Roku added 1.1 million active users in the first quarter of 2022, slightly increasing its total active user count to 61.3 million.
The company said its year-over-year active user growth of 14 percent was “moderated” due to the end of government stimulus payments, which it said helped drive spending in the first quarter of 2021. Supply chain issues also continue to drive down TV unit sales.
Roku saw bigger growth in user numbers between prior quarters, when it grew from 56.4 million users in the third quarter of 2021 to 60.1 million active users in the fourth.
Going into the earnings report, analysts had been concerned about competition in the space, which is only set to increase after Wednesday’s deal between Comcast and Charter, in which the two companies have teamed up to offer a connected streaming platform and devices. There’s also wider concern about flagging growth among streamers, after Netflix reported a loss of 200,000 subscribers in its most recent earnings report.
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Asked about the new Comcast and Charter venture, Steve Louden, Roku’s chief financial officer, told a group of reporters that the company remains confident in its competitive advantages, which include a platform designed to run on low-cost hardware and a dedicated licensing system.
“We’ve been battling big-name competitors successfully for a number of years,” Louden said. “We feel pretty good about the competitive moats for Roku.”
On the earnings call, executives doubled down on this message, saying increased competition in the streaming space has created the golden age of television and helped create a better environment for viewers. The increasing number of streaming channels will also help build out the platform’s offerings and increase advertising opportunities.
Streaming hours increased by 1.4 billion hours from the previous quarter to reach 20.9 billion. Total revenue reached $734 million, up 28 percent year-over-year and above the company’s guidance of $720 million. Earnings per share came in at -$0.19, below Wall Street expectations of -$0.18.
Roku has recently been making a bigger push into its own original content. The Roku Channel acquired the Quibi content library in 2021 and inked a film output deal with Lionsgate on April 26, which gives the Roku Channel exclusive rights to Lionsgate’s film slate, immediately following its theatrical window on Starz, as well as a second, more flexible release window. In the letter to shareholders, the company said the Roku Channel was a top-five channel on its platform in terms of user reach and streaming hour engagement.
Scott Rosenberg, the outgoing senior vp and general manager of Roku’s platform business, did not comment on how much the company plans to spend on content in 2022, but told reporters that the segment is “critical” in helping the platform attract first-time users and in creating exclusivity and scarcity for advertisers. However, Rosenberg noted that most of the content on Roku comes from third parties, with more than 250 providers on the platform.
“We are still first and foremost a platform company,” Rosenberg said.
Roku re-upped its deal with Amazon in April, so that the Roku Channel Store will continue to feature the Amazon Prime Video app and IMDb TV (now Amazon Freevee) content. This follows Roku’s hard-won battle, which will keep the YouTube TV and YouTube apps on the platform as part of a multiyear deal.
At the same time, more new content is expected, as Roku revealed the titles to be presented at its upcoming upfronts event: Honest Renovations, a home renovation series hosted by Jessica Alba and Lizzy Mathis; To Paris for Love: A Rom Com, produced in partnership with Reese Witherspoon’s Hello Sunshine and Zoe Saldaña’s Cinestar Pictures; and WEIRD: The ‘Weird Al’ Yankovic Story, starring Daniel Radcliffe.
While Roku has long been a favorite on Wall Street and the top streaming platform in the U.S., Canada and Mexico, its stock has dropped close to 40 percent over the past three months. And the company expects a tough road ahead, as it warned of “disruptions,” including inflation, geopolitical conflict and continued supply chain issues.
“In the near term, we expect these disruptions will continue to pressure our player gross margin and industry-wide TV unit sales, and have the potential to reduce or delay ad spend in certain verticals,” the shareholder letter reads.
These issues are also likely to continue to impact user growth in the near term. For the second quarter, Roku issued total revenue outlook of $805 million and a net loss of $109 million, while remaining bullish on its longer term outlook.
“We believe that these near-term headwinds are dwarfed by the long-term opportunities in the secular shift to TV streaming and TV OS consolidation,” the letter reads.
