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Roku Aims to Top $1 Billion in Revenue in 2019, Beats Holiday Quarter Earnings Expectations

Roku headquarters
Shutterstock / jejim

Roku wants to become a billion-dollar company in 2019, and invest more in its ongoing international expansion. The streaming-device maker told investors on Thursday that it expects to generate between $1 billion and $1.025 billion this year, and that international growth was one of its key investment areas for 2019.

Roku made these announcements as part of its Q4 earnings release, which showed that it exceeded the market’s expectations for the holiday quarter. The company reported revenue of $275.7 million for Q4, compared to $188.3 million during the same quarter in 2017. Earnings came in at $5.5 million, compared to $9.5 million in Q4 of 2017. This translates to earnings of $0.06 per share.

Analysts had expected revenue of $262.11 million, and $0.03 earnings per share. Investors sent Roku’s share price up around 4% in after-hours trading, following a 4% decline earlier during the day.

“2018 was an excellent year for Roku, with record results and solid progress towards our long-term vision of powering every TV in the world,” said CEO Anthony Wood in the company’s letter to investors. “We believe we are well positioned to deliver another excellent year.”

Roku added close to 8 million active accounts in 2018, and now has devices in more than 27 million households. “We estimate that nearly 1 in 5 U.S. TV households now use the Roku platform to stream at least a portion of their TV viewing,” Wood said in the investor letter.

A closer look at Roku’s numbers showed that the company grew both its hardware as well as its ads and services business in Q4. On the hardware side, Roku brought in $124.3 million in revenue, compared to $102.8 million a year ago.

21% growth for this segment will please investors, who in the past have been concerned with slowing hardware revenues as usage shifts from dedicated streaming devices to smart TVs. The company’s hardware gross profit fell by 77%, suggesting a move toward cheaper hardware as the company emphasizes account growth.

Even more important for the company’s bottom line is what Roku calls its platform revenue — advertising and licensing fees, with ads making up the majority of that revenue stream. Platform revenue grew 77% year-over-year, totaling $151.4 million in Q4. Roku managed to more than double its monetized ad impressions in 2018, the company said on Thursday.

Roku told investors that one area of focus for 2019 would be international expansion: “While we continue to see a lot of headroom to grow active accounts in the U.S., we are increasing our investment internationally,” Wood said.

However, executives cautioned that these investments wouldn’t pay off over night. Instead, they expect the company to start accelerating account growth abroad in 2020, with international revenue following after that. “You need to build up scale before you can ramp up monetization,” said chief financial officer Steve Louden in an interview with Variety on Thursday.

Roku currently sells its own streaming devices in 20 countries, including North America, France, the U.K., and a number of Latin American countries.

Louden also shared some perspective on Roku’s audio efforts, which began in earnest with the launch of the Roku Wireless Speakers last fall. He said the company purposefully decided to not sell the speakers, which only work with TVs running Roku’s operating system, in retail stores. “It is a very limited offering,” he admitted, adding that the company would share further plans for the audio space in the future.