The numbers that sent Roku stock soaring after its first earnings report
MARKETWATCH 6:54 AM ET 11/10/2017
Roku (ROKU) shares jump as much as 57% after report shows big gains for advertising revenue
Roku Inc. (ROKU) reported earnings for the first time as a public company Wednesday, revealing results that sent its young stock soaring and established important numbers to watch for the future of the streaming-video company.
Beating analyst models on the top and bottom line (www.marketwatch.com/story/roku-stock-up-22-on-earnings-and- revenue-beat-2017-11-08), Roku(ROKU) demonstrated once again that the company believes its TV operating system -- known as its platform business in filings -- is the key to growth, as executives have said repeatedly (http://www.marketwatch.com/ story/roku-earnings-after-ipo-these-are-the-numbers-to-watch-2017-11-07). Roku(ROKU) reported an adjusted loss of 10 cents a share on revenue of $124.8 million, with the company's platform revenue reaching 46% of total sales. Roku(ROKU) shares jumped as much as 57.3% Thursday morning to an early intraday high of $29.44, after closing Wednesday at $18.84. Before Thursday's gains, Roku(ROKU) stock was up 34.6% from the $14 IPO price, while the S&P 500 index had gained 1.6% in the same period.
Chief Financial Officer Steve Louden spoke with MarketWatch late Wednesday to discuss Roku's(ROKU) results, and break down the numbers from its fast-growing advertising business -- which represents about two-thirds of Roku's(ROKU) platform revenue - - and other key metrics for Roku(ROKU).
For more on what makes up platform revenue go here (http://www.marketwatch.com/story/roku-earnings-after-ipo-these- are-the-numbers-to-watch-2017-11-07).
Advertising revenue: Platform revenue more than doubled year-over-year to $57.5 million, and advertising represents about two-thirds of that segment. Average revenue per user grew 37% to $12.68, which Louden credited to the advertising business.
"Advertising is the fastest-growing piece of platform," Louden said. "We've been investing heavily in the video ad side, and so that business in terms of the number of ads we're serving is growing dramatically. A lot of advertisers are coming to the realization that they need to follow the audience and that audience has decidedly moved to streaming."
Video ads make up the largest portion of the advertising part of the business via several types of content deals, as well as video ads in the operating system itself and sponsorship deals for ads that take over the Roku(ROKU) home screen.
"I like them all because they all have relatively high margins," Louden said. "But some have extremely high margins because, say, the home screen display is ours, so there is very little cost around that."
The Roku Channel:Launched in September, the channel (http://www.marketwatch.com/story/roku-is-launching-its-own-free- ad-supported-movie-channel-2017-09-06) is ad-supported, populated by movies and is, most importantly, free -- one of the most searched for words on Roku(ROKU) is "free." On the third-quarter call, executives likened it to a large-scale TV- publishing platform that gives content distributors a direct link to consumers.
But the channel can be more lucrative since the company retains full control of playback, and allows the company to " bring forward all of its advanced ad tech," said Chief Executive Anthony Wood, who added that it was one of the best ways to monetize ad-supported attention on its platform.
Total number of streaming hours: Total streaming hours grew 58% to 3.8 billion in the third quarter, executives said. That amounts to about 2.5 hours per account a day, about the same as the second quarter of this year, after also factoring in growth of active user accounts.
"That's gone up a bit sequentially," Louden said.
Ad prices: Executives on the call said that the cost per 1,000 impressions, a common way of measuring costs in the advertising industry, topped $30.
"Our rate card starts at $30 and goes up from there as you add advanced targeting, interactivity and measurement on top," Louden told MarketWatch in a telephone interview. "That's not the exact CPM number. The Roku(ROKU) advertising experience is a targeted CPM, we have a relationship with the largest [streaming media] audience, and because we have a great relationship with them, we know a lot about them -- that is valuable... We haven't given any guidance around CPM, but we're early days in terms of the shift from that $70 billion in traditional TV advertising that's following that audience."
Read:The man who gave us the DVR says Roku(ROKU) is the future of TV (http://www.marketwatch.com/story/the-man-who-gave-us- the-dvr-says-roku-is-the-future-of-tv-2017-11-07)
Product sales: While platform is an important piece of the Roku(ROKU) puzzle, the streaming hardware that made it a well- known brand remains important as a customer-acquisition strategy. Roku(ROKU) is bringing down margins on the streaming players as it effectively gets paid to bring aboard new platform users, and executives said they have no problem trading some hardware profits for more users. That trade was evident in player sales, where revenue grew 4% year-over-year even while unit sales increased 35%.
One of the reasons was the $29.99 Roku Express, which further drove down the price of an entry-level streaming stick. Executives on the conference call said they don't currently have a plan on how low Roku(ROKU) is willing to take gross margins to drive sales volume.
But at the moment, "Our strategy is working," Wood said on the call.
-Max A. Cherney; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
11-10-170654ET
Copyright (c) 2017 Dow Jones & Company, Inc.
