Roku shares surged as much as 17% in after-hours trading on Wednesday after the company beat Wall Street expectations on revenue, which grew 20% year over year to $912 million during the third quarter of 2023.
Revenue growth was driven by “strong performance in content distribution and video advertising, along with unit sales of Roku-branded TVs,” which launched in March 2023.
However, the company reported a wider-than-expected net loss of $330 million, or $2.33 per share, compared to $122.2 million, or 88 cents per share, a year ago.
Analysts surveyed by Zacks Investment Research were expecting a loss of $1.99 per share on revenue of $857.4 million.
Platform revenue for the quarter, which is largely based on advertising sales and a subscription revenues split with partners, grew 18% year over year to $787 million, reflecting “strong contributions from both content distribution and video advertising, offset by lower M&E (media and entertainment) promotional spend.” Meanwhile, devices revenue grew 33% year over year to $125.2 million, driven by the launch of Roku branded TVs and smart home products.
Roku added 2.3 million active accounts during the quarter for a total of 75.8 million. Viewers streamed 27.7 billion hours during the quarter, representing 3.9 streaming hours per active account per day, up 5% year over year. As for the trailing 12 months, total hours streamed topped 100 billion for the first time. Average revenue per user fell 7% year over year to $41.03. Adjusted EBITDA was $43 million for the quarter, while gross profit was $369 million.
“We remain committed to achieving positive adjusted EBITDA for full year 2024 with continued improvements after that,” the company wrote in its quarterly shareholder letter. “We will balance this commitment with investments to further expand our scale, engagement, and monetization.”
The latest quarterly results come after Roku said in September that it would take several measures to bring down its operating expense growth, including laying off 10% of its workforce, conducting a strategic review of its content portfolio and ceasing the use of certain office facilities.
The company recorded a $62 million restructuring charge during the third quarter related to the removal of select licensed and produced content from The Roku Channel.
“We had a solid rebound in video ads in Q3 and we expect the YoY growth rate of video ads in Q4 to be similar,” Roku added. “However, we remain cautious amid an uncertain macro environment and an uneven ad market recovery. Additionally, we will face difficult YoY growth rate comparisons in content distribution and M&E which will challenge the YoY growth rate of platform revenue in Q4.”
Looking ahead, the company expects total revenue of roughly $955 million, total gross profit of roughly $405 million, and adjusted EBITDA of $10 million in the fourth quarter of 2023. It also expects M&E spend to be pressured in Q4 by the limited fall release schedule because of the strikes.
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