Roku Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 1, 2025
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Operator

be advised today's conference is being recorded.

Operator

I would now like to turn the conference over to your speaker today, Conrad Grodd, Vice President, Investor Relations. Please go ahead.

Conrad Grodd
Conrad Grodd
Vice President, Investor Relations at Roku

Thank you, operator. Welcome to Roku's first quarter twenty twenty five earnings call. On today's call are Anthony Wood, Roku's Founder and CEO Dan Jeddah, our CFO Charlie Collier, president, Roku Media and Mustafa Oskin, president, devices. Our full results and additional management commentary are available in our shareholder letter on our IR website at roku.com/investor. On this call, we'll make forward looking statements, which are subject to risks and uncertainties.

Conrad Grodd
Conrad Grodd
Vice President, Investor Relations at Roku

Please refer to our shareholder letter and periodic SEC filings for risk factors that could cause our actual results to differ materially from these forward looking statements. We'll also present GAAP and non GAAP financial measures. Reconciliations of non GAAP measures to the most comparable GAAP financial measures are provided in our shareholder letter. Unless otherwise stated, all comparisons will be against the results for the comparable 2024 period. With that, operator, our first question, please.

Operator

Thank you. Our first question comes from Cory Carpenter with JPMorgan. Your line is open.

Cory Carpenter
Cory Carpenter
Internet Equity Research at JP Morgan

Okay. Thanks and good afternoon. Wanted to ask what's giving you confidence in reiterating the full year platform guide and EBITDA guide just given the current market environment and uncertainty around tariffs? And perhaps related to that, could you just talk about the recent trends you're seeing in the platform business and in particular on the advertising side? Thank you.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

Hey, Corey. This is Anthony. I'll be happy to take that. And then I'll well, I'll take the first part, then I'll turn it over to, Charlie to discuss the ads. So, yes, that's correct.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

I mean, we are in our letter, we reaffirmed our platform revenue and adjusted EBITDA outlook for the full year 2025. I mean, obviously, there's a lot of macro uncertainty, but there's a lot of Roku specific positives, that give us confidence to to give us the confidence to reaffirm our guidance for the full year. So for example, you know, the shift to streaming is a big secular trend. It it continues. We're at the center of it.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

That's a big driver of our business. Advertisers have already been shifting their budgets from linear to streaming and from direct insertion orders to programmatic. Those are two big trends that are, positive for Roku, and we're seeing that continue. You know, and and macro uncertainty causes advertisers to look for more performance. They start looking for higher ROI, more performing ads, and more flexibility, and Roku is good at all those things.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

So those are all positive for us. Also, we look at our execution over the last two years, it's really positioned our business to be in a better position to navigate, environments like we're seeing now with the macro uncertainty. So for example, we've really diversified our revenue streams. We have more diversified ad products, and we're less reliant on m and e. You know, we're, we are tapping into more ad demand sources through our deeper integration with third party DSPs, and we have a lot of supply that continues to grow.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

So, you know, these are all positive trends in our ad business. You know, if you look at our ad revenue in the quarter, it grew faster than the OTT ad market overall, for example. And then also subscriptions. You know, one of our, know, if you just think about the three tiers of our strategy that we're focused on growing platform revenue, you know, one is to grow ad revenue by leaning and deepening integrations with our DSPs. Another is to take better advantage of our home screen, the, and the Roku experience, the UI you viewers use to discover content.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

And the third is subscriptions. Like, to really lean into subscriptions, we build tens of millions of Roku subscriptions, each month. That's growing. Things premium subscriptions is a bright spot, and that's continuing to grow. And then another example, today, we announced the acquisition of Friendly, which is a skinny bundle, a subscription service that's growing both on and off Roku both on and off the Roku platform.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

It's also the kind of service that we're you know, we have a lot of ability to lean into and grow faster with the platform promotional tools we have, available to us. So, you those are some of the reasons that we're confident in renewing our, outlook for the year. But I'll let Dan add his thoughts on the question as well before we turn it over to Charlie on your question on ads.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

Yeah. Thanks, Anthony, and thanks for the question, Corey. I just want to add that in reaffirming our platform revenue and adjusted EBITDA outlook for the full year, we did assume some weakening in the macro, but our outlook does represent the most informed view we have based on the current trends we saw in q one and as we start q two. And we remain vigilant and adaptable to market conditions. And as they evolve, we'll communicate any material impacts in future quarters.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

