Roku Inc. (ROKU), among the nine most-downloaded entertainment apps in the U.S., will likely report its first-ever year-over-year revenue decline in the first quarter as a tepid advertising market outweighs the growing popularity of its Roku Channel.
Key Takeaways
- Roku is likely to report EPS of -$1.45 for the first quarter, compared with -$0.19 in the prior-year quarter.
- Revenue could fall for the first time in company history, to $709.5 million.
- Roku faces diminished ad spending tied to inflation and rising interest rates.
The streaming platform provider will probably report net losses attributable to shareholders of $204.8 million, or $1.45 per share, compared with losses of $26.3 million, $0.19 a share, in the prior-year quarter, according to estimates compiled by Visible Alpha. Revenue could fall by 3.3% to $709.5 million, the first such decline in company history. Roku announces results after markets close Wednesday.
Roku’s advertising business, its largest source of revenue, faces macroeconomic headwinds including inflation and rising interest rates that shrunk ad budgets in recent quarters. The company said in February it was seeing some improvement in certain segments, including restaurants, travel, and wellness.
Citing the difficult economic environment, Roku promised investors last year that it would cut costs, and investors will be looking at first-quarter expenses to see evidence of that plan.
The company laid off 200 employees in November of last year and 200 more this March, for which it expects to incur between $30 and $35 million in one-time charges in the first quarter. Savings won’t be fully realized until later in the year.
Total operating expenses for the first quarter are expected to come in at $537 million, 38% higher than the year-ago quarter. That would be the slowest rate of increase in two years. Analysts expect operating expenses to increase by just 1% by the end of the year.
Meanwhile, Roku is expanding its product line-up and in-house programming. During the first quarter, the company launched its first Roku-branded TVs. It also partnered with content producers Pocket.watch and Jellysmack, among others, to increase offerings on The Roku Channel.
Roku shares fell about 41% in the last year, compared with a 17% drop for the benchmark S&P 500 Consumer Discretionary Sector Index.
Source: TradingView.
| Roku Key Metrics | |||
|---|---|---|---|
| Estimate for Q1 FY 2023 | Actual for Q1 FY 2022 | Actual for Q1 FY 2021 | |
| Earnings Per Share ($) | -1.45 | -0.19 | 0.54 |
| Revenue ($M) | 709.5 | 733.7 | 574.3 |
| Active Accounts (M) | 71.0 | 61.3 | 53.6 |
Source: Visible Alpha
The Key Metric: Active Accounts
Key to Roku’s advertising business is the number of active accounts on its platform, a measure of the size of its user base. Roku defines active accounts as the number of distinct user accounts that have streamed content on its platform sometime within the past 30 days. The company does not distinguish between unique individuals streaming content on the same account, though the number of active accounts is closely correlated with the number of viewers, and thus the potential reach for advertisers.
Roku’s user base is growing. The company said in early January that it surpassed 70 million active accounts, and analysts expect that it reached 71 million by the end of the first quarter.
