subscription video on demand (SVOD) services and encouraging Roku-billed subscription sign-ups.

The Roku Home Screen reaches over 120 million U.S. households daily, with viewers streaming 30.1 billion hours during the quarter—a 20% increase year over year. This translates to an average of 4 streaming hours per household per day, up from 3.8 hours in the same period last year. Over 70% of streaming hours on The Roku Channel were generated through features like the Content Row, Live TV, and "What to Watch."

Roku also emphasized the growth of its sports offerings, with streaming hours from the Roku Sports Experience more than tripling year over year. The company recently introduced an MLB Zone in addition to existing NFL and NBA Zones and secured exclusive multi-year rights to MLB’s Sunday Leadoff live games, which are available for free on The Roku Channel. While Roku continues to rely on third-party licenses and revenue sharing for content, it is leveraging its Roku Originals to draw viewers and advertisers.

Looking forward, Roku anticipates that its monetization initiatives will boost advertising revenue in the latter half of 2024, aiming for growth beyond the current challenges in the M&E sector. These initiatives include expanding third-party partnerships and promoting a new marquee video ad unit, which quickly sold out during its initial invite-only beta phase.

Roku CEO Anthony Wood acknowledged the challenges in the M&E sector, attributing them to streaming services pulling back on marketing budgets, which has affected the market overall. For the third quarter, Roku is forecasting a net revenue growth of 11% year over year to $1.01 billion, with platform revenue growth projected at 9% and devices revenue growth expected at 24%. The company anticipates a gross profit of $440 million, a net loss of $50 million, and an adjusted EBITDA of $45 million, reflecting its commitment to operational discipline. Roku also expects a sequential increase in the growth rate of platform revenue in the fourth quarter.

In conclusion, Roku remains optimistic about its ability to accelerate platform revenue in 2025 and beyond, aiming to maximize advertising demand, leverage its Home Screen as a key entry point for television, and expand Roku-billed subscriptions.