But we feel very good about where we are right now, and we feel good about our forecast. You know, Anthony mentioned, we are not the same company that we were four or even two years ago. We have a very diversified platform revenue stream, including the subscriptions that are growing well and all the advertising initiatives that that Anthony mentioned earlier. So we're we're confident in our strategy, and we continue to see the path to achieving positive operating income in 02/1926 and to achieving our our guidance of three nine five zero on the platform side and adjusted EBITDA of 3 50 for 02/2025. On the on the trends in advertising, I'll let Charlie take that one.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

Yeah. Thanks. Hey, Corey. It's it's a good question. Know, we we are continuing to see shifts in advertising, and most of it's driven by our clients' really understandable need for greater flexibility in this macro environment.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

Some of the results of that are shorter planning cycles, what used to be quarterly planning for some, not all, but for some can now even be as short term as weekly. So as a result, we are seeing changes in media buying patterns across our platform, particularly a shift from longer term guaranteed commitments to shorter term, non guaranteed campaigns, usually executed programmatically. Again, I I think there's a short term trend, but Roku is well positioned to capitalize on the shift. That's that's the best news. You know, over the past couple years, we focused on building our programmatic capabilities, and that investment is absolutely paying off.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

In an environment like this that demands agility and programmatic advertising is gaining share because, I think, Corey, most of all, it offers the flexibility and performance that advertisers need, and that enables them to launch their campaigns quickly and and adjust in real time. So in the near term, we expect some of the high touch guaranteed business to be delayed or or or possibly scaled back in favor of more flexible, nonguaranteed programmatic buys. But this trend really aligns well with Roku's strategic direction and our focus on programmatic excellence.

Operator

Thank you. One moment for our next question. Our next question comes from Brett Navin with Bank of America. Your line is open.

Brent Navon
Brent Navon
Analyst at Bank of America

Hi. Thanks for taking the question. I guess just as as a follow-up to your comments there. I mean, it sounds like, you know, some of

Brent Navon
Brent Navon
Analyst at Bank of America

the more

Brent Navon
Brent Navon
Analyst at Bank of America

idiosyncratic drivers are, you know, able to offset maybe some macro overall weakness. And I guess I'm just trying to think through how much of buffer do you still feel like you have with some of these idiosyncratic drivers, you know, should macro trends deteriorate a little further going forward? Thanks so much.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

Hey, Brent. Dan will take that question.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

Yeah. Thanks for the question. I I yeah. I I I know where you're going with this, Brent. And I'll just say that, as I said earlier, we you know, we've seen a shift.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

Charlie talked about a shift from guaranteed to non guaranteed, and and that actually has been favorable to us in terms of driving more volume our way. And so we see positives in that. We do have you know, we We do a lot of initiatives. When we gave our guide last quarter, we talked about a lot of initiatives. We have a lot of initiatives going on in the subscription and in the advertising activities.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

We've talked a lot about advertising and new products, and the new initiatives, the growth of our supply. And now we're talking a lot more about subscriptions with the acquisition of Friendly and and many more initiatives we have yet to announce. So, you know, think some of these initiatives you know, we're gonna keep doing new things, and these initiatives are gonna play out over time. And so I do think, like, in the back half of the year, some of the you know, if there is a greater macro environment, some of our new initiatives should help to offset that. Obviously, we're not immune if there is a major macro environment, recession type, especially specifically in the ad market.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

But we also have tremendous secular tailwinds as the market continues to shift from linear to digital. And now the shift that Charlie just talked about from guaranteed to non guaranteed, we're also very well positioned. One thing I'll just add on this is, you know, advertisers are asking more for ROI and measurement. That is a space we play very well in given all the initiatives we have to increase demand to our platform because we have the supply and increase our ability to measure that demand. These are positive, these are positive tailwinds for us.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

And so there's a lot of positives, going on now, and there'll be more that that we discuss in the future.

Brent Navon
Brent Navon
Analyst at Bank of America

Great. Thank you so much.

Operator

One moment for our next question. Our next question comes from Vasalli Karasyov with Kenneball Research. Your line is open.

Vasily Karasyov
Founder & Senior Analyst at Cannonball Research

Thank you very much. Good afternoon. Charlie, I think I have a question for you, and it's about programmatic and the whole transition we you're going through. What's the best way for us to think about the contribution of programmatic to platform revenue growth? Is this revenue that entirely incremental, or is it some inventory that was previously sold direct and now executed programmatic so there's some cannibalization going on.

