Roku Inc. shares tumbled 16% in after-hours trading on Wednesday after the streaming company beat expectations with its latest results but gave a weaker-than-expected outlook for the holiday quarter as economic conditions continued to drive “advertising budgets.” could affect”.
For the fourth quarter, Roku executives expect revenue of $800 million and a loss of $135 million based on adjusted Ebitda. The FactSet consensus called for revenue of $899 million and an adjusted EBITDA loss of $48 million.
“As we head into the holiday season, we expect the macro environment to continue to pressure consumer spending and squeeze advertising budgets, particularly in the TV scatter market,” the company said in its shareholder letter. “We expect these conditions to be temporary, but it’s difficult to predict when they will stabilize or recover.”
Chief Financial Officer Steve Louden told reporters after the release that the company’s guidance “reflects the fact that we see many challenges in the macroeconomic environment.”
He explained that Roku tends to have more exposure to the scatter ad market — which represents ads purchased during the quarter — than the typical TV network. Scatter issues are easy for marketers to turn on, but also easier to turn off, he noted.
The guidance overshadowed Roku’s third-quarter results, which came in largely better than expected.
The company posted a net loss of $122.2 million, or 88 cents a share, while it posted net income of $68.9 million, or 48 cents a share, in the year-ago period. Analysts followed by FactSet were expecting a loss of $1.29 per share.
Roku also reported a loss of $34 million based on adjusted earnings before interest, taxes, depreciation and amortization. The company reported positive adjusted EBITDA of $130 million in the prior-year quarter. The FactSet consensus was for a loss of $74 million on the non-GAAP measure.
Revenue rose to $761 million from $680 million, while analysts had expected $696 million.
The company generated $670 million in platform revenue and $91 million in player revenue. Analysts expected $613 million in platform revenue and $87 million in player revenue.
Roku had 65.4 million active accounts last quarter, up from 63.1 million in the second quarter. Average revenue per user was $44.25 on a trailing 12 month basis, compared to $44.10 in the second quarter and $40.10 in the third quarter of last year.
Analysts reckoned with 64 million active accounts and an average revenue of $43.40 per user.
Louden noted at the media briefing that the account numbers “exceeded expectations.” The company has seen “strong smart TV sales both in the US and internationally,” with Louden adding that “it’s hard to tell how much will be driven by a shift back at home or back to streaming, which is a very Value for money is when money is tight.”
Viewers spent 21.9 billion hours streaming content through Roku’s platform during that period. The FactSet consensus was streamed for 20.9 billion hours.
As the likes of Netflix Inc. NFLX, -4.80% and Walt Disney Co. DIS, -3.94% dig deeper into ad-supported streaming, Louden sees opportunities for Roku to be of further value.
“It shifts their focus a bit from just looking at subscribers to looking at engagement,” and he sees Roku’s team members as “experts who understand how consumers see it.”
The company also noted in its shareholder letter that CFO Louden intends to leave Roku sometime in 2023 after helping recruit and train his successor.