Roku stock gains after earnings beat, though ad market remains challenging

Roku stock gains after earnings beat, though ad market remains challenging

Roku’s forecast comes in better than expected

Roku Inc. shares moved 2% higher in Wednesday’s after-hours action as the streaming-media company cited continued ad-market pressures but topped expectations for its latest quarter.

The company reported a first-quarter net loss of $193.6 million, or $1.38 a share, compared with a loss of $26.3 million, or 19 cents a share, in the year-earlier quarter. Analysts tracked by FactSet were expecting a $1.47 loss per share.

Roku (ROKU) also reported a $69.1 million loss on the basis of adjusted earnings before interest, taxes, depreciation and amortization (Ebitda), whereas analysts surveyed by FactSet were looking for $102 million. A year ago, Roku posted $57.6 million in adjusted Ebitda.

Revenue rose to $741 million from $734 million, whereas the FactSet consensus was for $708 million.

The company generated $635 million in platform revenue, which includes areas like licensing and advertising, and $106 million in devices revenue, which encompasses sales of streaming hardware. Analysts were modeling $627 million in platform revenue along with $86 million in devices revenue.

“Overall, smart-TV unit sales in the U.S. were resilient in Q1, driven in part by lower TV panel and freight costs and consumer spend of income tax refunds,” the company said in a shareholder letter. “Roku benefited from these trends along with a consumer focus on value, particularly in a difficult macro environment.”

On the advertising front, the “macro environment remained challenged,” Roku continued. “While ad spend on the Roku platform in verticals including financial services and M&E [media and entertainment] remained pressured, verticals such as travel and health and wellness improved.”

The company had 71.6 million active accounts as of its first quarter, up from 70.0 million in the fourth quarter. Analysts had been looking for 71.1 million.

Streaming hours increased to 25.1 billion from 23.9 billion in the fourth quarter. The FactSet consensus was for 24.8 billion.

Looking to the second quarter, Roku executives expect $770 million in revenue and a $75 million adjusted Ebitda loss. The FactSet consensus was for $766 million in revenue and an $85 million adjusted Ebitda loss.

“Consumers remain pressured by inflation and recessionary fears, and thus discretionary spend is likely to remain muted,” Roku said in its shareholder letter. “Accordingly, we expect the advertising market in Q2 to look much the same as it did in Q1.”

While the company expects macro uncertainty to continue through 2023, it’s targeting positive adjusted Ebitda for full-year 2024.

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