Roku reports that its streaming service grew to 60.1 million active users in the fourth quarter of 2021, an addition of 8.9 million subscribers over the fourth quarter of 2020. Streaming hours increased by 14.4 billion hours to 73.2 billion for the year, and average revenue per user grew to $41.03, a 43% increase year-over-year, compared to $28.76 in the fourth quarter of 2020. According to Roku, in terms of streaming hours, they were the number one streaming TV platform in the U.S., Canada and Mexico last year. Roku utilizes a freemium model, offering free, ad-supported linear and on-demand programming, original and licensed content, and access to paid, premium content.
In its February 17, 2022 shareholder letter, Roku reported total revenue of $865.3 million, a 33% increase year-over-year. This fourth-quarter revenue includes $703.6 million from the Roku platform and $161.7 million from Roku player sales. Last year, Roku reported revenue growth of 51% in the third quarter and 81% in the second quarter, according to CNBC.
“Audiences around the world continue to shift to TV streaming due to its affordability, ease of use, and breadth of content choices,” said Roku. “Roku’s U.S. active account base surpassed the U.S. video subscribers of all of the cable companies combined.”
Roku said that slowing growth was primarily due to global supply chain disruptions that impacted the U.S. TV market with TV unit sales falling below pre-pandemic levels. These unit sales were partially offset by player sales.
“This was a result of careful management of our streaming player supply chain and inventory,” added Roku. “Our strong and growing ARPU allowed us to prioritize account acquisition and insulate consumers from rising material and shipping costs in our player business.”
2021 highlights
In its shareholder letter, Roku shared the following highlights:
- Roku’s total revenue grew 55% year-over-year to $2.765 billion.
- Platform revenue increased 80% year-over-year to $2.285 billion.
- Gross profit for the year grew 74% to $1.409 billion.
- The Roku Channel, one of Roku’s top five channels on the platform, offers more than 270 linear channels for free.
- Roku’s active users get access to free on-demand programming and licensed content from 250 publishers.
- In December, they created their first feature film, Zoey’s Extraordinary Christmas.
Guidance for first quarter of 2022
Roku shared the following guidance for the first quarter of 2022:
- Total revenue of $720 million
- Total gross profit of $360 million
- Net loss of $(30) million
- Adjusted EBIDTA of $55 million
“For 2022, we expect ongoing supply chain disruptions will continue to impact the global economy. This will affect the broader consumer electronics space, and the TV industry in particular. Overall TV unit sales are likely to remain below pre-COVID levels, which could affect our active account growth,” Roku said.
“Account acquisition will remain a priority, and we intend to continue to insulate customers from elevated costs in our player business, which will continue to cause negative player gross margins until conditions normalize,” added Roku. “On the monetization side, delayed ad spend in verticals most impacted by supply/demand imbalances may continue into 2022. However, we view all these factors as temporary and for the full year, we expect total net revenue growth to be 35%.”
Stock drops dramatically
Based on the slowing growth and the company’s first quarter guidance, Roku stock dropped dramatically after the company released its fourth quarter and full-year 2021 earnings report. On February 16, the day before the report dropped, Roku stock was valued at $161.45 per share. As of 9:05 AM Eastern on February 23, Roku stock had dropped to $121.97 per share, a 24.4% decrease, and significantly lower than the company’s 52-week high of $490.76 per share and dangerously close to its 52-week low of $102.60 per share.
Insider Take
Like all the streaming services, Roku’s growth is slowing. 2020 was a blip on everyone’s radar, and while revenue growth continued into 2021, it was hard to match the prior year. With the added challenges of increased costs and supply chain disruptions, it is understandable that Roku’s performance fell below expectations. However, they are still seeing double-digit growth and they have multiple monetization opportunities from the platform, the players, and advertising. Numbers may not be what investors hoped for, but we expect that Roku will rebound this year, perhaps not to the 52-week high level, but above its current standing.
