Roku earnings call: Supply chain still an issue - but market is still large

Apr. 28, 2022 5:38 PM ETRoku, Inc. (ROKU)CMCSA, CHTRBy: Jason Aycock, SA News Editor17 Comments

Front left view of a Roku box on a white background

Marvin Samuel Tolentino Pineda/iStock via Getty Images

Roku stock (NASDAQ:ROKU) was up 5% after hours at the start of its conference call (still ongoing) covering a mixed first-quarter earnings report, where the company beat revenue expectations, though it indicated user growth had decelerated sequentially, and it guided to the low side for second-quarter revenues.

During the call, Roku has turned negative postmarket again, in mixed trading since the release. The action follows a regular-session gain of 8.1%, as Roku took part in a broader Thursday tech rally that lifted the market.

During the previous quarter's earnings call, company stock was sliding as execs detailed supply-chain issues plaguing the business.

Those concerns haven't gone away this quarter, Chief Financial Officer Steve Louden said in Thursday's call. "Ongoing supply chain disruption increased US TV prices in Q1 2022, resulting in industrywide TV unit sales that were below 2019 pre-COVID levels for the third quarter in a row," he says.

As for the company's boxes, Roku player unit sales fell 12% year-over-year - but Louden notes they were above pre-COVID levels; average selling price decreased 9% year-over-year. Supply chain issues "will continue to pressure the player business," he says, resulting in a negative growth margin "as we prioritize account acquisition and absorb elevated costs."

The addressable market is still large, CEO Anthony Wood says: Advertisers are only spending just 18% of their budgets on streaming, and "that's gonna be 100%" in time, he says.

After Netflix's rough quarter, where its user base actually declined for the first time in a decade, observers have raised questions about whether the streaming market is getting tapped out.

"It's too soon to say anything about saturation of SVOD (subscription video-on-demand)," Wood says. "Streaming is more popular than ever ... it's a large global phenomenon that's still spreading around the world. You know, we roughly have 60 million active accounts - but that's still tiny compared to the billion broadband households around the world that are all going to get their TV through streaming."

Updated: Comcast (CMCSA) and Charter (CHTR) made a splash Wednesday with a plan to take on the hardware dominance of Roku and by combining efforts on a streaming hardware platform based on Comcast's Flex.

How does Wood feel about the competitive situation? "We've got over 60 million active accounts and growing fast," Wood says. "We're the No. 1 TV selling operating system in the United States; a few years ago, Roku TVs didn't even exist."

"We're incredibly focused on streaming; it's all we do," he says, noting he expects more consolidation - "because the amount of money that goes into building a competitive TV streaming platform is very large and growing. We're funneling ... a big chunk of our gross profit back into building the strength of the platform."

"It's hard to imagine how they're going to be successful given the long number of years we've invested in our platform, and our competitors have as well," Wood says.

Updated 6:16 p.m.: With the call in the books, Roku stock's (ROKU) volatile postmarket moves have settled to the flat line for the moment - moving by a few pennies around Thursday's closing price of $91.63, on heavy after-hours volume of nearly 2.7 million shares.

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