Roku, Inc. Q1 FY2025 earnings call

• Roku reaffirmed its Platform revenue and adjusted EBITDA outlook for full year 2025, citing secular trends like the shift to streaming, diversification of revenue streams in ads, and growth in subscriptions. • Advertisers are shifting budgets from linear to streaming and direct to programmatic, with Roku well-positioned to capitalize on this, having diversified ad products and deeper integrations with third-party DSPs. • The acquisition of Frndly is seen as a positive initiative, with potential to grow subscriptions faster using Roku's Platform tools and expected to be adjusted EBITDA margin accretive in the first full year. • Roku has a diversified manufacturing strategy for Devices to mitigate tariff impacts, with teams working on optimizing the manufacturing footprint and passing some costs to consumers through price increases. • The Roku Channel's growth as the number two app on the platform is a key asset, providing significant ad inventory engagement and reach, with a symbiotic relationship with content providers.

No detailed breakdown of product segment financial performance and revenue contribution % provided in the transcript.

• Reaffirmed Platform revenue and adjusted EBITDA outlook for full year 2025. • Q2 guidance and full year guidance considered, with Q4 likely having a slight sequential step down in growth rate due to comparison with large Q4 2024 figures, but many initiatives ongoing that could impact growth. • Frndly is included in the full year guidance as one of multiple initiatives, expected to be adjusted EBITDA margin accretive in the first full year.

• Macro uncertainty and tariffs pose risks, but Roku's diversified revenue streams, ad product diversification, and manufacturing strategy help mitigate impacts. • Potential cannibalization or offset in programmatic vs. direct sales, but Roku's multiyear push to diversify demand is working with incremental revenue from partnerships.

Q: What's giving Roku confidence in reiterating the full year Platform guide and EBITDA guide given market uncertainty and tariffs, and trends in Platform and advertising business?

A: Anthony Wood mentioned secular trend of shift to streaming, Roku's position at the center, advertisers shifting budgets to streaming and programmatic, Roku's diversified revenue streams, and execution over 2 years positioning the business. Dan Jedda added reaffirmed outlook assumes some weakening in macro but is based on current trends, and Roku has diversified Platform revenue stream. Charlie Collier discussed shift from guaranteed to non-guaranteed campaigns in advertising.

Q: How much buffer does Roku have with idiosyncratic drivers if macro trends deteriorate?

A: Dan Jedda said shift from guaranteed to non-guaranteed has been favorable, Roku has many initiatives in subscriptions and advertising, new initiatives will play out over time, and advertisers asking for ROI and measurement which Roku plays well in.

Q: About programmatic and transition, contribution to Platform revenue growth, incremental vs cannibalization?

A: Charlie Collier said multiyear push to diversify demand is working, some programmatic revenue is incremental, especially through Platform partnerships, and programmatic is a method of execution allowing easier access to inventory, with true incrementality from small- and medium-sized businesses using Roku Ad Manager.

Q: Significance of Roku Channel being number two app, impact on content providers and DSPs?

A: Anthony Wood said Roku Channel is an important part of ad inventory access, powerful asset with large inventory engagement. Charlie Collier said unmatched scale of Roku's Home Screen is attractive to content providers for audience reach, and Roku can meet advertisers' demands at every price point, with Home Screen units and other content destinations aiding DSPs.

Q: Why virtual MVPD market is not transitory, and how Frndly aids ad services?

A: Anthony Wood said linear is popular, Frndly has popular brands, not a virtual MVPD but linear channels in paid tier. Charlie Collier said Frndly benefits from Roku's Platform power, elevating content and aiding ad services through recommendation engines and sales team.

Q: Housekeeping on Frndly in guidance and tariff impact on Devices?

A: Charlie Collier said Frndly is included in full year guidance as one of many initiatives. Mustafa Ozgen said Roku has diversified manufacturing strategy, agile to mitigate tariff impacts, no material change to Devices gross profit expected, and streaming players help mitigate demand softness from TV price increases due to tariffs.

Q: Platform revenue growth trajectory, Home Screen growth drivers outside M&E?

A: Dan Jedda said Q4 likely has slight sequential step down in growth rate, but many initiatives ongoing. Anthony Wood said Home Screen is used for more than M&E, with initiatives like recommendations driving subscription signups and engagement, and testing new Experiences on Home Screen.

Q: Platform revenue growth, Q2 margins, underlying growth rate?

A: Dan Jedda said Q2 Platform gross margin guide of 51% is due to shift from guaranteed to non-guaranteed in advertising, but full year guide is 52%-53%, and underlying growth rate is sustainable over longer period when excluding 606 adjustments.

Q: Update on Devices demand and why outlook flattened?

A: Anthony Wood said Roku is focused on growth in Roku using households, not Device revenue. Dan Jedda said Device revenue is lumpy, and Roku looks at unit volume and streaming households growth, which are positive.