Investor Strategy

Roku Misses Earnings in Q1 as Costs Surge; Warns of Weaker Ad Revenue

imageStock Markets3 hours ago (May 07, 2020 04:54PM ET)

(C) Reuters. – Roku (NASDAQ:ROKU) fell in after-market hours on Thursday after it pulled its guidance and reported first-quarter mixed results as a surge in costs weighed on profit.

The streaming-device company also warned it expected growth in its ad business to fall short of its initial expectations.

“Despite the likelihood that total U.S. advertising expenditures will decline in 2020, we believe Roku is relatively well positioned based on the effectiveness of our ad products and the trend towards streaming. As a result, we anticipate that our ad business will deliver substantial revenue growth on a year-over-year basis, albeit at a slower pace and lower gross profit than we originally expected for the year,” it added.

Roku was down more than 6.8% in postmarket trading.

Roku reported first-quarter earnings of $0.45 per share, in line with expectations, compared with a loss of $0.09 per share in the year-ago quarter. Revenue of $320.8 million topped estimates of $309.23 million.

The miss on the bottom line comes as operating expenses jumped 76%, offsetting a jump in active accounts, average revenue per user (ARPU) and streaming hours.

“The acceleration of growth in new accounts and viewership continued in April. Active accounts grew roughly 38% versus last year, driven by a year-over-year (YoY) increase in new accounts of more than 70%. Streaming hours rose by roughly 80% year-over-year, driven by an increase in streaming hours per account of approximately 30%,” Roku said.

Average revenue per user (ARPU) was up 28% to $24.35.

“Since mid-March, platform monetization has seen a mixture of impacts. For example, subscription video on demand (SVOD) trials and subscriptions, and transactional video on demand (TVOD) purchases are up. While our advertising business has seen higher than normal cancellations as overall advertising budgets have declined, this has been partially offset by ad-spend that has moved to Roku from traditional TV budgets,” the company said.

Roku Misses Earnings in Q1 as Costs Surge; Warns of Weaker Ad Revenue

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