Parsing Roku Results: why sales are growing, while stocks are falling

Разбор результатов Roku: почему продажи растут, а акции падают

Year (NASDAQ: YEAR) - American company, which, using its devices, connects home TVs to the Internet. Its streaming platform is the largest in the three major North American markets.: in USA, Canada and Mexico.

In mid-February, Roku released financial results for 4 Quarter 2021, which American investors did not like very much: shares after the publication of the report fell by 23%. Basic moments:

  • revenue increased by 33%, up to $0.865 billion, — vs market consensus of $0.893 billion;
  • Adjusted EBITDA decreased by -24% from $0.113 billion to $0.087 billion on the back of lower net income;
  • net earnings per share fell from 0,53 to 0,18 $ due to strong growth in operating costs. The adjusted figure was 0,17 $ when forecasting in 0,04 $;
  • management announced its forecast for financial results for 1 quarter of 2022, which turned out to be worse than market expectations.

Sales structure

Roku management divides its activities into two business divisions: Platform и Player. Core segment revenue, Platform, generated through the sale of digital advertising and related services, including OneView advertising platform, third party content distribution services and more. Second direction, Player, earns mainly on the implementation of streaming devices.

Roku sales structure:

  1. Platform — 87%.
  2. Player — 13%.

IN 4 quarter of 2021, the American company recorded excellent sales: Roku's total revenue increased by 33%, up to $0.865 billion, thanks to the strong growth of the Platform division, which year by year added 49% and rose to $0.703 billion. Second segment, Player, showed moderately negative results amid weak demand: sales fell by 9% - up to 0.162 billion dollars.

Sales structure of the company, billion dollars

4к2020 4к2021 The change
Platform 0,471 0,704 40%
Player 0,179 0,162 −9%
total revenues 0,650 0,865 33%

Key operational metrics

Let's break down the three most important Roku operational metrics. The first is the number of active accounts, or the general audience of the company. The second is streaming hours - how many hours the audience spends on the Roku streaming platform. And the last indicator is ARPU.

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ARPU, или average revenue per user, is the average revenue per user. It is also called the average income per unit.. Calculated by dividing total revenue by the number of users. This indicator helps to see the degree of monetization of the service..

In 2021, ARPU demonstrated the strongest growth rates — 43%, it grew by increasing the monetization of the service. The number of active accounts has increased 17% against the backdrop of a weak third quarter. The streaming hours increased by 15% because of the terrible results 2 quarter.

Разбор результатов Roku: почему продажи растут, а акции падают

EBITDA and net income

The main negative point in Roku's results for 4 quarter should be considered a strong increase in operating costs, which have increased by 49% and led to a decrease in Adjusted EBITDA by 24%: from $0.113 to $0.087 billion. The largest increase in expenses was recorded under the item “Sales and Marketing”, it immediately increased 70%.

Besides, rising operating costs also led to a drop in Roku's net profit, in 4 quarter, it decreased by 64%: from $0.067 to $0.024 billion. The adjusted indicator showed similar dynamics, falling by 65%.

Key financial results of the company, billion dollars

4к2020 4к2021 The change
Revenue 0,650 0,865 33%
Operating expenses 0,240 0,358 49%
Adjusted EBITDA 0,113 0,087 −24%
EBITDA margin 17% 10% −7 p. P.
Net profit 0,067 0,024 −64%
net debt −0,998 −2,056 −106%

Management forecasts and comparison with competitors

Following the publication of financial results for 4 quarter 2021 management presented its forecast for the next quarter. Basic moments:

  1. Roku's total revenue 1 quarter of 2022 will increase by 25%: from $0.574 to $0.72 billion.
  2. Gross profit will increase by 10%: from $0.327 to $0.36 billion.
  3. The net loss will be -0.03 billion dollars - against a profit in 1 quarter of 2021 in the amount of $0.076 billion.
  4. Adjusted EBITDA for the first 3 months of 2022 will decrease by 56%: from $0.126 to $0.055 billion.

Comparison with major market benchmarks

2016 2017 2018 2019 2020 2021
Year 100 $ 370 $ 219 $ 956 $ 2371 $ 1630 $
Nasdaq 100 $ 107 $ 104 $ 142 $ 206 $ 252 $
Peer Group 100 $ 107 $ 98 $ 134 $ 193 $ 270 $

Comparison with competitors

EV / EBITDA P / E net debt / EBITDA
Year 25,68 57,85 −4,42
Walt disney 26,50 78,95 3,72
Comcast 8,53 14,77 2,49
Netflix 26,34 31,14 1,46
Charter Communications 9,43 20,70 4,58
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What's the bottom line?

Roku is an American fast growing company, dynamics of which began to decline: if for the last 3,5 year, the company's financial results increased by an average of 55%, then in 4 quarter of 2021, this figure was 33%, and in 1 quarter of 2022, it will decrease even more - to 25%.

As a result, this slowdown in growth has resulted in, that the market took a fresh look at the company: Roku quotes fell from 490 $ up to practically 110 $, and the assessment was equal to another American competitor, Netflix. For example, companies have identical values ​​of the multiplier P / S — 5. But how fair is that?, Considering, that Roku's current growth rate is 33%, а Netflix — 16%?

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