Roku Inc. (NASDAQ: ROKU) has released its Q4 earnings report, with mixed results that indicate both growth opportunities and challenges for the streaming platform. The stock tumbled 14% as it projected a Q1 net profit slightly below expectations.
Shares of ROKU fell 9% two days ago as rumors that retail giant Walmart (WMT) was interested in buying TV maker Vizio. ROKU was asked about this on the call but declined to comment. The lower profit and competition concerns have led investors out of the stock. Shares are trading at $80 in after hours and are eyeing up a test of the 200-day moving average ($77.78).
The company reported a loss per share of $0.55, in line with consensus, however, revenues rose 13.5% year-over-year to $984.4 million, surpassing the consensus of $967.72 million.
One significant highlight for Roku is its growing user base. The company ended 2023 with 80.0 million active accounts, up 12% from the previous year's 70.0 million. Viewer engagement on the platform reached record levels, with over 100 billion hours streamed in 2023, averaging 4.1 hours per day per account in Q4.
Despite these positive metrics, Roku faced challenges in its average revenue per user (ARPU), which declined 4% year-over-year to $39.92 on a trailing 12-month basis. The company attributed this decline to its growing international presence and its focus on scaling and engaging with new markets.
The company achieved positive Adjusted EBITDA and Free Cash Flow for the full year 2023, surpassing expectations and achieving profitability ahead of schedule. Additionally, Roku offered optimistic guidance for Q1, forecasting revenues of $850 million, gross profit of approximately $370 million, and break-even Adjusted EBITDA. The company expects to maintain the Q4 2023 year-over-year Platform growth rates in Q1 and deliver positive Adjusted EBITDA for the full year 2024.
One key driver of Roku's success is its position as the leading TV streaming platform, with more than 80 million active accounts. Roku's streaming hours on its platform continue to outpace traditional TV, with a 21% year-over-year increase in global streaming hours, compared to a 16% decline in hours spent on traditional TV in the U.S. Furthermore, the engagement per account globally increased to 4.1 hours per day in Q4 2023, up from 3.8 hours in Q4 2022 and 3.6 hours in Q4 2021.
Roku highlighted the significant opportunity in the TV streaming market, as there remains a significant gap between viewership and ad dollars allocated to streaming. U.S. adults aged 18-49 spent over 60% of their TV time on streaming in 2023, while advertisers only allocated 29% of their TV budgets to streaming. This gap presents a growth potential for Roku to capture a larger share of ad spending in the streaming industry.
The company's financials reflect these growth prospects, with total net revenue of $3.5 billion in 2023, up 11% year over year. Platform revenue, driven by streaming services distribution and video advertising, reached $3.0 billion in 2023, up 10% year over year.
Looking ahead, Roku aims to increase revenue, free cash flow, and achieve profitability over time. However, the company acknowledges the challenges presented by the macroeconomic environment and the uneven recovery of the advertising market. Despite facing difficult year-over-year growth rate comparisons in streaming services distribution and a challenging media and entertainment environment, Roku expects to maintain its Q4 2023 year-over-year Platform growth rates in Q1 and deliver positive Adjusted EBITDA for the full year 2024.
Overall, Roku's Q4 earnings report showcases the company's strong user base growth, record-breaking streaming hours, and positive financial performance. While facing certain challenges, Roku remains optimistic about its ability to drive monetization and growth in the TV streaming industry. Investors will be closely monitoring how Roku capitalizes on its leading position and focuses on innovation and growth in the coming year.