MARKETWATCH 6:54 AM ET 11/10/2017
Roku (ROKU) shares jump as much as 57% after report shows big gains for advertising revenue
Roku Inc. (ROKU) reported earnings for the first time as a public company Wednesday, revealing results that sent its young stock soaring and established important numbers to watch for the future of the streaming-video company.
Beating analyst models on the top and bottom line (www.marketwatch.com/story/roku-stock-up-22-on-earnings-and- revenue-beat-2017-11-08), Roku(ROKU) demonstrated once again that the company believes its TV operating system -- known as its platform business in filings -- is the key to growth, as executives have said repeatedly (http://www.marketwatch.com/ story/roku-earnings-after-ipo-these-are-the-numbers-to-watch-2017-11-07). Roku(ROKU) reported an adjusted loss of 10 cents a share on revenue of $124.8 million, with the company's platform revenue reaching 46% of total sales. Roku(ROKU) shares jumped as much as 57.3% Thursday morning to an early intraday high of $29.44, after closing Wednesday at $18.84. Before Thursday's gains, Roku(ROKU) stock was up 34.6% from the $14 IPO price, while the S&P 500 index had gained 1.6% in the same period.
Chief Financial Officer Steve Louden spoke with MarketWatch late Wednesday to discuss Roku's(ROKU) results, and break down the numbers from its fast-growing advertising business -- which represents about two-thirds of Roku's(ROKU) platform revenue - - and other key metrics for Roku(ROKU).
For more on what makes up platform revenue go here (http://www.marketwatch.com/story/roku-earnings-after-ipo-these- are-the-numbers-to-watch-2017-11-07).
Advertising revenue: Platform revenue more than doubled year-over-year to $57.5 million, and advertising represents about two-thirds of that segment. Average revenue per user grew 37% to $12.68, which Louden credited to the advertising business.
"Advertising is the fastest-growing piece of platform," Louden said. "We've been investing heavily in the video ad side, and so that business in terms of the number of ads we're serving is growing dramatically. A lot of advertisers are coming to the realization that they need to follow the audience and that audience has decidedly moved to streaming."
Video ads make up the largest portion of the advertising part of the business via several types of content deals, as well as video ads in the operating system itself and sponsorship deals for ads that take over the Roku(ROKU) home screen.
"I like them all because they all have relatively high margins," Louden said. "But some have extremely high margins because, say, the home screen display is ours, so there is very little cost around that."
The Roku Channel:Launched in September, the channel (http://www.marketwatch.com/story/roku-is-launching-its-own-free- ad-supported-movie-channel-2017-09-06) is ad-supported, populated by movies and is, most importantly, free -- one of the most searched for words on Roku(ROKU) is "free." On the third-quarter call, executives likened it to a large-scale TV- publishing platform that gives content distributors a direct link to consumers.
But the channel can be more lucrative since the company retains full control of playback, and allows the company to " bring forward all of its advanced ad tech," said Chief Executive Anthony Wood, who added that it was one of the best ways to monetize ad-supported attention on its platform.
Total number of streaming hours: Total streaming hours grew 58% to 3.8 billion in the third quarter, executives said. That amounts to about 2.5 hours per account a day, about the same as the second quarter of this year, after also factoring in growth of active user accounts.
"That's gone up a bit sequentially," Louden said.
Ad prices: Executives on the call said that the cost per 1,000 impressions, a common way of measuring costs in the advertising industry, topped $30.
"Our rate card starts at $30 and goes up from there as you add advanced targeting, interactivity and measurement on top," Louden told MarketWatch in a telephone interview. "That's not the exact CPM number. The Roku(ROKU) advertising experience is a targeted CPM, we have a relationship with the largest [streaming media] audience, and because we have a great relationship with them, we know a lot about them -- that is valuable... We haven't given any guidance around CPM, but we're early days in terms of the shift from that $70 billion in traditional TV advertising that's following that audience."
Read:The man who gave us the DVR says Roku(ROKU) is the future of TV (http://www.marketwatch.com/story/the-man-who-gave-us- the-dvr-says-roku-is-the-future-of-tv-2017-11-07)
Product sales: While platform is an important piece of the Roku(ROKU) puzzle, the streaming hardware that made it a well- known brand remains important as a customer-acquisition strategy. Roku(ROKU) is bringing down margins on the streaming players as it effectively gets paid to bring aboard new platform users, and executives said they have no problem trading some hardware profits for more users. That trade was evident in player sales, where revenue grew 4% year-over-year even while unit sales increased 35%.
One of the reasons was the $29.99 Roku Express, which further drove down the price of an entry-level streaming stick. Executives on the conference call said they don't currently have a plan on how low Roku(ROKU) is willing to take gross margins to drive sales volume.
But at the moment, "Our strategy is working," Wood said on the call.
-Max A. Cherney; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
11-10-170654ET
Copyright (c) 2017 Dow Jones & Company, Inc.
