Roku Earnings Beat Expectations as Ads, Services Surpass Hardware Revenue

Meet the new Roku: The company best known for its streaming devices made more money with ads and licensing fees than with hardware sales for the first time in its corporate history this past quarter. Roku generated $61.5 million with the sale of streaming pucks and sticks during the first quarter of this year, and $75.1 million with advertising and licensing fees.

“That shows clearly that our business model is working,” said Roku CEO Anthony Wood in an interview with Variety Wednesday. The company has long had the strategy to use its hardware as a way to grow its audience, and monetize that audience through advertising. “Our scale is growing,” Wood said.

Roku generated a total revenue of $136.6 million during the first quarter, compared to $100.1 million during the same quarter last year. The company had net losses of $6.9 million, compared to $7.8 million a year ago. This translates to adjusted losses of $0.07 per share, compared to $1.79 a year ago.

Analysts had expected revenue of $128 million for the quarter, and losses of $0.15 per share. Roku’s stock price was up around 5 percent in after-hours trading.

The company ended the quarter with 20.8 million active accounts, with consumers streaming a collective 5.1 billion hours of audio and video via Roku’s platform in Q1. That’s up from 14.2 million active accounts, and 3.3 million streaming hours a year ago.

Half of Roku’s new users came from Roku smart TVs built by companies like TCL, with Wood telling Variety that 1 in 4 TVs sold in the U.S. during the quarter were Roku TVs.

The company also revealed in its letter to investors that almost half of Roku’s active users have cut the cord, or never had a pay TV subscription to begin with. It went on to argue that media companies would increasingly target those consumers by licensing their content to players like Roku instead of trying to build out their own streaming services.

“It’s hard to build a direct-to-consumer service,” said Wood. “A typical media company really doesn’t have those skills.”

Roku’s stock price came under pressure last month after Amazon announced a partnership with Best Buy to sell Insignia TVs powered by Amazon’s Fire TV operating system. Insignia, Best Buy’s house brand, had previously made a number of TVs powered by Roku’s software.

But on Wednesday, Wood seemed confident that the partnership between Best Buy and Amazon wouldn’t have too much of an impact on Roku, arguing that consumers would still be able to buy Roku TVs from a number of other manufacturers at Best Buy. “We are confident that (..)  the number of models of Roku TVs at Best Buy will go up this year,” he said.

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