Roku in Q3 surpassed $1 billion in total quarterly revenue for the first time, finishing the July - September period with $1.062 billion in net revenue while beating equity analysts’ consensus forecasts.
The streaming company also cut its losses in a big way, reporting total red ink of $9.03 million vs. $330.1 million in the third quarter of 2023.
For their part, Roku’s investors reacted the way they usually do, offloading the stock in after-hours trading — share prices were down nearly 11% as of the time this sentence was typed.
Here’s a summary of Roku’s Q3 performance from its quarterly letter to shareholders:
The revenue growth stemmed from a 15% year-over-year rise in Q3 platform revenue, the unit of Roku’s business that includes advertising revenue. (Roku did forecast slightly decelerated Q4 platform growth of 14%, which could be attributed to the most recent stock drop.)
Roku also reported a 13% yoy rise in streaming households to 85.5 million, with average revenue per user (ARPU) almost flat year-over-year at $41.10.
Notably, the company told investors Wednesday that it will stop disclosing household and ARPU data starting with its Q1 2025 earnings report.
It’s a move similar to one made by a company Roku is often compared to, Netflix, which said earlier this year it will stop reporting subscriber metrics and ARPU in Q1.
Asked what he thought the rationale was behind the move by Roku, MoffettNathanson equity analyst Michael Nathanson told StreamTV Insider, “No clue. I don’t get it.”
During Roku’s analyst call, which started 10 minutes later on Wednesday, CFO Dan Jedda explained that ARPU comparisons for Roku with the U.S. are apples and oranges in regions like Mexico, a very different market economically and one in which the company is in a much less advanced phase of market development.
As Roku has proliferated its user base abroad, Jedda said, streaming homes and ARPU are “no longer representative of platform growth.”
Roku said it will periodically disclose these forsaken metrics, specifically pointing to when its streaming households reach or surpass 100 million. Jedda said he expects that benchmark to be met in the next 12-18 months.
After the call, Nathanson described Jedda's explanation as being "really odd," remarking that "the solution should have been adding more disclosure not less" about U.S. key performance indicators vs international KPIs.
He also pointed to the performance metric disclosure changes, as well as revenue guidance, as contributing to the stock decline.
"The market is telling [Roku] what they think about that new revenue guidance and the change in KPMs,” Nathanson commented. “They have terrible disclosure [a]nd this actually makes it worse.”
As for the metrics Roku said it will emphasize going forward, the company reported a 20% uptick in total streaming hours on its platform to 32 billion. Free cash flow was up 56% YoY to $157.3 million. Q3 Adjusted EBITDA was up 126% to $98.2 million.
Then there’s platform revenue. Roku Founder and CEO Anthony Wood told equity analysts the Q3 growth can be attributed to “deepening integration with third-party platforms,” noting the deployment of the “Olympic Zone” viewing portal on the platform over the summer drove signups for NBCUniversal’s Peacock. Roku, of course, shares revenue with NBCU on every Peacock customer enlisted on its platform.
Updated with additional comment from Nathanson regarding Roku's stock price decline.