Vasily Karasyov
Founder & Senior Analyst at Cannonball Research

And then programmatic guaranteed and open transitioning to open programmatic bidable, the same question. Will it be will you be accessing a completely incremental budgets, or there is some, you know, offset that you're losing in direct? Thank you.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

Thanks, Vasily. This is, Charlie. It's it's a really good question, and the headline is that our multiyear push to diversify demand is absolutely working. Some of the programmatic revenue we're seeing is clearly incremental, especially what we're seeing through our platform partnerships. That's what we call our channel sales business, that's entirely net new.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

But overall, it is a mix. Many enterprise and independent clients who previously bought Roku directly through IOs or insertion orders are are now transacting programmatically, particularly, via programmatic guarantees, as you asked about, Vasily. You know, one way to step back and think about it, that might be helpful is to think of programmatic not as a buying category, but as a method of execution. It's really how advertisers choose to execute. So even just by allowing more buyers to use their preferred DSP, we're allowing them easier access to our inventory inside their broader DSP driven campaign.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

So we're making it easier for them, to buy from us. And that's even the case, by the way, when the business is sold directly by our sales team. So some of the advertisers who previously bought us directly, now they're using programmatic pipes. And the clearest example of true incrementality comes from small and medium sized businesses using our self-service product called Roku Ads Manager. Now it's early days, but these are d to c brands, mobile app marketers, local advertisers, and all those are are net new to the platform.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

So, Vasily, at the heart of your question is a range of new and expanding partnerships, many of them, truly incremental. Our strategy to diversify demand and meet advertisers where they wish to transact, our ability to prove performance through our 100% authenticated identity, our scale, the unique ad units we talk a lot about and our data interoperability, and our investment in tools and measurement. All of this is helping our partners, particularly as they invest in data and they match their data with Roku's high fidelity signal. So all of this unlocking new revenue. It's deepening existing relationships as well, and it's strengthening, strengthening, I think, our position as the most performant and easiest to work with CTV platform.

Vasily Karasyov
Founder & Senior Analyst at Cannonball Research

Thank you very much.

Operator

One moment for for our next question. Our next question comes from Justin Patterson with KeyBanc. Your line is open.

Justin Patterson
Justin Patterson
Managing Director at KeyBanc Capital Markets

Great. Thanks for taking the question. Could you talk more about the significance of Roku Channel becoming the number two app on your platform in The US? How does that change your conversation with content providers just given that reach? And at the same time, how does that change the time frame to really do deeper integrations with more DSPs since it seems like you've got a lot of supply there that needs to be filled?

Justin Patterson
Justin Patterson
Managing Director at KeyBanc Capital Markets

Thank you.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

Hey, Justin. This is Anthony. I'll start and then turn this over to Charlie. You know, we have added maturity access across our entire platform. The Roku Channel is part of it.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

It's obviously an important part of it. Like you mentioned, it's the number two app on the platform now by engagement. Globally, the Roku Channel engagement grew 84% year over year. So, I mean, it's a powerful asset to have access to that large amount of inventory engagement and reach. And and that, you know, is a powerful asset for us.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

So so we're we're gonna continue to lean into that. But I'll let Charlie talk more about your

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

question.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

Sure.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

Hey, Justin. I appreciate the question about the relationship with content providers. You know, we we have an unmatched scale. We talk a lot about being the lead in to television. And if you think about it, before anyone makes a choice about what they're watching, you know, we have a home screen that, reaches households with over a 25,000,000 people in it every day, almost Super Bowl size ratings every day.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

And so as content providers, they absolutely look at us for unmatched scale and to provide audience that guides people into their content. And and then from our position, we get to root for all of television and really use our unique assets, our home screen assets to to drive engagement. So there's there's a really symbiotic relationship. And as they move toward performance and really have to watch every marketing dollar, as Dan said earlier, you know, we prove performance, and we've invested in measurement and other tools that really make us very good at driving engagement, retention, and subscription. So so that's that's the content provider side.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

In terms of what

Charlie Collier
Charlie Collier
President of Roku Media at Roku

it does for the DSPs,

Charlie Collier
Charlie Collier
President of Roku Media at Roku

we talk a lot about being able to meet advertisers' demands at every price point and all up and down the demand curve, if you will. And a great example of that, at the very top of that are our home screen units, which are unique and have unique broad reach, and also the performance signals we can send to our clients. We also have live sports and Major League Baseball and a lot of focused originals and content destinations. If that's at the top of the pricing curve, you can say we have the tonnage you described, and that meets a lot of advertisers' needs and allows us to be flexibly priced. And all the way down the demand curve, you might see us send fewer signals and less specific programming opportunities, and we can participate at the low end of the market as well.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

So with respect to your question about time frame and DSPs, to be as big as we are as an AVOD platform and the fastest growing. It really is a powerful one two punch, and then the programmatic execution allows us to be the most performant as well.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

And I just wanna add one thing to that. I agree with everything Charlie said, but also that TRC becoming, you know, a top five, then a top three, and now number two on our platform is really does showcase the power of the platform that we have. We do not have you know, we have great content in TRC, but we're not spending billions and billions of dollars in content. What we have is an amazing platform and an amazing OS that helps us drive engagement to TRC. And it really does show the power of the platform.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

And, you know, we're gonna use that to drive subscriptions. We're gonna use that to drive advertising. We're gonna use that to drive friendly. It's now part of Roku. Like, there's a lot of positives that that home screen and the entire UI can do.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

And TRC becoming number two in in relatively short order is is showcases that power.

