Business
Roku Beats Q3 Estimates, But Stock Plummets
(CTN News) – Streaming platform and media company Roku handily surpassed Wall Street estimates for the third quarter of 2022, as it acquired 2.3 million streaming accounts to reach 65.4 million.
With inflationary pressure and a slowdown in ad spending, Roku warned investors that net revenues will decline by 7.5% year over year in Q4.
An adjusted net loss of $135 million was projected for Q4 (compared with an adjusted EBITDA loss of $86.7 million in the year-ago quarter).
In after-hours trading Wednesday, Roku shares fell as much as 19% due to the company’s Q4 guidance.
“As we enter the holiday season, we expect the macro environment to further depress consumer discretionary spending and erode advertising budgets, particularly in the TV scatter market,” the company stated in its Q3 earnings letter to shareholders.
Our expectation is that these conditions will be temporary, but it is difficult to predict when they will stabilize or rebound. Therefore, we expect Q4 Player revenue and Platform revenue to be lower than last year.”
In his earnings call, CEO Anthony Wood indicated that this holiday season is not like any other. The macroeconomic headwinds “are creating a tremendous amount of uncertainty,” and the first thing companies do in such a situation is “cancel their ad budgets.”
According to Wood, some large advertisers that Roku has worked with in the past have not been spending with the company.
According to Roku’s third quarter results, revenues rose 12% year over year to $761.4 million, while losses fell by $122.2 million (or 88 cents per share) to $122.2 million. Based on Refinitiv data, Wall Street analysts expect revenue of $694 million and a net loss of $1.28 per share.
In the third quarter, operating costs increased by 71%, reaching $503.8 million. A significant increase in hiring in late 2021 and early 2022, when we believed the economy was emerging from pandemic-related disruptions, was largely the result of accelerating investments that had been deferred previously.
In late Q2, Roku began taking steps to “significantly slow” the rate of hiring and other operating expenses growth, but stated that normalizing the opex growth rate would take a few more quarters.
In addition, the company increased total streaming hours in Q3, which totaled 21.9 billion – an increase of 1.1 billion over the prior quarter and a 21% increase over last year – following a slight sequential decline in Q2. In the quarter, its account growth exceeded that of both 2019 and 2021.
The Roku Channel’s streaming hours increased by over 90% year-over-year in Q3, although the company does not disclose these figures.
Roku has stepped up its spending on original and exclusive content, and in September hired TV executive Charlie Collier as the senior head of Roku Media.
“Weird: The Al Yankovic Story,” starring Daniel Radcliffe, is scheduled to premiere Friday, Nov. 4, on the free, ad-supported Roku Channel.
Roku had previously acquired a number of short-form originals from the short-lived Quibi network, including Kevin Hart’s “Die Hart” (renewed for a second season) and Chrissy Teigen’s “Chrissy’s Court”.
SEE ALSO:
