ROKU, INC Q3 FY2024 earnings call

• Roku delivered strong Q3 results with first quarter over $1 billion in total net revenue. - Roku OS was #1 selling TV OS in US, Canada, and Mexico. The Roku Channel was #3 app by reach and engagement with Streaming Hours up 80% year-over-year. - Focused on initiatives to grow Platform revenue: Home Screen innovation, deeper third-party platform integrations (e.g., DSPs), and growing Roku-billed subscriptions. - Strong engagement: Streaming Hours up 20% year-over-year, Streaming Hours per Streaming Household per day 4.1 hours in Q3. - Q3 Adjusted EBITDA $98 million, better than outlook; Free Cash Flow $157 million trailing 12 months.

Platform Revenue: $908 million, up 15% year-over-year. Driven by streaming services distribution and advertising activities. Devices Revenue: Increased 23% year-over-year, driven by expansion of Roku-branded TVs retail distribution. Gross Profit: $480 million, up 30% year-over-year. Platform gross margin was 54%, up 610 basis points year-over-year. Devices gross margin was negative 8%, down 10 basis points year-over-year.

• Anticipates total net revenue for Q4 2024 of $1.14 billion, gross profit $465 million, gross margin 41%, and adjusted EBITDA $30 million. - Platform revenue expected to grow 14% year-over-year, device revenue 25% year-over-year in Q4. - Platform gross margin expected to be between 52% and 53% in Q4. - Full-year 2024 OpEx expected to be slightly down year-over-year excluding one-time restructuring charges; adjusted EBITDA for full-year 2024 expected $213 million.

• Impact of M&E market challenges on advertising revenue. - Political ad lumps affecting quarterly performance. - Comps for advertising verticals, including M&E and auto, posing challenges.

Q: Expand on the drivers of the platform acceleration in the beat relative to the guide in Q3 and the change in KPIs removing streaming households in ARPU.

A: Anthony and Dan discuss platform revenue drivers like Home Screen innovation, deeper third-party integrations (e.g., Trade Desk), and subscription growth. Regarding KPI change, they explain international markets at different monetization stages affect ARPU, and streaming hours are a better proxy for engagement.

Q: How to think about accelerating growth into 2025 and OpEx investment?

A: Dan mentions platform revenue growth exceeded expectations in 2024, optimistic about 2025 growth. Anthony notes OpEx expected to grow modestly in 2025 with focus on high-impact projects.

Q: Big benefits between Trade Desk partnership and Home Screen video advertising next year?

A: Anthony states Trade Desk integration is showing positive impacts, with plans to integrate more DSPs. Home Screen video advertising (in beta) has good client reviews, going GA in Q4, with opportunities in zones like sports and food.