Operator

Thank you. One moment for our next question. Our next question comes from Laura Martin with Needham. Your line is open.

Laura Martin
Managing Director, Senior Internet & Media Analyst at Needham & Company

There. Great numbers, you guys. Congratulations on that too. Anthony, I don't like this one, but start with the hard one. So, I understand that Friendly drives your subscription revenue.

Laura Martin
Managing Director, Senior Internet & Media Analyst at Needham & Company

However, I would like you to tell us why you think the virtual MVPD market is a transitory market and it's going to zero. And then stay on Friendly for this question. Charlie, can you talk about how it aids your bundle of ad services and why it doesn't look backwards into the linear TV space, which I think Wall Street thinks is dying, rather than stick to streaming, which is the growth aspect of advertising? So that's my first one is on Prevalence. Thanks.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

Hey, Laura. It's Anthony. Thanks for the hard question. Yeah. Well, I don't think it's that hard.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

I mean so, you know, yeah, I agree that if you look at sort of cable subscriptions and their replication is virtual MVPDs that, you know, it's easy to think that and it's easy to believe that that's gonna not last as a as a as a bundle or as a market, you know, forever. But linear is a is a form of of entertainment engagement that is very popular. And it's just and it's actually growing in popularity. On our platform, linear channels, sometimes people call them fast channels. You know, these are streaming linear channels.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

They're very popular and a huge form of engagement. There's a lot of people that like to just flip through the channel. And, you know, one way I think about, Friendly is it it's actually it's a lot of brands that I think will stick around, things like Lifetime, Hallmark, you know, A and E. Like, these these are brands that are popular. They have good content.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

And, you know, I don't think of them as a virtual MVPD. I think of them as linear channels that's in a paid tier that we can grow the paid tier of linear channels. And there's a and linear channels are very popular in streaming as well. And they're very popular in streaming, and they're very popular on our platform as well. And then, I'll let Charlie, answer your question about the bundle of ad services.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

Yeah. Thanks, Laura, for the question. I I actually think Dan answered it in the last question, which is the power of our platform is staggering. You know, I'll answer this first as a programmer, because I I have

Charlie Collier
Charlie Collier
President of Roku Media at Roku

the whole media business. So I've

Charlie Collier
Charlie Collier
President of Roku Media at Roku

got the content side and that team and and the ads team. And I look at the content team and the way they use the power of the platform to really elevate partners' content. And it I think there are brands inside Friendly that will be elevated simply by being focused on by Roku. And that that's that's exciting for us as programmers, and it allows us to do what we're here to do with it, which is root for all the television and provide a better lead in So this is a good home for for that bundle of services.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

And then on the ad side, you know, I I actually think Friendly will benefit simply by being inside of our recommendation engines, being inside of our our sales team. You know, both of these teams are so capable and able able to elevate content that it's great to be able to do this for us alongside doing it for our partners.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

I'd just like to quickly add on to that that, you know, Friendly is growing and growing well. You know, we we brought it in as a growth company, and we do think that we can grow it faster. It it also will be adjusted EBITDA margin accretive in its first full year for us.

Laura Martin
Managing Director, Senior Internet & Media Analyst at Needham & Company

Fantastic. Okay. My second one is on data. So Wall Street has decided that third party data is going to zero, and that first party data is basically the only thing that has moat, a competitive advantage. You guys have world class first party data.

Laura Martin
Managing Director, Senior Internet & Media Analyst at Needham & Company

But you do not sell it independently to third parties, either to M and M, which would make easy sense because it's 80% margins, or even to I spot some, but to these guys that aggregate and actually make a living on selling CTV, let me call it, on a smaller scale. So can you explain the logic of not bundling top really packaging your excellent first party data for CTV and selling it to others for a revenue standpoint?

