Roku CFO: Ad Buyers ‘Hit the Emergency Brake’, But Streaming ‘Still a Key Opportunity’

Roku Ultra plays well with other manufacturers and includes headphones

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There is still an “significant gap” for advertising to fill as the consumer transition to connected TV continues, according to Steve Lauden, Roku’s chief financial officer, during a press conference Thursday.

Roku announced in prepared statements at Quarterly shareholder letter.

Louden was speaking after a disappointing second-quarter earnings report by the company, in which Roku missed revenue estimates for the June quarter by 5% and forecast revenue this quarter 10% below consensus, and withdrew its full-year revenue forecast.

“What you’re seeing is half of consumer television airtime right now, advertisers know that’s where the world is moving, but they’re hitting the emergency brakes because of the uncertainty” in the economy, including the prospects of a recession, Lowden said. “Both of these things can exist,” Lauden said.

The combined concerns about supply chain, stagnation and inflation are a continuation of the broad weakness in the Roku market that first appeared in Quarterly report for the month of November of last yearand became clearer with February forecast miss.

Roku’s The stock lost a quarter of its value Late trading after the report.

In the June quarter, Roku’s revenue and earnings, $764 million and a net loss of 82 cents per share, were below Wall Street’s consensus of $805 million and a loss of 62 cents.

For the current quarter, the company expects revenue of $700 million, below the consensus of $902.7 million.

Roku withdrew its full-year forecast for “total net revenue growth to be 35% year over year.”

During the call with reporters, Louden noted the discrepancy between advertising budgets and broadcast usage. While more than half of TV viewing is now broadcast, “there’s a lot of friction and gridlock” in TV ad spending budgets, he said, with only about 22% of TV ad spending going to live broadcasting.

“There’s still a huge gap out there,” Louden said of the disparity in budgets versus consumption. “This is a huge opportunity for live stream creators – I think it’s an essential opportunity.”

In addition to the lack of advertising, Roku has continued to struggle with an industry-wide slowdown in sales of connected TVs, amid supply chain issues.

The company said, “Retailers were empowered by rising US TV inventory and temporarily lowering TV prices in the second quarter, which helped mitigate the decline in TV unit sales in the quarter.

“The overall sales of the US TV industry and gamers, as well as Roku TV and gamer unit sales, were lower than the second quarter of 2021.”

Louden said Roku has continued to absorb high prices, on average, for TVs to isolate consumers. The company’s gross margin on its hardware products, which has always been a “loss leader” to promote new account sign-ups, fell in the first quarter to minus 24% from minus 17% in the previous quarter.

Other work metrics have also slowed. Although the number of active accounts, 63.1 million, increased, year-over-year, in the same quarter by 14% as the previous quarter, the company’s revenue per user grew more slowly, increasing by 21% versus 34% in the March quarter. ).

With the revenue shortfall, Roku’s profit margin, adjusted for Ebitda (earnings before interest, taxes, depreciation, and amortization), fell into negative territory, coming to negative 1.6% of revenue, versus positive 7.8% in the previous quarter, and positive 19% in the same quarter. Previous.

asked by ZDNet How the company will manage its expenses this year, after canceling promises of revenue growth, Lowden said the main focus is on slowing the company’s hiring. He noted that this slowdown is not a hiring “freeze”, nor is it layoffs, but rather a downturn from the pace of “significant” new hires.

He noted that Roku will also consider spending on discretionary projects such as developing original Roku programming, although this currently represents a minority of the company’s spending on content.