Roku grew total net revenue 51% year-over-year to $680 million for the third quarter of 2021, but it was lighter than investors expected — and the company warned that ongoing supply-chain problems, which it expects to extend into 2022, could have a “broad” negative impact on Q4 results.
The streaming platform’s active accounts reached 56.4 million, a net increase of 1.3 million active accounts from the prior quarter — an even further slowdown from Q2 2021, when it netted 1.5 million. Roku said the slower account growth was the result of supply chain disruptions in the U.S. market, and that specifically total U.S. TV sales in Q3 fell below 2019 (pre-COVID) levels.
Total streaming hours were 18.0 billion, up slightly (by 0.7 billion hours) from Q2. Roku reported net income of $68.9 million (versus $12.9 million in the year-ago quarter), translating to 48 cents per diluted share.
Roku shares were down more than 8% in after-hours trading on the revenue miss.
Investors also were reacting to Roku’s commentary in its shareholder letter that “our business fundamentals remain strong but we are mindful that the challenges created by the global supply chain disruptions will likely continue into 2022.” In addition, the company warned that “These headwinds may have a broad impact on the holiday season in terms of consumer confidence, product pricing and availability, and advertising spend levels.”
On average, Wall Street analysts predicted revenue of $683.36 million and EPS of 6 cents, according to Refinitiv data. Roku’s previous guidance for Q3 pegged revenue coming in at $675 million-$685 million.
The company touted growth for its Platforms segment in Q3, even with a tough year-over-year comparison: Platform revenue was up 82% to $583 million, “reflecting significant contributions from both content distribution and advertising activities,” Roku said in announcing earnings. Average revenue per user hit $40.10 (on a trailing 12-month basis), an increase of nearly 50% year-over-year.
“While the pandemic has had different impacts on different parts of our business, the secular shift to streaming remains intact,” CEO Anthony Wood and CFO Steve Louden wrote in the shareholder letter.
Roku’s Q4 outlook is for total net revenue of $893 million at the midpoint (which would be up 37% year-over-year) and total gross profit of $385 million at the midpoint (up 26% year-over-year).
In 2021, viewing on the Roku Channel has shot up thanks to the company’s growing lineup of original and exclusive content, but the company didn’t provide an update on household reach of the Roku Channel for Q3. The Roku original content slate includes the 75-plus shows it acquired from the now-defunct Quibi and “This Old House.” Roku’s recent opportunistic content deals include feature-length film “Zoey’s Extraordinary Christmas,” set to hit the Roku Channel on Dec. 1, based on NBC’s canceled musical comedy series “Zoey’s Extraordinary Playlist.”
Meanwhile, Roku remains at an impasse with Google over distribution of YouTube on the streaming platform. According to Google, barring an agreement, YouTube will no longer be available on new Roku devices as of Dec. 9. Roku has complained that Google is making anticompetitive demands, including preferencing YouTube search results. Asked on the Q3 analyst call about talks with Google, Scott Rosenberg, SVP of Roku’s Platform business, said he didn’t have an update but said the company wants to resolve the disagreement “in a way that’s positive for Roku and our customers.”
Rosenberg also said that changes in the online ad market that are hurting the ability to track consumers, like Apple’s iOS 14.5 update requiring opt-in for ad tracking, work in Roku’s favor because the company uses its own first-party data to serve connected-TV ads.