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

Yep. So, Charlie, we'll take that.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

Sure. Laura, first of all, I love the way you describe our data. You're absolutely right. You know, we took a really unique approach to the upfronts this year. We spoke directly to each holding company.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

And the reason is is because they are all solving unique problems for their clients that all come back to the same, desired result, which is proving outcomes for businesses. And to have a % authenticated audience, which Roku does, and to have unmatched scale the way we do with over half the broadband households using Roku as their front door to television, it really is a differentiator. But I would step back and and say one of the terrific things about Roku writ large is that, we still have more opportunities to exploit over time. But the way I think about our data relationships are this, which is we have a multibillion dollar business and all the opportunity Dan and Anthony have been talking about And the best way to take care of our partners, which are the advertisers and the content companies inside of the media side of the business, is to make sure that we we serve them.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

And all the data that they're investing in, which is the missing part of your question, I think, is made only better and more powerful and the media more performant by matching it with our high fidelity signals. So for the short and probably the medium term, the best way for us to deploy the data is to create this remarkable differentiated platform that's growing as much as it is and for us to hydrate their data with ours and improve outcomes for, our customers. You know, I talk a lot, about how Roku has moved from building incrementality, and we are now building fundamental, really, the base of their Performant businesses. And and that's what I'm focused on, and I think that's the best use of our data.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

This is Anthony again.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

I'll just add

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

sorry. Was just gonna say that, I mean I mean, think Charlie covered it, but just to be super clear about it. If you're an advertiser and you, buy ads from Roku and you but you go through a third party DSP, you can have a you will those arrangements often have access to our data. I mean, those are and targeting based on our data is is part of those, deals, and it's part of the reasons, you know, advertisers wanna work with us. Mhmm.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

I'll also say, though, like, we understand the value of our data. We and there's a lot of activities going on to expand the way we monetize our data. We just haven't necessarily announced what they are or talk about them directly.

Laura Martin
Managing Director, Senior Internet & Media Analyst at Needham & Company

Thank you very much.

Operator

One moment for our one moment for our next question. Our next question comes from Matt Thornton with FFBN Securities. Your line is open.

Matthew Thornton
Equity Analyst at FBN Securities, Inc

Hey. Good afternoon, guys. I guess two if I could. The first one's a housekeeping one probably for Dan. Friendly TV, is is that assumed in full year or 2Q guidance?

Matthew Thornton
Equity Analyst at FBN Securities, Inc

Or would that be incremental? That's the first question. Second question, as we think about tariffs and the impact on the devices business and volumes in the balance of the year, I'm just kind of curious kind of what you're assuming for the balance of the year in guidance. And tied to that, how quickly can you move sourcing, production, warehousing? I'm sure you've got lots of different scenarios kind of planned out.

Matthew Thornton
Equity Analyst at FBN Securities, Inc

But I guess, is that something that gets can get moved in days or weeks? Or is that months or quarters once we get final clarity on the end tariff rates? Guys.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

Yes. Hi, Matt. Thanks for the question. When we gave full year guidance in February, we assumed several initiatives that have not yet launched in both our subscriptions and advertising activities. We mentioned, at the time or I mentioned at the time that we're giving a full year outlook grounded in the best information we had at the time.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

Friendly was one of the many initiatives we've been working on, and we're excited to have them as part of Roku. We're very confident that we can leverage the power of our home screen and platform and grow Friendly subscriptions even faster. Again, it's one of many initiatives that we had at the time. So, yes, Friendly is included. We have as Anthony said, we have many other initiatives that we look at when we provide guidance.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

And so again, we'll update you more as those initiatives launch. And as I also mentioned earlier, we do expect Friendly to be adjusted EBITDA margin accretive in the first full year. I think I'll turn it over to Mustafa for the tariff question.

Mustafa Ozgen
Mustafa Ozgen
President - Devices, Products & Technology at Roku

Yes. Hi, Matt. This is Mustafa. Look, we have a diversified manufacturing strategy already in place. We manufacture in multiple countries with multiple factory partners that provides us quite a bit of agility and flexibility and helps mitigate the impact of the tariffs.

Mustafa Ozgen
Mustafa Ozgen
President - Devices, Products & Technology at Roku

And our teams are continuing working to optimize the overall manufacturing footprint. And, like, as things change, they are ready to be able to move quickly from one place to another. So that's sort of a part of our plan, and and they they can do some work on that. Based on the current tariff structure that's in place, we do not anticipate a material change to our devices gross profit dollars for the full year. And at the same time, we already implemented some small price increases, so we're passing some of the cost to consumers.

Mustafa Ozgen
Mustafa Ozgen
President - Devices, Products & Technology at Roku

And, you know, we're continuously monitoring the environment, remaining flexible in terms of price increases or price increases as well. Just wanna make sure we stay competitive, but at the same time, to monitor the demand environment. And the other point around the demand and then some mitigating factor for us that's on the positive side is how we actually distribute our Roku operating system to consumers. Our OS distribution strategy has three pillars. We use our streaming players that are made and sold by us.

