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Despite adding 2.3 million active accounts and seeing total streaming hours grow to 21.9 billion, Roku saw operating losses balloon by 314 percent year over year to $147 million.
In a letter to shareholders Wednesday, Roku said the increase in active accounts was primarily driven by TV sales. But the company, best known for its devices, has continued to absorb losses from its player business, with gross margins down by four percentage points year over year due to “elevated” supply chain costs, according to the letter.
During the third quarter, Roku brought in $761.4 million in net revenue — a slight decline from Q2’s $764.4 million but a 12 percent year-over-year increase. Total gross profit dropped by 2 percent compared to the previous year, landing at $356.8 million.
Ad spending has continued to see a slowdown in growth “due to current weakness in the overall TV ad market and the ad scatter market in particular,” the letter said, with continued pressure on ad budgets — and consumer spending — expected to continue into the holiday season.
“Companies are pulling back their ad budgets because they’re uncertain if there’ll be a recession or not, and so a lot of Q4 ad campaigns are being canceled,” Roku CEO Anthony Wood said during an earnings call with analysts. “That’s why I think this holiday season…is probably going to be different than the typical holiday season.”
For Q4, Roku is estimating it will reach $800 million in revenue and $325 million in gross profit while sustaining $245 million in net losses; year-over-year platform and player revenue is also expected to be lower.
Roku recently poached Fox Entertainment CEO Charlie Collier, who joined Roku in October to oversee ad monetization, content licensing and production as the president of Roku Media. CFO Steve Louden, who was initially set to step down in 2019 but ultimately stuck around after a move to Seattle, will once again move forward with his exit in 2023 after helping find a successor.
Outside of its streaming devices, Roku took a major step into smart home services and products with the launch of cameras, video doorbells, plugs and lighting. On the content side, Roku will release one of its biggest original film projects to date on the Roku Channel — a satirical biopic based on “Weird Al” Yankovic, starring Daniel Radcliffe — on Nov. 4.
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