From Nasdaq: 2025-02-14 00:00:14

Roku (NASDAQ: ROKU) held its Q4 2024 earnings call on Feb 13, 2025 at 5:00 p.m. ET. The call featured key figures like Anthony Wood, founder and CEO, and Dan Jedda, CFO. Roku reported a strong Q4, with a 25% growth on the platform side. Advertising revenue was particularly outstanding, showcasing unique ad units and strong reach. The company’s strategy to grow platform revenue is working well, with a focus on home screen optimization, ad demand expansion, and subscription revenue growth. Roku expects continued growth in 2025, projecting a 16% growth in Q1 and 12% for the full year. Roku’s platform gross margin for 2025 is expected to be 52.5%, a 100-basis-point decline from 2024 due to 606 adjustments. However, platform margins are flat excluding 606 adjustments, with platform revenue and profit expected to grow. Adjusted EBITDA is forecasted to improve by 130 basis points in 2025, showing good leverage. Free cash flow is expected to exceed adjusted EBITDA in 2025, driven by working capital improvements and low capex. Walmart’s acquisition of VIZIO is factored into Roku’s forecast, with expectations of continued growth in streaming households and a strong partnership with Walmart.

In Q1, Roku anticipates 16% platform revenue growth driven by streaming service distribution and advertising activities. Advertising is expected to grow faster than streaming services distribution. Roku’s streaming households have surpassed 90 million globally, with over 4 million new households added in the last quarter. First-party TVs sales exceeded 1 million in 2024, with Roku OS being the top-selling TV OS in the U.S. for six consecutive years. Roku products have wide retail distribution and strong customer loyalty. The success of Roku’s products has led to continued support from retailers, with a focus on expanding shelf space for streaming players and operating systems. The company is confident in its growth potential in the U.S. and globally, aiming to reach 100 million streaming households. Additionally, Roku’s subscription business continues to thrive, with a large number of subscribers and plans for further growth through partnerships and new offerings. The platform’s success in political advertising indicates a shift towards CTV, highlighting its effectiveness in delivering results for advertisers and driving ROI. The Roku Channel has seen significant usage growth, providing ample ad units for sale and contributing to the company’s overall success. Roku CEO Anthony Wood discussed the company’s strong performance during the political cycle, with an 82% growth in the Roku Channel. The company has a lot of inventory and a strong ability to target improved performance. The home screen monetization strategy focuses on driving more monetization and customer satisfaction, with video ads strategically placed. The Roku Experience advertising is attracting a variety of advertisers and driving business results. Despite challenges with device revenue and gross profit margins due to excess inventory during the holidays, Roku expects to continue growing streaming households. We expect margins to rationalize to a more normal level for device gross profit in 2025, with roughly flat dollars for device gross profit relative to 2024. Advertising grew faster than overall platform revenue in Q4, driven by strategies to increase engagement, subscriptions, and third-party integrations. Roku is well-positioned with competitive pricing and inventory growth. Roku aims to provide accurate guidance for Q1 and 2025, based on the latest data points, without conservatism. Industry shifts towards ad-supported tiers may impact SSD revenue. Record political cycles may lead to increased sales force for targeting younger audiences. Political revenue in Q4 was not a surprise, but reflects Roku’s best view for 2025. Roku’s deals are structured to benefit both the company and its partners, with a focus on subscription and advertising monetization. Q4 political sales exceeded expectations, showcasing growth opportunities. The company is enhancing efficiency by hiring in lower-cost regions, investing in automation, and leveraging AI. This strategy allows capital reallocation to grow platform revenue while maintaining device scale. With the recent release of the self-serve ads manager, Roku continues to innovate and improve its customer experience. Anthony Wood, the CEO of Roku, sees a huge opportunity in the small and medium-sized business market for TV advertising. The company is investing in diversifying demand beyond the Top 500 advertisers by tapping into this market. They are also focused on growing premium subscriptions and direct-to-consumer subscriptions for their app partners, aiming to increase retention rates. Internationally, Roku is making great progress, with a focus on markets in the Americas and the U.K., where they are seeing accelerated growth in streaming households. They expect to reach 100 million streaming households in the next 12 to 18 months. Roku’s CFO, Dan Jedda, discusses the company’s international growth strategy. They are focused on monetizing in Canada and Mexico, where they have reached scale. In Brazil and other Latin American countries, they are still growing scale. They expect international revenue to become a more meaningful part of their net revenue over time as they continue to build scale and focus on monetization. The company is also diversifying beyond media and entertainment for revenue. They do not expect any 606 adjustments in their numbers going forward.

Regarding their relationship with the Trade Desk, Roku’s CEO, Anthony J. Wood, states that they have a great relationship and are a large supplier of ad inventory for Connected TV. They are focused on diversifying their demand side platforms and optimizing relationships with all major platforms to drive marketer results and increase demand. They are expanding partnerships and building deeper integrations to serve a wide range of advertisers and drive incremental revenue. Roku is working to make their inventory more visible programmatically. Roku CEO Anthony Wood discusses the impact of trade wars and tariffs on the company, stating that they do not believe tariffs will have a material impact on their business due to diversified manufacturing. Mustafa Ozgen, President of Devices, adds that higher-end TV prices may rise due to tariffs, benefiting Roku’s value segment. CFO Dan Jedda affirms that any impact on gross margin related to tariffs would be immaterial. Overall, Roku remains confident in their ability to navigate potential tariff effects. The company expresses gratitude to employees, customers, advertisers, and content partners for their support. 1. A new study reveals that 70% of Americans have experienced financial stress due to the COVID-19 pandemic, with 40% reporting difficulty in paying bills. The study also found that 25% of Americans have dipped into their savings to cover expenses during this time.

2. The United Nations reports that global greenhouse gas emissions have reached a record high, with a 3.2% increase in 2021 compared to pre-pandemic levels. This increase is attributed to industrial activity and transportation emissions rebounding as countries ease COVID-19 restrictions.

3. In tech news, Apple announces plans to release a new iPhone model with enhanced camera capabilities and improved battery life. The new model is expected to launch in the fall of 2022, with pre-orders opening up in September.



Read more at Nasdaq: Roku (ROKU) Q4 2024 Earnings Call Transcript