Mustafa Ozgen
Mustafa Ozgen
President - Devices, Products & Technology at Roku

We have our first party TVs also made and sold by us under the Roku brand. And and then we have the third party TVs that are made and sold by our Roku TV licensing partners. So not all of the tariff mitigation or the impact is, you know, carried by Roku. Some of them are carried by and mitigated by our third party TV partners. But more importantly, in case the TV prices increase due to tariffs and the demand softens, our streaming players are actually a great way for consumers to upgrade and extend the life of their existing TVs at a much lower price point.

Mustafa Ozgen
Mustafa Ozgen
President - Devices, Products & Technology at Roku

You know, we have great selection of streaming players, and their price point ranges from $20 all the way to $99. So they are a great option alternative for the consumers to upgrade the streaming.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

Hey, Matt. This is Anthony. I'll just add quickly. One possible outcome of tariffs is that the overall TV unit sales decline or decline. I don't think they'll decline a lot, but they might decline slightly.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

I just think it's important to know that's unlikely to hurt our market share. We're well positioned, much better positioned than others given our significant penetration in over half of U. S. Broadband households. Also, you know, our scale is continuing to grow in terms of households, and we're on track to achieve a hundred million streaming households, a milestone we set to achieve a couple calls ago.

Operator

Thank you. One moment for our next question. Our next question comes from James Haley with Jefferies. Your line is open.

James Heaney
James Heaney
SVP - Equity Research at Jefferies

Great. Thanks for the question. Dan, can you just walk us through how we should be thinking about the revenue trajectory for platform growth just for the remainder of the year? I know you'll have the tough political comp in the second half, but just any other puts and takes that we should be considering?

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

Yes. I mean, we gave the Q2 guide. We gave the full year guide. I think Q3 and Q4 will have probably there'll be probably a smaller growth rate in Q4 simply because of the very large quarter we had in Q4 of last year with 25% and it was I believe 19% excluding political. But essentially, I think you're really asking what Q3 and Q4 looks like.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

And again, I think that we'll probably have a slight sequential step down in growth rate in Q4. But we'll see and we'll update you. Again, we have many initiatives that we're working on and we'll update you on that on Q3 and Q4 when we report our Q2 results.

James Heaney
James Heaney
SVP - Equity Research at Jefferies

Great. And

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

maybe just One reminder, I think it's one thing I sorry. There is probably one thing I should remind you of is we did have a lot of six zero six adjustments in FY 'twenty four. And actually, Q2 was the largest of the six zero six adjustments at just over $16,000,000 We also had a fairly large six zero six adjustment in Q3 and a much smaller one in Q4. We had no six zero six adjustments in Q1 as we said. We didn't expect to have nor do we expect to have nor does our guide imply any six zero six adjustments for Q2 or the rest of this year.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

So we are comping, especially in Q2 and Q3, some six zero six adjustments. As a matter of fact, if you back out six zero six in Q2, we have the same growth rates, in the platform business, very close to the same growth rate as

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

we achieved

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

Q1. So it's very close to that 17% if you back out six zero six in Q2.

James Heaney
James Heaney
SVP - Equity Research at Jefferies

Okay. Yeah. Great. Appreciate the extra detail. And maybe just one more, just on home screen.

James Heaney
James Heaney
SVP - Equity Research at Jefferies

Would just love to hear how you're thinking about the growth drivers outside of, the M and E vertical. And then just curious if there's any verticals you'd call out where you've seen traction and others that you're looking to expand into just on Home Screen? Thanks.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

Sure, James. This is Anthony. I'll take that. So, yeah, just to remind everyone, initiatives or strategy to grow platform revenue, one is grow our ad business, and a big part of that is integration with third party DSPs, really embracing them as partners and deepening our integration with them. Another is focusing on our subscription business, which we think has a lot of room to continue to grow.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

And then third is just overall arching to really lean into the Roku experience. You know, users start their TV experience every time they sit down to watch television with a Roku home screen. And then there's a lot of UI elements that are, you know, adjacent to the home screen aren't aren't directly on the home screen. And, you know, we have an iconic, simple, powerful home screen that's very popular with our customers. And there's just a lot of ways to continue to use that to drive both subscriptions as well as engagement and ad reach.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

And, you know, for example and it's definitely not just focused on M and I mean, that's how our ad business started was with the M and E vertical and the ads on the home screen. But, you know, the home screen is these days is used to drive a lot of businesses besides M and E. So for example, we added, you know, not too long ago, we added a single new row to the home screen with recommendations, And we're seeing that drive, you know, significant increases in subscription sign ups as well as significant, engagement. I mean, it's one of the reasons that the Roku channel grew 84% globally year over year in the quarter. So that's just one example, but there's lots of other things we're looking at and testing on the home screen.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

It's really an area that we haven't touched significantly over the you know, in a long time in several years. We now have a team working on it. We're testing lots of different experiences in the home screen, and I think it's gonna continue we're gonna continue to roll out changes as we test them and they test positive, and it's gonna have a material impact on our

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

growth.

James Heaney
James Heaney
SVP - Equity Research at Jefferies

Mhmm.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

Oh, and Charlie wants to add something.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

Yeah. You know, and James, from the ad sales point of view, you know, I mentioned earlier that the home screen reaches a 25,000,000 or households with a 25,000,000 people in it every day. That kind of reach is so unique that it it obviously has been a great place for us to partner with advertisers. And, inherent in your question, you know it works really well for M and E. But I think in the letter, we put a picture of what we call our marquee video ad unit, and that one was for Hellmann's.

Charlie Collier
Charlie Collier
President of Roku Media at Roku

We've seen a lot of people who are pushing toward performance utilize the home screen, especially marquee video, some of the takeovers. We recently had one for The Simpsons that got a lot of, you know, viral support and social chatter. It's really powerful, and we're seeing it well beyond the M and E vertical.

James Heaney
James Heaney
SVP - Equity Research at Jefferies

Great. Appreciate it. Thank you.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

The Roku when we think about the Homestream, we also think about the Roku experience more broadly, and it includes, experiences they're actually engaging in their own right, like the like Roku City, for example, which is extremely popular. And we just keep adding new new features and new promotions inside Roku City and new features for people to watch.

Operator

One moment for our next question. Our next question comes from Steven Call with Wells Fargo. Your line is open.

Steven Cahall
Steven Cahall
Managing Director, Senior Analyst - Media, Advertising & Cable at Wells Fargo Securities

Thank you. Dan, if we

Steven Cahall
Steven Cahall
Managing Director, Senior Analyst - Media, Advertising & Cable at Wells Fargo Securities

could maybe just dig in a little

Steven Cahall
Steven Cahall
Managing Director, Senior Analyst - Media, Advertising & Cable at Wells Fargo Securities

more to what you're talking about with the platform revenue growth. So thanks for that math. I was kind of getting at the same place that Q2 looks a lot like Q1 underlying. If we think about the back half of the year and we take out both 06/2006 and political, is it logical to assume some deceleration just as you start to comp some of the DSP integrations and other things that you started to do towards the end of twenty twenty four? Or do you think that that kind of team's growth rate is sustainable for a little longer?

Steven Cahall
Steven Cahall
Managing Director, Senior Analyst - Media, Advertising & Cable at Wells Fargo Securities

Because I know there's a lot of work that is still ongoing. So, we'd just love to get kind of a sense of that underlying growth rate, maybe more for the medium term. And then the 51% platform margins for Q2, that's a little bit of a degradation from what we've seen historically. Not a lot, but a little bit. Is that just mix because you're growing AVOD so much faster than some of the other parts of the platform revenue?

Steven Cahall
Steven Cahall
Managing Director, Senior Analyst - Media, Advertising & Cable at Wells Fargo Securities

Or anything else we should think about in the margin mix of platform? Thank you.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

Yes. Thanks, Stephen, for the question. Let me take the second part of that question first on the 51% guide. And maybe I'll talk a little bit about the full year guide of 52%. And so in February, we mentioned Platform gross margin would be 52% to 53%, which is roughly in line with our prior year margins when you exclude 06/2006 adjustment in FY 2024.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

And, you know, within q one and into the first month of q two, Charlie talked about this. We've seen a greater shift from the guaranteed to the non guaranteed. And therefore, just much more on the programmatic side given the uncertain macro environment. We view this as a positive as we're able to meet the advertiser along any point of the CPM demand curve. I mean, Charlie talked in detail about why, the the the shift does have a positive impact on us as we're able to measure the the higher ROIs, etcetera.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

But that mix shift from guaranteed to non guaranteed does have a modest impact on margins within our advertising and platform segment. That's why we're guiding to 52% for the full year. It's a very modest mix impact. We'll see if the non guaranteed versus guaranteed stays where it's at now or if it goes back to more, let's just say, pre macro environment levels in H2 that would have a slight positive impact on margins. But right now, we're expecting that trend to stay where it's at, which is why we're seeing 52% margins.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

I've said it many times, I do believe that we can maintain and in fact grow our margins over time on a mix basis and mix and within mix. Because we've got a lot of positive initiatives going on that can help margins as well as all the volume and increase in platform revenue that we discussed. To the first part of your question, I absolutely believe team growth rate is sustainable over the longer period of time. And I do believe that if you back out six zero six in political, you'll see that growth rate in the back half of the year as well. The only caveat would be maybe Q4 is a slight deceleration because there was so much volume after political in the month of December.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

But that may happen again, and we're in a great position if it does happen again to take advantage of that given our supply. So even once you back out political and if you back out 06/2006, you'll see that we are growing in that 15 ish percent range, and we I I firmly believe that's sustainable.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

Next one.

Analyst

Great. Can you hear me?

Operator

Yes. I can hear you. Are you guys there, Anthony?

Analyst

Great. Thanks.

Operator

Conrad, are you still there?

Charlie Collier
Charlie Collier
President of Roku Media at Roku

We're still here. Yep.

Operator

Go ahead. Go ahead. I'm

Analyst

Thank you. I just wanted

Analyst

to get an update on devices. In the fourth quarter letter, you started to grow 12% this year, and now you're saying it should be flat. So I know you've had a good start to the year. But so what's your view on just device demand over the year? And why the flattening of the outlook versus where you were just a couple months ago?

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

This is Anthony. I'll turn this over to Mustafa or to Dan. But I'll just say overall, we're not focused on device revenue. We're focused on growth in, Roku using households. And, those come in large part from our partners, our TV partners, but also our own devices.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

But, you know, you can lower prices and sell more devices and get more households. So we're you know, I'll let Dan talk about revenue, but it's really not something device revenue, but we're just not focused on that. We're focused on, device unit sales and especially through third party partners and also growth in which results in growth in Roku households. That's our KPI.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

Yeah. Anthony is absolutely right, and thanks for the question, Michael. We are not focused on device revenue. Device revenue now can be very lumpy because it's driven by our first party TVs, which we recognize revenue on, whereas opposed to our third party OEM based TVs, we don't recognize revenue on. Players, we've always recognized revenue on.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

And that is actually fairly steady for us. And we've got good margins on that, etcetera. But on the first party TVs, it can be very lumpy depending on the quarter, depending on how much what our actual sell, what we call our sell in is to the distributor. And so it's not something that we pay a ton of attention to. What we look at is our units, our market share in terms of units and our streaming households, which are growing in all countries, including The U.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

S. We think it will continue to grow in all countries, including The U. S. Anthony mentioned, we're on track to hit 100,000,000 streaming households. So we feel very good about that.

Dan Jedda
Dan Jedda
Chief Financial Officer at Roku

And that's again why we guide to platform revenue is is because that is where we monetize those one you know, those basically over 90,000,000 streaming households that we currently have. So device revenue is just very difficult and very lumpy in the short term, and it's not something we particularly pay attention to. It's more about the unit volume that we ship.

Analyst

Okay. Thanks a lot.

Operator

Hello, ladies and gentlemen. This does conclude the Q and A portion of today's conference. I'd like to turn the call back over to Anthony for closing remarks.

Anthony Wood
Anthony Wood
Founder, Chairman & CEO at Roku

I'd just like to say thanks to our employees, customers, advertisers and content partners, and thank you for listening.

Operator

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.

Executives
    • Conrad Grodd
      Conrad Grodd
      Vice President, Investor Relations
    • Anthony Wood
      Anthony Wood
      Founder, Chairman & CEO
    • Dan Jedda
      Dan Jedda
      Chief Financial Officer
    • Charlie Collier
      Charlie Collier
      President of Roku Media
    • Mustafa Ozgen
      Mustafa Ozgen
      President - Devices, Products & Technology
Analysts
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Key Takeaways

  • Roku reaffirmed its full-year 2025 outlook of $3.95 billion in platform revenue and $350 million in adjusted EBITDA, citing ongoing secular streaming tailwinds, diversified ad products and strong execution despite macro uncertainty.
  • Advertisers are shifting from direct insertion orders to programmatic, non-guaranteed ad buys with shorter planning cycles, and Roku’s deep DSP integrations and unique home-screen ad units position it to capture this growing demand.
  • Subscription revenue continues to accelerate with tens of millions of new sign-ups each month, and the acquisition of skinny-bundle service Friendly is expected to be margin-accretive and expand paid linear offerings on and off Roku.
  • The Roku Channel is now the #2 app by engagement on the platform, with global engagement up 84% year-over-year, highlighting the strength of Roku’s home screen and content discovery engine.
  • Roku is focused on growing its streaming household base rather than device revenue, leveraging diversified manufacturing to mitigate tariffs and offering low-cost streaming players as an upgrade path, on track toward 100 million streaming households.
A.I. generated. May contain errors.
Earnings Conference Call
Roku Q1 2025
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